Why Sovereign Bond Composite Notes could bridge Nigeria’s SME $32bn credit gap

Sovereign Bond Backed Composite Notes (SBCNs) can serve as a catalyst to accelerate Nigeria’s funding-starved small and medium enterprises (SMEs) and quicken economic growth, according to DLM Capital Group.

The Lagos-based financial advisory firm said SBCNs, if strategically channeled, could unlock opportunities for SMEs, allowing firms within this category to scale, create jobs, and drive consumer demand that fuels broader economic growth.

“SMEs, often starved of capital, can now expand operations, hire and train talent, and innovate. Increased consumer income translates into higher spending, supporting businesses in various sectors of the economy,” DLM Capital said in a statement.

This comes barely two months after the group announced it was seeking to raise N30 billion in Nigeria’s first Sovereign-Bond Backed Composite Notes targeted at consumer finance and SMEs.

SMEs account for more than 80 percent of Nigeria’s employment and contribute about half of GDP, according to the National Bureau of Statistics, yet they remain constrained by limited access to credit, estimated at $32.2 billion by PwC.

“Nigeria’s SME sector represents a massive, largely untapped engine of growth. With SBCNs, investors have a direct pathway to participate in this growth, creating returns for themselves while helping the nation scale industries that have long been overlooked without compromising investors’ corporate bond portfolio credit quality.”

SBCNs are a type of fixed-income investment that combines the security of government bonds with exposure to other income-generating assets.

Unlike conventional fixed-income instruments, these notes are backed by the Nigerian government’s cashflows, ensuring safety even in turbulent markets, delivering both security and yield to investors.

They also offer diversified exposure across industries, boosting portfolio performance and credit quality while hedging against inflation.

With this new fixed income instrument, the company said, communities that previously had limited access to finance now have avenues to grow, and the country benefits from a more inclusive, resilient economic ecosystem.

Sonnie Babatunde Ayere, CEO of DLM Capital Group, said SBCNs were created not just to show that investment is about returns but impact.

“We wanted a product that fuels growth while offering investors a secure, high-performing instrument,” Ayere said. “If not now, when? If not this product, then what?”

To DLM Capital Group, SBCNs are not just another investment option; they are a blueprint for sustainable economic development.

“They demonstrate that strategic, well-structured financial products can generate measurable impact while rewarding investors. And perhaps most importantly, they pose a question to every potential investor: if a product like this exists, why not participate?”