Segun Asegun
In Nigeria, over 80 percent of micro, small, and medium enterprises (MSMEs) fold within their first five years. While this statistic is alarming, it isn’t surprising. Despite the loud applause for entrepreneurship, many critical support structures remain absent, leaving MSMEs vulnerable in an environment stacked against their survival.
The Vital Role of MSMEs
MSMEs are rightly called the backbone of Nigeria’s economy. They comprise over 96 percent of all businesses, employ more than 60 million Nigerians, and contribute nearly half of the nation’s GDP. Yet, despite their importance, a perfect storm of systemic issues continuously undermines their stability and growth.
Why Do So Many MSMEs Fail?
The reasons go beyond poor business ideas or lack of determination. Instead, a complex web of systemic constraints gradually stifles their progress:
- Power and Infrastructure Challenges: Day-to-day costs driven by unreliable electricity, bad roads, and internet downtime eat into profits and hinder operations.
- Limited Financing Options: Many MSMEs struggle to access affordable credit. When they do, high interest rates and rigid repayment terms often drown their businesses in debt.
- Poor Recordkeeping: Without proper financial documentation, small businesses become invisible to lenders, investors, and even themselves, limiting growth opportunities.
- Excessive Regulatory Pressure: Overlapping taxes, local levies, and bureaucratic hurdles increase operational costs and reduce business sustainability.
- Environmental and Market Risks: Fluctuating economic policies, inflation, and supply chain disruptions further threaten MSMEs’ survival.
Even the most resilient entrepreneurs find their businesses closing shop when the environment ceases to support stability and consistent growth.
What Makes Some MSMEs Thrive?
The few that succeed often have access to three key factors: capital, training, and structure.
Support systems such as government schemes, donor programs, or incubator hubs provide vital early-stage support that significantly boosts survival rates. However, many MSMEs operate without these safety nets, and often, the solution isn’t just funding but equipping businesses with tools, knowledge, and sustainable practices.
What Needs to Change?
To foster more resilient MSMEs, Nigeria must shift the focus from solely holding entrepreneurs accountable to fixing the systemic issues that hinder success. Here’s where to start:
1. Improve Access to Early-Stage Capital
Rather than load MSMEs with debt they aren’t ready to handle, introduce micro-grants, seed funding, and support programs that allow for risk-taking without the fear of debt traps.
2. Foster Business Structure Support
Simple tools like record-keeping templates, affordable bookkeeping apps, and basic financial management can make a huge difference in helping entrepreneurs make informed decisions.
3. Prioritize Training and Mentorship
Supporting new business owners with strategic thinking, financial literacy, and operational skills ensures they’re not just hustling but building sustainable enterprises.
4. Invest in Infrastructure
Reliable roads, stable power supply, logistics, and internet connectivity are foundational. Improving these reduces the hidden costs that often push MSMEs out of business.
5. Implement Pro-MSME Policies
Policy reforms should go beyond press releases. Reduced taxes, simplified registration processes, transparent funding channels, and genuine support mechanisms can create an environment conducive to growth.
The Bigger Picture
MSMEs are more than just drivers of employment and income; they’re strategic pillars for Nigeria’s national development. Every MSME that survives beyond five years strengthens supply chains, generates local value, and boosts GDP.
If even half of Nigeria’s MSMEs lasted that long, the economic landscape would be transformed. But for this to happen, deliberate systemic reforms, targeted policies, and real support systems are necessary.
Moving Beyond Celebration
It’s time Nigeria moves beyond celebrating entrepreneurship as a social good. Instead, the focus should shift toward building an ecosystem that nurtures, sustains, and scales small businesses into resilient engines of growth.
Seyi Asagun is a finance executive and advocate for inclusive lending. His mission is to make access to capital more equitable for Nigeria’s underserved small businesses; because systemic change is the key to unlocking their full potential.
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