Onome Amuge

Nigeria’s entrepreneurs,long celebrated as the nation’s shock absorbers, are once again carrying the weight of economic adjustment on their backs. But this time, the burden is heavier than anything seen in recent memory.

According to the FATE Institute’s State of Entrepreneurship in Nigeria 2025 Report, released this week, the country’s 41 million-strong micro, small and medium enterprises (MSMEs) have powered a fragile but unmistakable recovery in business confidence despite a turbulent year defined by monetary tightening, foreign exchange reforms, fuel subsidy removal, and four major tax changes.

Still, the optimism masks a deeper tension. Entrepreneurs are becoming more confident, more tech-enabled and more adaptable, yet their foundations remain fragile—shaped by institutional shortcomings and an overreliance on personal resilience instead of structured support.
Drawing insights from 10,882 businesses across Nigeria’s 36 states and the FCT, the fifth-edition report reveals an enterprise ecosystem on the cusp of significant change.

The FATE Institute sees 2025 as the first year in which macroeconomic reforms, however painful, have begun to show signs of stabilisation. GDP grew 3.7 per cent in H1 2025, inflation slowed significantly from last year’s peaks, and foreign investor sentiment is cautiously improving.

However, the stabilisation has imposed heavy burdens on entrepreneurs. This is as credit costs have climbed above 30 per cent, energy bills now exceed 51 per cent of operating expenses, currency swings sharply raise import prices, and weakened purchasing power has reduced consumer demand.

The result? Nigerian businesses are operating in what economists call a “stability paradox”: macroeconomic indicators look better, but microeconomic survival remains precarious.

And yet, 91 per cent of entrepreneurs still express confidence in their business prospects.

This paradox defines the 2025 report and sets the stage for what the FATE Institute warns is a critical crossroad: either Nigeria consolidates the reforms by addressing structural bottlenecks—or the gains evaporate.

The 2025 State of Entrepreneurship Index recorded a slight increase from 0.46 to 0.47, marking the first upward movement since 2022, with gains in perception of opportunities, innovation and digital adoption, and business performance, even as the enabling business environment and skill acquisition pillars continued to underperform.

The index affirms that entrepreneurs continue to excel despite a weak operating environment, with rapid digital adoption providing critical support through tools that ease inflationary pressures and broaden market access, yet these gains are still precarious without stronger institutional backing.

One of the most striking findings in the 2025 report is the widening gap in entrepreneurial performance across the country, with Kogi, Kwara and Bauchi emerging as the top performers with scores of 0.65, 0.63 and 0.60 respectively.

These states benefitted from improved infrastructure, more supportive local policies, and greater adoption of innovation by MSMEs.

Lagos, despite its large market and ecosystem density, ranked below expectations due to rising costs and regulatory fatigue among micro-enterprises.

Worst performers include; Gombe (0.24), Imo (0.31), and Kaduna (0.32).

Entrepreneurs across the weaker-performing states reported poor infrastructure, insecurity and inconsistent state-level regulations as their biggest obstacles. Despite the few bright spots in the data, small businesses recorded a net job loss of around 2,300 positions. A total of 14,269 jobs were created during the year, but 16,571 were lost, a pattern that highlights how thin the survival margins of MSMEs have become. 

New business formation rose as 26.7 per cent of respondents started a new venture in 2025, up from 24 per cent in 2024, although still below the pre-2023 average of 30 per cent. The rise continues to be driven largely by necessity, as 61 per cent of new entrepreneurs went into business to earn additional income and 23 per cent were motivated by unemployment. Even so, there is a gradual increase in innovation-led ventures, particularly in northern states such as Kwara, Jigawa and Yobe, indicating a subtle but meaningful shift in the country’s entrepreneurial geography.

A notable change in gender dynamics also emerged. Female participation in entrepreneurship dipped from 48 per cent in 2024 to 44 per cent in 2025, although the figure remains higher than in 2023. Crucially, women-led enterprises outperformed male-led firms on growth, with 69.2 per cent reporting business expansion compared with 65.8 per cent of their male counterparts. Women continue to dominate nano and micro-sized businesses and are increasingly active in northern states such as Zamfara, Jigawa, Plateau, Kwara and Adamawa; areas previously considered male-dominated. However, the persistent financing gap remains a major constraint: only 26.3 per cent of female entrepreneurs accessed institutional funding, a shortfall that significantly affects their ability to scale.

Young entrepreneurs also recorded stronger performance in 2025. Growth was reported by 65.8 per cent of youth-led businesses, up from 62.3 per cent in the previous year. Their strongest gains came from states such as Kogi, Kano and Zamfara. Youth-owned firms continue to lead in digital adoption, embracing tools ranging from AI-enabled marketing to e-commerce logistics, a shift that is helping them access markets beyond their immediate environments. Nonetheless, young entrepreneurs remain disproportionately challenged by a lack of collateral, weak financial documentation, high interest rates and inadequate business support services.

The wider business environment remains the biggest brake on entrepreneurial growth. Entrepreneurs continue to struggle with restricted access to finance, limited access to markets, weak business support structures, policy inconsistency and persistent security challenges. Interestingly, electricity no longer tops the list of constraints, not because power supply has improved, but because businesses have adapted by increasing spending on alternative energy sources. More than 51 per cent of business owners now allocate the majority of their operating budgets to electricity, demonstrating that energy remains both a major constraint and an unavoidable financial drain.

Despite these pressures, entrepreneurial optimism remains remarkably high. The FATE report shows that 91 per cent of Nigerian entrepreneurs express confidence in the future and 54 per cent describe the business environment as “good” or “very good.” This optimism is considered an asset, but it also presents a risk because it may mask underlying fragility and create the illusion of improvement for policymakers. Many entrepreneurs are confident because they have been forced to innovate to survive, but necessity-driven innovation cannot replace the structural reforms required to unlock sustainable growth.

The FATE Institute outlines several priority interventions that policymakers must consider urgent:

First, access to affordable credit must be expanded, as interest rates above 30 per cent are incompatible with small business growth. Solutions such as credit guarantees, asset registries and alternative collateral systems need to be scaled. 

Second, the policy environment must be stabilised. Frequent changes in taxes, import rules and registration procedures continue to undermine planning and investment. 

Third, sub-national competitiveness should be strengthened, with the experiences of high-performing states such as Kogi, Kwara and Bauchi showing that reform-driven states can create supportive ecosystems. 

Fourth, security must be improved, particularly in agrarian belts where insecurity disrupts markets, displaces entrepreneurs and reduces rural manufacturing capacity.

Fifth, digital adoption and skills development programmes should be deepened. Technology has emerged as the most reliable equaliser for small firms, yet skills acquisition remains one of the weakest components of the entrepreneurship index. 

The report urged the government to provide targeted financial tools for women and youth, arguing that without gender-responsive financing and youth-friendly credit mechanisms, Nigeria risks losing two of its most dynamic entrepreneurial segments.