Making the impacts of SMEs felt in Africa

In Nigeria, Small and Medium Enterprises (SMEs) are defined by the National Bureau of Statistics (NBS) based on their number of employees and their asset base. They are businesses that have between 10 and 199 employees and assets (excluding land and buildings) worth between N5 million and N500 million. These businesses cut across various sectors, from agriculture to manufacturing, retail and services. They are characterised by their ease of establishment, wide coverage, flexibility, innovation and dynamism. SMEs operate all over Nigeria and are the economic main-stay of the majority of Nigerians but have little support from the government. The fact that they are ubiquitous means that they are a force to reckon with in any economy. Improving small and medium scale enterprises means improving the economy of any nation. There are over 10 million small and medium sized businesses in America that do not have a website. That is more than one in three businesses. There are 33.2 million small businesses in America, which account for 99 percent of all U.S. firms.

Key characteristics of SMEs in Nigeria are:

Number of employees: SMEs have between 10 – 199 employees. While small and medium scale businesses have between 10 and 199 employees, micro enterprises have below 10 workers.
Asset base (excluding land and buildings): 5 million – 500 million naira.
Sectors: Agriculture, manufacturing, retail, services.
Traits: Easy to establish, wide coverage, flexibility, innovation, dynamism. SMEs account for 96 percent of all businesses and nearly 90 percent of the manufacturing sector globally. In most countries, SME operators are not required to register business names.

The economic impact of SMEs
SMEs play momentous roles in Nigeria’s economy. They contribute about 48 percent of the national GDP and employ 84 percent of the country’s workforce. This makes them a crucial driver of economic growth and job creation. Out of about 90 million Nigeria’s labour force in 2024, about 76 million are operating SMEs. In the first quarter of 2025, income contributed by SMEs to the economy was N13 billion out of over N2.6 trillion generated by the total workforce. Comparatively, SMEs that employ 84 percent of the workforce are reported to have generated about N78 billion incomes to their operators. About 38 percent small and informal businesses make less than $7.00 dollar (about N10,000) as profit per day and even more striking, 70 percent earn below N50,000 ($34) a day, according to “The 2025 Informal Economy Report by Moniepoint” which examined data from five million businesses and on-the-ground surveys across Nigeria.
Despite these contributions, SMEs in Nigeria face numerous challenges that hinder their growth and sustainability. These challenges range from poor access to finance and infrastructure deficits to regulatory hurdles and uncertainty in the capital market, which hinder their growth and optimal contribution to the economy. SMEs developments are largely stifled by finance. In 2023, 90 percent of SMEs claimed finance was their major hurdle in growing their businesses. Nigeria faces large infrastructure gap challenges. The roads, which are the bedrock of commerce, are highly dysfunctional. Electricity supply is also inadequate. A small scale business survey in Africa in 2024 showed that the rate of electricity supply in Africa is directly related to the rate of business development, especially among the small scale business owners. Regulations are also stifling the growth of SMEs in Africa generally and in Nigeria in particular. The story of Nigeria’s small businesses is one of grit that is starting to grow thin. The 2025 Moniepoint report found that most SMEs are stuck in survival mode.
Rising fuel, food, accommodation and energy costs, transport fares and cost of supplies are eating into profits, even for businesses with higher turnovers and revenues. About 79 percent said their cost of doing business has gone up in 2024, while only 47 percent saw any profit growth. Most SMEs depend on foreign exchange for their operations. Women entrepreneurs are faring worse. Around 41 percent of women-owned businesses earn below ₦10,000 ($7) daily, compared to 34 percent of men. Though the naira has stabilised in recent months, the lingering effect of haemorrhaging currency value in recent past years remains. Savings by SMEs operators are also falling. Nations grow when productivity is a function of income.
Corruption in high places is a big challenge of SMEs. 74 percent of business owners now save money, down from 92 percent last year. Most save for stock or expansion, but borrowing has become harder with high interest rates and tighter lending rules. Sourcing raw materials is a great challenge due to the high foreign exchange rate. Insecurity is also a major challenge. The insecurity in the country is not reducing and this is affecting small businesses in so many ways.
Nigeria’s small businesses power more than 80 percent of jobs and 48 percent of the gross domestic product (GDP), yet they are being priced out of growth. They contribute barely five percent (5%) of the income of businesses and have little opportunity for innovation. Policy needs to move beyond scattered interventions to real, coordinated support that helps them scale and not just survive. The government must make a move to improve the financial inclusion of small scale businesses as there are lots of benefits in this. Most small and medium enterprises are the livewire of large scale businesses in that they supply the large scale businesses the raw materials required for their operation and also maintain the machineries of this category of business. Small- and medium-sized enterprises stimulate competition for the design of products, prices and efficiency. Without SMEs, large scale enterprises will become monopolies.