Structural Challenges Undermining MSMEs’ Growth, Says Report
A new policy review has identified major structural barriers that are hindering the growth and sustainability of micro, small, and medium enterprises (MSMEs) in Nigeria. The report, titled 'Reassessment of Nigeria’s National Policy on Micro, Small and Medium Enterprises (MSMEs), 2021–2025 and Strategic Directions for 2026–2030', highlights that despite the sector's critical role in the economy, persistent challenges continue to undermine performance.
Key Findings from the Report
The study, conducted by Africari Limited and led by policy researcher Onyinye Ozurumba, points to several critical issues:
- Limited Access to Affordable Finance: MSMEs struggle to obtain long-term loans for expansion, with most credit facilities being short-term and focused on liquidity rather than capital investments.
- Weak Infrastructure Systems: Unreliable electricity, poor logistics networks, and rising energy costs increase operating costs and reduce competitiveness.
- High Level of Enterprise Informality: Many businesses operate outside the formal economy due to regulatory complexities and multiple taxation concerns.
- Low Technological Adoption: Reliance on manual processes and lack of digital tools hinder productivity and market access.
- High Business Mortality Rates: These challenges contribute to many small enterprises failing to survive beyond their early years.
Government Initiatives and Constraints
During the 2021–2025 policy period, the Nigerian government introduced various financial interventions, entrepreneurship programs, and regulatory reforms. However, the report notes that these initiatives have not translated into sustained enterprise growth due to structural and institutional constraints. For instance, while credit interventions from institutions like the Central Bank of Nigeria (CBN) were implemented, many MSMEs still face difficulties in accessing loans that support long-term investment.
Impact on Business Operations
The report emphasizes that borrowed funds are often used to manage operational expenses such as rent, inventory purchases, staff wages, and energy costs, rather than for capital investments like equipment acquisition or technology upgrades. Additionally, businesses that formalize face numerous tax obligations, including value-added tax (VAT), company income tax (CIT), stamp duties, import duties, and personal income tax, depending on their sector and location.
In summary, the report warns that without addressing these structural barriers, the growth potential of Nigeria's MSME sector remains limited, threatening economic stability and job creation.
