As Nigeria joined the global community in commemorating the 2025 International Micro, Small, and Medium-sized Enterprises (MSMEs) Day on Monday, the spotlight once again turned to the nation’s most crucial economic engine. The timely call by United Nations agencies for greater investment in MSMEs underscores the urgent need for bold and sustained action to unlock the full potential of this vital sector.

MSMEs: The Foundation of Nigeria’s Economy

Micro, small, and medium-sized enterprises make up the backbone of Nigeria’s economy. With over 40 million active MSMEs, they account for approximately 96% of all businesses and provide employment to 84% of the country’s workforce. These enterprises also contribute nearly 50% of the Gross Domestic Product (GDP), and policymakers are targeting an increase to 70% by the end of 2025.

At the Abuja commemoration event, representatives from the United Nations Industrial Development Organization (UNIDO), International Labour Organization (ILO), United Nations Development Programme (UNDP), and World Intellectual Property Organization (WIPO) emphasized the pivotal role MSMEs play in promoting inclusive development and economic transformation.

According to Varsha Redkar-Palepu of the UNDP, “MSMEs are engines of job creation, innovation, and social inclusion, especially for women and young people. They must be placed at the heart of our development agenda to transform opportunities into tangible outcomes.” Her remarks capture the essence of the sector’s relevance to national progress.

Mounting Challenges Threatening MSME Sustainability

Despite their importance, Nigerian MSMEs face a litany of challenges that continue to stunt their growth and survival. The access to finance remains one of the most persistent barriers. Industry experts estimate the sector faces a funding shortfall of over $32 billion, while many MSMEs must borrow at exorbitant interest rates reaching 27.5%, rendering capital unaffordable and stalling business expansion.

Additionally, infrastructure deficits—especially unreliable electricity and inefficient transport systems—drive up operating costs and limit competitiveness. Moreover, multiple taxation regimes, excessive regulation, and a lack of coherent support systems impose further burdens on small enterprises struggling to survive in a volatile economic environment.

As a result, the failure rate among Nigerian MSMEs remains alarmingly high, with around 80% shutting down within five years of launching. According to 2024 data, 67% of small businesses reported a drop in sales, largely due to the impact of inflation, currency depreciation, and weakening consumer demand.

MSMEs Still Demonstrate Resilience and Ingenuity

Despite these obstacles, Nigeria’s MSMEs have continued to demonstrate resilience, adaptability, and innovation. Speaking at the Abuja event, Chinedu Nnabuihe of ProHealth noted, “In spite of challenges such as limited access to finance, infrastructure, and economic constraints, Nigeria’s MSMEs have continued to show resilience, creativity, and determination.”

This unwavering spirit of entrepreneurship is a hallmark of the Nigerian business landscape, as small enterprises across sectors persist in the face of adversity, constantly innovating and seeking opportunities within their constraints.

Global Best Practices Offer Roadmaps for Nigeria

Many countries have successfully boosted MSME productivity and growth through deliberate, targeted policies. For instance, Indonesia’s MSMEs account for 64% of business value added, driven by strong support for digital adoption and export capacity. Likewise, Italy and Portugal have promoted MSME success through cluster development, innovation grants, and tax relief schemes, resulting in over 60% value added from MSMEs in both countries in 2024, according to a McKinsey report.

Nigeria must adopt and adapt such proven strategies if it hopes to elevate the performance of its MSME sector and fully harness its economic potential.

The Way Forward: What Nigeria Must Do

To reposition MSMEs for sustainable growth, Nigeria must urgently pursue a multi-pronged strategy that tackles the most pressing challenges:

1. Expand Access to Affordable Financing

The federal government should implement a national credit guarantee scheme to de-risk lending and encourage commercial banks to extend credit to MSMEs, particularly those operating in agriculture, manufacturing, and technology sectors. Special financial products tailored to small enterprises must be developed to ease liquidity challenges.

2. Improve Critical Infrastructure

Addressing infrastructure bottlenecks is non-negotiable. Nigeria must prioritize investments in stable electricity supply, efficient road and rail transport networks, and broadband connectivity. These upgrades will drastically reduce overhead costs and enable MSMEs to operate more efficiently and competitively.

3. Enact Meaningful Regulatory and Tax Reforms

To foster ease of doing business, the government must simplify regulatory procedures, harmonize tax regimes, and eliminate duplicative levies. Newly passed tax legislation that removes VAT from essential goods must be effectively implemented, and regulatory agencies should provide clear, unified guidance to reduce red tape.

4. Leverage Digital Transformation and Innovation

MSMEs need support to fully embrace digital tools and platforms. Programs that promote digital literacy, e-commerce access, and innovation hubs will help small businesses scale operations, improve service delivery, and compete beyond local markets.

5. Generate Reliable Data Through MSME Census

The 2025 MSME Census, as emphasized by stakeholders at the Abuja event, is a crucial opportunity to collect real-time, disaggregated data. This data will enable policymakers to develop evidence-based interventions that are tailored to specific sectors, locations, and enterprise sizes.

6. Foster Market Access Under AfCFTA

The African Continental Free Trade Area (AfCFTA) offers enormous potential for MSMEs to expand regionally and integrate into global value chains. However, to seize these opportunities, Nigeria must invest in capacity-building, trade facilitation, and logistics support for local enterprises.

7. Strengthen Stakeholder Collaboration

No single actor can transform Nigeria’s MSME ecosystem. Effective collaboration between government agencies, financial institutions, private investors, NGOs, and international partners is essential to create a holistic support system for MSMEs across all stages of growth.

Conclusion: Empowering MSMEs Means Empowering the Nation

Micro, small, and medium-sized enterprises are far more than just economic entities—they are engines of innovation, vehicles for poverty reduction, and pillars of national resilience. Supporting MSMEs is not an option; it is an economic imperative. By placing these enterprises at the centre of its development strategy, Nigeria can build a more inclusive, productive, and competitive economy.

As the country looks ahead, transforming the MSME sector will require visionary leadership, robust investment, and relentless commitment to reform. With the right policies and collective resolve, Nigeria can ensure that its entrepreneurs thrive—and that its economy flourishes.