The small business landscape in Nigeria is facing severe challenges due to economic headwinds and policy issues.
Many business owners have struggled to cope with high operational costs, restricted access to credit, and rising inflation, which reached 33.4% in July 2024.
According to the Association of Small Business Owners of Nigeria (ASBON), an estimated 8 million small businesses have closed their doors between January 2023 and June 2024 due to a combination of harsh economic policies, inflation, and the rising cost of living.
Recent decisions, such as the removal of fuel subsidies and ongoing currency devaluation, have further strained small businesses, leading to closures and significant downsizing.
The closures have resulted in significant job losses and economic instability, as many businesses have had to reduce their workforce dramatically to survive. For instance, some companies have cut their staff by as much as 70%, directly contributing to the rising unemployment rate in Nigeria.
Larger corporations have also felt the impact, with several multinationals, such as Shoprite and Mr. Price, exiting Nigeria due to the volatile economic environment, regulatory uncertainties, and forex liquidity issues. This exodus has worsened the economic situation for small businesses that relied on these corporations for supply chains and operations.
As Nigeria’s economic crisis deepens, millions of small businesses are grappling with unprecedented challenges as the massive downturn represents about 20% of the country’s 40 million small businesses.
The dire situation has led to calls for the government to declare a state of emergency on the economy and implement targeted interventions to support small businesses. Such measures are seen as essential for job creation and maintaining economic stability in the country.
ASBON’s National President, Femi Egbesola, paints a bleak picture saying “Many businesses simply cannot cope with the harsh economic environment. Owners are closing their shops, unable to meet loan obligations or manage skyrocketing operational costs.”
He adds that some business owners are experiencing severe stress, leading to tragic outcomes. “Several people have died under the pressure; others are in the hospital. It’s a humanitarian crisis.”
In Aguda, Surulere, 35-year-old Chinedu Okeke, owner of a small logistics firm, had to cut his staff from 20 to 9. “Our fuel costs have tripled, and our profit margins are shrinking daily,” he laments.
With fuel prices soaring to N1,000 per liter, businesses like Chinedu’s that rely heavily on transportation have been hit particularly hard. Chinedu’s company, once a thriving business delivering packages across Lagos, now struggles to survive as operational costs spiral out of control.
Similarly, Amara Obi, who runs a bakery in Ikeja, Lagos, has faced daunting challenges. “Our flour prices have increased by over 80%, and the cost of sugar and other ingredients is almost double,” she explains.
Amara has had to raise the prices of her baked goods, which has resulted in a decline in customer demand. “We have lost about 40% of our regular customers because they can no longer afford our bread,” she says, suppressing sober emotion.
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Government policies and business realities
The removal of fuel subsidies, a move aimed at fiscal consolidation, has inadvertently spiked transportation and production costs, directly affecting SMEs.
Additionally, currency devaluation and high inflation, rising to 33.4% in July 2024, have squeezed profit margins for small businesses, forcing many to shut down.
According to Dr. Ngozi Nwosu, an economist at the Nigerian Economic Summit Group (NESG), “The policy environment is simply not conducive for small businesses. While the government aims to stabilize the economy, the lack of targeted interventions for SMEs is creating a vacuum that pushes these businesses into collapse.”
Calls for action and immediate intervention
There is a growing call among business leaders and economists for the government to intervene more decisively.
Musa Abdullahi, a small-scale cobbler in Abeokuta, says: “We need emergency funding, reduced interest rates, and better access to credit. Without these, I don’t see how many of us can survive the next six months.”
The Nigerian business community is pleading with the government to declare a state of emergency on the economy.
“Small businesses account for 86% of Nigeria’s workforce,” emphasizes Egbesola. “If they continue to close, we are looking at a complete economic collapse. The government must act now.”
While the government has acknowledged the economic difficulties, it has yet to implement measures that adequately support small businesses. Economists like Dr. Nwosu suggest that without an immediate intervention plan focusing on affordable credit, energy subsidies, and tax relief for SMEs, the situation may worsen, threatening the stability of Africa’s largest economy.
With millions of small businesses already shuttered and many more on the brink of collapse, Nigeria faces a critical economic juncture.
The resilience of the Nigerian entrepreneur is legendary, but even the toughest can only hold out so long without adequate support. As Chinedu puts it, “We are doing everything to survive, but we need the government to meet us halfway.”
