Infrastructure, market access drive MSMEs to Lagos, Rivers, Kano

Lagos, Rivers and Kano states are Nigeria’s leading hubs for micro, small, and medium enterprises (MSMEs).

According to a new PwC report, the concentration of MSMEs in these economically active regions is driven by infrastructure, market access, and business ecosystems.

The report titled, ‘Building Resilience: Strategies for MSME Success in a Changing Landscape,; revealed that a survey of 567 MSMEs across 13 sectors ranked Lagos as the state with the highest concentration, accounting for 7.3 percent of MSMEs, followed by Rivers with 6.8 percent and Kano (6.4 percent).

Lagos is the leading hub for MSMEs in Nigeria, with its population of over 20 million and strong infrastructure which attracts entrepreneurs It boasts of seaports, airports and an attractive demography.

Rivers State’s wealth from natural resources has driven infrastructural development, creating a solid business foundation, while Kano’s large dynamic market draws in small businesses.

Muda Yusuf, chief executive officer, the Centre for the Promotion of Private Enterprise (CPPE), said it is unsurprising that Lagos and Kano have emerged as hubs for MSMEs, given their status as commercial centres. However, he expressed uncertainty about Rivers State’s position in this regard.

Yusuf pointed out that entrepreneurship and SMEs are typically more prominent in the eastern states of Nigeria.

Looking at the sectors that contribute to this growth, the PwC report disclosed that wholesale/retail trade and manufacturing sectors stand out as the most dominant contributors to MSMEs in Nigeria, comprising 25.3 percent and 22.5 percent, respectively.

“This underscores the significance of commerce and manufacturing activities in the MSME landscape, highlighting their crucial roles in economic development and job creation,” the report said.

Read also: Why MSMEs’ prefer Lagos, Rivers, Kano

According to the Nigerian Economic Summit Group (NESG) outlook report for 2024, key sectors in Nigeria with the huge potential to lift millions out of poverty are missing in the country’s economic growth.

The report classified the country’s sectors into ‘growth drivers,’ ‘growth stagnators’, and ‘growth draggers.’

It said growth drivers include the financial, ICT, and trade sectors, contributing significantly to the gross domestic product (GDP) and overall growth.

Agriculture, real estate, construction, and manufacturing are identified as major growth stagnators due to subdued growth, while transport and the oil and gas sectors are regarded as growth draggers, contracting and suppressing the overall growth.

“The deceleration was attributed to policy adjustments and reform shocks, most prominently the implementation of the naira redesign policy, resulting in a cash crunch that impacted various sectors, particularly the informal economy,” NESG disclosed.

Data from the National Bureau of Statistics (NBS) revealed that the total number of MSMEs as of 2020 stood at 39 million, with micro-enterprises constituting 96.9 percent and SMEs making up 3.1 percent.

These MSEMs play vital roles in Nigeria’s economy, contributing significantly to employment generation, poverty reduction, and overall economic growth. They account for about 80 percent of employment and over 40 percent of Gross Domestic Product.

However, a further breakdown of the PwC report reveals that states like Bayelsa, Kebbi, and Taraba are the three states with the least MSMEs in Nigeria.

Sam Abu, country senior partner at PwC Nigeria, said in the report: “As MSMEs suffer from lack of electricity and the cost of fuel–which in turn affects the productivity of employees who work from home, there is an increasing need for an affordable alternate source of energy.

“For economic prosperity, it is important that the Government funds initiatives that adequately support the pressing needs of SMEs both on paper and in reality,” he added.