Number of SMEs in Nigeria Decline by 45%, NBS Data Shows

The total number of persons operating as small and medium-sized enterprises (SMEs) in Nigeria has declined by a staggering 45% – from 246,200 in 2020 to just 170,098 in 2022, the National Bureau of Statistics (NBS) reveals in its 2023 Social Statistics Report.

The data indicates a worrying trend for Nigeria’s economy, particularly within the SMEs sector and it poses significant challenges to the country’s economic aspirations

Factors Behind the Decline

Several key factors have contributed to this downturn. Economic instability remains a major hurdle, compounded by policy and regulatory challenges that make navigating the business landscape difficult for SMEs in Nigeria.

Additionally, limited access to finance and inadequate infrastructure further hamper growth, while the impacts of the COVID-19 pandemic have added another layer of complexity.

The combined effect of these issues has reduced the number of SMEs and pushed many towards becoming micro businesses or, less commonly, growing into large-scale industries.

Sector-Specific Impacts

The decline in SMEs in Nigeria varied across different sectors, with each facing unique challenges:

Education Sector: Once boasting the highest number of small-scale industrialists, the education sector saw a 29% reduction from 2020 to 2022. Factors like reduced funding and policy shifts, alongside pandemic impacts, have driven this decline.

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Real Estate Sector: Experiencing the most substantial drop at 58%, the real estate sector reflects broader economic challenges and the potential impacts of policy changes or market conditions.

Agriculture Sector: Showing some resilience with only a 7% decline, agriculture hints at stability potentially due to supportive government policies and a push to promote agricultural activities.

ICT Sector: With a 32% decline, the ICT sector highlights the impact of rapid technological changes and market shifts.

Manufacturing Sector: Affected by a 37% decrease, the manufacturing sector struggles with supply chain disruptions, economic policies, and rising production costs.

Mining Sector: Showing modest stability with a 9% decline, the mining sector seems somewhat shielded due to increased activities and investments, despite challenges like regulatory changes.

Wholesale and Retail Trade Sector: This sector faced a 49% decrease, severely impacted by economic conditions that affect consumer behaviour and business operations.

Implications and the Path Forward

The sharp reduction in SMEs in Nigeria carries far-reaching implications for the economy. These businesses are crucial for employment, GDP contribution, and fostering innovation.

The 45% decrease in SMEs could lead to higher unemployment rates, reduced economic diversification, and diminished economic resilience.

To counteract this trend, there is a clear need for targeted interventions to support small businesses.

Such measures could help stabilise and potentially reverse the decline in the number of SMEs in Nigeria, fostering a more robust economic environment capable of achieving Nigeria’s ambitious economic goals.