An industry estimate says about one in five small businesses in Nigeria closed down between January 2023 and June 2024. The number is not the government’s official count, but inflation, fuel, currency and credit data show why those 18 months became a brutal test of survival.
The figure represents about 20 per cent of the country’s estimated 40 million SMEs.
The 18 months were the period in which small businesses moved almost without respite – from a cash shortage to the removal of the petrol subsidy, a sharp devaluation of the naira, inflation above 30 percent and increasingly expensive credit.
The figure resurfaced in August when Dele Oye, chairman of the Alliance for Economic Research and Ethics, warned that the scale of business mortality exposed a deeper weakness beneath Nigeria’s industrial ambitions. In a policy brief examining the gap between the Federal Government’s new industrial policy and the conditions in which businesses operate, Oye cited an estimated eight million micro, small and medium-sized enterprises that had closed during the period.
But the eight million figure is not the result of an official count by the Nigerian Bureau of Statistics or SMEDAN (Small and Medium Enterprises Development Agency of Nigeria) of business closures.
Its traceable source is Femi Egbesola, national president of the Association of Small Business Owners of Nigeria, who said in September 2024 that roughly 20 percent of the country’s estimated 40 million small businesses had stopped operating.
“We have around 40 million small businesses in the country and with 20% already shut,” Egbesola said at the time.
The 40 million baseline itself is broadly rooted in official data. The most recent comprehensive SMEDAN-NBS national MSME survey counted about 39.65 million micro, small and medium enterprises in 2020, down from about 41.54 million in 2017. Crucially, 96.9 percent of those enterprises were micro businesses, while only 3.1 percent fell into the small and medium categories.
First came the cash crunch
The period did not begin with petrol or foreign exchange.
It began with money becoming difficult to access.
Nigeria’s naira redesign and cash shortage under late Muhammadu Buhari’s administration disrupted economic activity in the first quarter of 2023, particularly for businesses that depended heavily on cash transactions.
The NBS recorded real GDP growth of 2.31 percent in the first quarter of 2023, down from 3.52 percent in the preceding quarter, and explicitly attributed the slowdown partly to the “adverse effects of the cash crunch”. NBS first-quarter 2023 GDP report
For larger companies with digital payment infrastructure, multiple bank accounts and established working-capital facilities, the disruption was painful but manageable.
For a trader, restaurant, neighbourhood retailer, transporter or micro manufacturer dependent on daily cash turnover, the same disruption could break the cycle that paid suppliers, employees and operating expenses.
Many firms had barely recovered when the next shock arrived.
President Bola Tinubu announced the end of the petrol subsidy in May 2023.
The effect was immediate. According to NBS, the average retail price of petrol jumped from ₦238.11 per litre in May 2023 to ₦545.83 in June, an increase of 129.23 percent in one month. By June 2024, the national average had risen to ₦750.17. And as of today, the pump price at the NNPC is ₦1,265 per litre.
That increase did not remain at the filling station.
Higher fuel prices raise the cost of transporting staff and goods, powering generators and delivering orders. Small businesses are often less able than larger companies to absorb those increases or spread them across a wider revenue base.
A ₦10 million rise in annual energy costs can be absorbed differently by a national corporation with billions of naira in revenue than by a small manufacturer operating on a narrow gross margin.
Four shocks, one balance sheet
Then came foreign exchange.
In June 2023, the Central Bank of Nigeria changed the operation of the foreign-exchange market, moving towards a more market-determined rate after years of multiple official windows.
The reform addressed long-standing distortions, but its immediate effect was a substantial repricing of the naira.
The International Monetary Fund recorded the currency moving from about ₦461 to the dollar in May 2023 to around ₦900 by the end of that year. The naira then depreciated by another 40 percent in January and February 2024.
For import-dependent businesses, the arithmetic changed quickly.
A company could buy inventory at one exchange rate, sell it weeks later and discover that the proceeds were insufficient to replace the stock because the naira had weakened again.
Even businesses that sourced most of their products locally were not necessarily insulated. Nigerian manufacturers frequently depend on imported machinery, packaging, spare parts, chemicals or intermediate inputs. Currency depreciation therefore travels through domestic supply chains.
Muda Yusuf, chief executive of the Centre for the Promotion of Private Enterprise (CPPE), captured the planning problem in May 2024 after repeated changes in the exchange rate used to calculate import duties.
“It is extremely difficult for investors to plan under these unstable circumstances,” he said.
CPPE estimated that the Customs duty exchange rate had changed 28 times in the first quarter of 2024 alone.
Inflation magnified the problem.
By June 2024, Nigeria’s headline inflation rate had reached 34.19 percent, compared with 22.79 percent a year earlier. Food, housing and energy, transport and other essential categories were major contributors to the increase.
That created one of the most difficult combinations for a small business: costs were rising quickly while customers were simultaneously losing purchasing power.
A business can protect its margin by increasing prices only as long as customers can absorb the increase.
Once consumers begin trading down, reducing quantities, delaying purchases or abandoning non-essential products altogether, the owner faces a choice between preserving margin and preserving sales.
PwC’s MSME research provides a broader picture of those pressures. In its 2024 report, based on a survey of 557 operators across 29 states, 35 percent identified inadequate access to finance as a major growth constraint, 21 percent pointed to poor infrastructure including electricity, and 12 percent cited multiple taxes and levies.
These were not new weaknesses. What changed in 2023 and 2024 was the intensity with which several of them hit at once.
Credit offered little shelter
A healthy credit market can give otherwise viable businesses time to absorb a temporary shock.
For many Nigerian small businesses, that buffer was weak before the crisis began.
As inflation accelerated, the Central Bank of Nigeria tightened monetary policy. Its benchmark Monetary Policy Rate rose from 18.75 percent in 2023 to 22.75 percent in February 2024, 24.75 percent in March and 26.25 percent in May 2024.
The objective was macroeconomic stability, but the transmission to businesses was higher borrowing costs.
The Lagos Chamber of Commerce and Industry warned in April 2024 that higher rates were making it more expensive for companies to obtain financing for working capital, expansion and survival.
“We have consistently advised that rate hikes alone will not curb inflation without resolving the challenges of the real sector,” LCCI president Gabriel Idahosa said.
The financing problem has persisted beyond the immediate crisis.
The World Bank said in December 2025 that fewer than one in 20 Nigerian MSMEs had access to bank credit, describing available loans as often short-term and expensive, with collateral requirements excluding many viable firms.
Business Elites Africa has also reported that private-sector credit in Nigeria was equivalent to just 9.4 percent of GDP in the 2026 African Economic Outlook, illustrating the relatively shallow pool of financing available to businesses.
For an SME under pressure, lack of working capital has a compounding effect.
Suppose a retailer previously needed ₦5 million to replace its inventory. If the cost of that inventory rises to ₦8 million while customers are spending less, the business needs more cash merely to maintain its previous operating capacity.
Without affordable finance, the owner can reduce stock, inject personal savings, borrow at expensive rates, extend supplier credit, downsize or close.
That helps explain why formal closure figures alone would not capture the entire damage.
A business can remain registered while losing half its workers, carrying less inventory, delaying supplier payments and operating fewer days each week. Economically, that business has contracted even if it has not disappeared from a register.
Egbesola himself said in 2024 that his workforce had fallen from 52 employees to 14 as operating conditions deteriorated.
The reforms exposed an older weakness
It would be misleading to attribute Nigeria’s small-business mortality entirely to policies introduced by the Tinubu government. The fragility predates them.
The SMEDAN-NBS enterprise count had already fallen from about 41.54 million businesses in 2017 to 39.65 million in 2020, a decline of roughly 1.9 million enterprises. COVID-19, insecurity and competitive pressures were among the explanations given at the time.
Power shortages, expensive finance, weak infrastructure, insecurity, multiple taxes and poor management systems were established constraints before subsidy removal or FX reform.
The significance of 2023-24 is that major macroeconomic adjustments landed on businesses that often had little capital, limited formal financing and weak operating buffers.
Nearly 97 percent of enterprises counted in the national MSME survey were micro businesses. Many are sole proprietorships where the dividing line between household finances and business working capital is thin.
Business owners who mix personal and company cash are particularly exposed when costs rise sharply because household emergencies can drain the same money required to restock or pay suppliers.
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The reforms themselves also have a legitimate macroeconomic rationale.
The World Bank has argued that the previous fuel subsidy and foreign-exchange arrangements were distortionary and unsustainable. Its October 2024 Nigeria Development Update said the new policy direction was necessary, while acknowledging that it had “added to already intense pressures on households and firms.”
That is the central tension.
A policy can improve the long-term allocation of foreign exchange while inflicting an immediate loss on an importer whose replacement costs double.
Removing an expensive subsidy may improve public finances while destroying the margin of a transport-dependent business.
Higher interest rates may be part of the effort to control inflation while simultaneously putting bank credit beyond the reach of smaller firms.
The question is therefore not simply whether reform was necessary. It is whether the sequencing of reforms, the strength of the business environment and available financial buffers allowed productive firms to survive the transition.
The policy gap
Nigeria’s response now includes another ambitious industrial strategy.
President Tinubu formally unveiled the Nigeria Industrial Policy 2025 in February 2026, with manufacturing, value-chain development, infrastructure, energy and SME integration among its priorities.
The administration itself acknowledged many of the problems that businesses have been raising.
Nigeria had grappled for too long with “fragmented value chains, high production costs, infrastructure gaps [and] policy inconsistency,” Tinubu said at the launch.
Oye’s criticism is less about the ambition of the policy than whether businesses will feel its effects soon enough.
“For millions of Nigerian entrepreneurs struggling to survive, the NIP2025 reads less like a practical roadmap and more like a distant promise,” he said.
That is where the eight-million estimate becomes more important than a single statistic.
Nigeria still lacks a sufficiently current national business-demography dataset to establish precisely how many enterprises disappeared during one of the most disruptive economic periods in recent history. The absence of that data is itself a policy weakness. Governments cannot easily design survival finance, tax relief or industrial support without knowing which businesses are closing, where they are closing and why.