The Nigerian Economic Summit Group (NESG) has raised the alarm over the state of the country’s economy, revealing that 30% of Micro, Small, and Medium Enterprises (MSMEs)—amounting to 7.2 million businesses—closed down between 2023 and 2024 due to the harsh business climate.
This startling revelation, made by Dr. Segun Omisakin, Chief Economist and Director of Research at NESG, underscores the growing economic fragility in Nigeria. Speaking at the 2025 Private Sector Outlook launch, Omisakin painted a bleak picture of a business environment battered by economic volatility, policy uncertainty, and dwindling investor confidence.
He further revealed that Nigeria lost an estimated N94 trillion due to multinational divestments and business closures during the same period, signaling a worrying trend of capital flight.
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“Between 2023 and 2024, multinational divestments and business closures led to an estimated N94 trillion economic loss. Additionally, 30% of Nigeria’s 24 million registered MSMEs shut down, underscoring the country’s economic vulnerability,” Omisakin stated.
More MSME Closures Expected in 2025 Amid Harsh Economic Realities
With Nigeria’s economic trajectory showing no signs of a significant turnaround, economists are warning that even more MSMEs could shut down in 2025.
The country’s stubborn inflation, erratic foreign exchange policies, and deteriorating consumer purchasing power have made survival difficult for small businesses, which constitute over 90% of Nigeria’s business sector and employ nearly 80% of the workforce.
A combination of rising energy costs, forex scarcity, and unstable government regulations has further crippled small businesses, with many unable to secure funding or sustain operations in a high-inflation environment.
Nigeria’s Struggles with Debt and Currency Depreciation
While NESG acknowledged that foreign exchange availability improved due to recent policy reforms, it did little to halt the rapid depreciation of the Naira, which averaged N1,479.9 per US dollar in 2024.
In addition, Nigeria’s fiscal crisis worsened, with public debt ballooning to N142.3 trillion as of September 2024.
“While there have been modest improvements in trade surpluses and capital inflows, the macroeconomic framework remains weak, and fiscal constraints persist,” Omisakin stated.
This dire situation has left the private sector struggling to navigate an unpredictable economic landscape, with many businesses unable to cope with the rising costs of imported raw materials, transportation, and operational expenses.
At the NESG forum, panelists stressed the importance of policy consistency in attracting foreign direct investment (FDI).
While the depreciation of the Naira remains a major concern, investors are more worried about policy inconsistency, government overreach, and unpredictable regulatory frameworks.
Analysts have noted that foreign investors are willing to operate in an environment where the currency is weak, but they need policy stability. The biggest concern, however, is said to be that Nigeria has changed monetary and fiscal policies multiple times within short periods, creating uncertainty.
To address these concerns, stronger collaboration between the public and private sectors was recommended. Panelists urged the government to involve business organizations such as the Nigerian Association of Small and Medium Enterprises (NASME), the Nigerian Association of Small-Scale Industrialists (NASSI), and the Nigeria Employers’ Consultative Association (NECA) in economic decision-making processes.
AfDB’s $230m SME Support: A Lifeline or a Drop in the Ocean?
To mitigate the crisis facing MSMEs, the African Development Bank (AfDB) has approved a $230 million trade finance package for Access Bank Plc, aimed at helping small businesses survive the economic downturn.
The funding consists of:
- $170 million Trade Finance Line of Credit (TFLoC) – A three-and-a-half-year loan designed to provide forex liquidity to Nigerian SMEs, ensuring they can pay for essential imports and sustain operations.
- $60 million Transaction Guarantee (TG) – A three-year guarantee that will protect banks from the risk of non-payment on trade finance transactions, allowing Access Bank to expand financing options for SMEs.
While the AfDB’s intervention is expected to help some businesses stay afloat, experts caution that it is not enough to address the magnitude of the crisis.
To prevent another wave of business closures in 2025, experts and business leaders are calling on the Nigerian government to implement bold economic reforms. Some key recommendations include:
- Stable and predictable policies: The government must commit to consistent monetary and fiscal policies to restore investor confidence.
- Access to affordable credit: The CBN should work with financial institutions to provide MSMEs with low-interest loans and easier access to capital.
- Lower energy and production costs: The government must address high electricity tariffs and fuel prices, which have become major burdens on businesses.
- Increased private sector involvement in policy formulation: Business groups should be given a seat at the table to help shape pro-business policies.