Inadequate finance, power stifle MSMEs growth in 2024 – Report

Limited access to finance and unreliable power supply remain the biggest hurdles for Nigeria’s micro, small, and medium enterprises (MSMEs), a new report by the Fate Institute has revealed.

The findings were presented at the 10th Annual Policy Dialogue Series on Entrepreneurship, organized by the Fate Foundation.

The 2024 State of Entrepreneurship report surveyed 10,535 businesses across Nigeria’s 36 states and the Federal Capital Territory (FCT). It painted a detailed picture of the challenges and opportunities in the MSME sector, which accounts for over 40 percent of Nigeria’s GDP and employs millions of citizens.

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The survey found that 64 percent of businesses experienced growth in the past year, a decline from 72 percent in 2023 and 75 percent in 2022. Lack of access to finance topped the list of growth inhibitors, with limited funding affecting both male and female-led businesses across all sectors.

“For female-led businesses, 63.1 percent recorded growth in the past year, but this represents a decline from 73.6 percent in 2023,” said Amaka Nwaokolo, director of the Fate Institute.

“The macroeconomic environment, coupled with inflationary pressures and regulatory inefficiencies, continues to constrain business performance.”

Power supply ranked as the second-largest challenge. Nigeria remains the least electrified country globally, with an estimated 92 million people lacking access to electricity, according to Kolawole Osinowo, CEO of Baobab+ Nigeria.

“We need concessional financing to support SMEs with alternative energy solutions,” Osinowo said. “Most SMEs cannot afford the cost of solar systems or other reliable energy sources. This is critical for irrigation, cooling, and other productive use applications.”

Despite these challenges, optimism among Nigerian entrepreneurs is growing. 87 percent of entrepreneurs expressed optimism about the business environment in 2024, compared to 80 percent in the previous year.

The report also highlighted an increase in female-led businesses, which now account for 48 percent of the surveyed MSMEs, up from 42 percent in 2023 and 39 percent in 2022. However, many of these businesses are less than five years old, with 65 percent of surveyed enterprises being in their early stages.

Anambra and Ebonyi led the entrepreneurship index, scoring 0.77, followed by Kogi, Kwara, and Oyo states. The index, which measures entrepreneurial activity across five pillars – business performance, skills acquisition, technology and innovation, enabling environment, and perception of opportunities showed marginal improvement in the perception of opportunities, rising from 0.64 in 2023 to 0.70 in 2024.

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Adding to the conversation, Taiwo Oyedele, chairman of the presidential committee on Fiscal Policy and Tax Reforms, noted the government’s efforts on tax harmonisation to alleviate the burden on MSMEs.

“Nigeria’s tax system is one of the most complex globally, with over 60 different taxes levied by federal, state, and local governments,” Oyedele said. “This multiplicity of taxes discourages investment and stifles growth.”

The committee has proposed consolidating taxes into fewer, more manageable categories. Oyedele noted that streamlining taxes will reduce compliance costs for small businesses and improve Nigeria’s ease of doing business ranking.

“MSMEs contribute significantly to the economy but face an unfair burden when it comes to taxation. Our goal is to simplify the system, ensure fairness, and make it more transparent,” he added.

He also highlighted plans to digitise tax collection processes, which would curb corruption and improve efficiency.

Also at the event, Jumoke Oduwole, minister of Trade and Investment, lauded the resilience of Nigerian entrepreneurs.

“In the face of adversity, our entrepreneurs continue to innovate and thrive.

However, we must address systemic issues such as access to finance, infrastructure, and regulatory inefficiencies to unlock their full potential,” she said.

The dialogue concluded with recommendations to address the persistent challenges facing Nigerian MSMEs, urging policymakers to address infrastructure deficits, simplify tax systems, and create a more enabling environment for MSMEs.

It also highlighted the need for technological adoption and skills development to drive growth in the sector.