More than three million small businesses are striking it rich in Lagos despite mountains of obstacles facing them.
With N2 million, Temita Resources began marketing herbal toothpastes in Nigeria’s biggest commercial city in 2015. By 2024, the company’s revenue had ballooned to over N500 million, with the firm expanding to 15 states, including the Federal Capital Territory (FCT).
Thousands of small businesses from tech startups to ‘suya’ smokers are making it big in Lagos, thanks to the city’s demography and relatively political and economic stability.
The state hosts 2,000 tech startups, now valued at $9 billion, according to the Lagos State Ministry of Innovation, Science, and Technology.
The 2024 Startup Index ranked Lagos as 70th in the world, designating it as a vibrant startup ecosystem.
“Lagos is the strongest startup ecosystem in Nigeria, with a total score of more than 15 times greater than Abuja, the 2nd ranked city, showing strong centralization. Lagos excels in the Consumer Goods industry, ranking 1st in Africa for this industry,” the report noted.
Lagos hosts some of the thriving small businesses in Nigeria. From Sheclouded to PayHippo, down to Dukka, PayStack, Moniepoint and The Grind By Cubana, Lagos hosts some of the biggest and most innovative startups in Africa’s most populous nation.
Paystack was founded in Lagos by entrepreneurs Shola Akinlade and Ezra Olubi. In 2020 when COVID-19 was demotivating entrepreneurs,
Stripe, a global payments giant, acquired it for over $200 million. Soon after, the firm joined the league of unicorns –worth over $1 billion.
Similarly, Moniepoint was founded in Lagos in 2015 as TeamApt. It was an initiative by Tosin Eniolorunda and Felix Iketo to directly serve millions of people still left out of the financial system. Ten years later, the company has processed $17 billion in transactions, manages 10 million accounts and issued 72 million cards on its terminals.
The small-scale segment in the Lagos real estate market is not left out.
The short-let market in Lagos is projected to reach N300 billion this year, driven by consistent demand for flexible accommodation from business travellers, tourists, expatriates, and local professionals.
According to the Lagos short-let market report, based on data from AirDNA (78 percent) and Edala Homes (22 percent) surveying 5,806 listings, the market is set to expand from the N264.3 billion recorded in 2024.
“This growth is expected to be driven by sustained demand across all submarkets, as well as notable revenue expansion in emerging areas,” said Samuel Olatunde, co-founder & COO, Edala Homes.
Read also: How Nigerian businesses turn limitations into innovations
Challenges mount
However, micro, small and medium enterprises (MSMEs) in the state face mountains of challenges.
They share part of their profits with non-state actors and struggle to afford exorbitant shop rents or navigate through the muddy morass of regulatory hurdles.
Iya Basirat owns a make-shift shop in Oshodi, one of the largest markets in Lagos metropolis. She deals in toiletries and makes at least N20,000 every day in revenue. However, she shares her N5,000 average daily profit with non-state actors, popularly called ‘agberos.’
“Every day, I spend N1000 to N2000 on agberos,” she told BusinessDay during a visit last Saturday.
“There are often four or five groups which come to collect money each day. Some collect N500; others, N200. Some of them issue receipts, but others do not,” she added.
Iya Basirat is not the only one facing this challenge. Her neighbour, Obinna Obichelu, who sells clothes, spends even more. He revealed that he pays between N1,500 and N3,000 to non-state actors every day, which may not be going into the state coffers.
“It is even the manner in which the money is collected that creates problems,” he said.
Obichelu told BusinessDay that though he makes at least N4000 to N7000 each day in profit, he will exit the business.
“It takes a warrior to do business in Lagos, especially if you cannot afford to pay for shops. Apart from the money we give ‘agberos’ each day, touts and government agencies like KAI sometimes seize our goods and take them to their offices. We often ‘bail’ them with N20,000 to N50,000.”
Shops in Oshodi cost between N2 million to N5 million – something Iya Basirat and his neighbour cannot afford. In Ojuelegba and Isolo, shops also cost as much.
Bisola Ademola, who sells food at Egbeda, told BusinessDay that she is being chased around by touts.
“That is because I don’t have a shop. Half a shop here costs as much as N1 million or N1.5 million, and I can’t afford it, being a widow with four children,” she said.
Lagos businesses say they pay double or multiple taxes. In 2021, John Aluya, vice president, Manufacturers Association of Nigeria (MAN), Lagos zone, said manufacturers had been forced to pay both land use charge and ground rent.
“This is double taxation,” Aluya said. “Today, the central sewage has not been built by the government, but we are being made to individually construct our effluent treatment plants and still pay the treatment charges to the state government without any value derived from the payment,” Aluya further said.
There are also regulatory hurdles to cross. One entrepreneur in the food business said state and federal institutions sometimes fight while carrying out inspections on the same company or product. Each of them demands money.
Furthermore, there are also policy flip-flops– sometimes influenced by politics. A businessman, who preferred anonymity, said his land title was revoked in 2022 in Lagos despite making due payments for them and doing business there for over 10 years.
He said he had to move his business to another state, where he has had a breath of fresh air.
MSMEs in Nigeria generally have poor access to funding, and Lagos is not an exception. About 52 percent of small businesses can’t have access to finance, a report said.
In Lagos, electricity is erratic in several areas, except in places where there are Band A consumers.
About six million households spend N17 trillion on power annually. They burn about nine billion litres of fuel to self-generate more than 10 gigawatts of power annually, Biodun Ogunleye, Lagos energy commissioner, confirmed in January 2025.
Government’s efforts
However, the government is aware of some of the challenges and makes efforts to put the kibosh on them.
Babajide Sanwo-Olu, Lagos governor, signed the Lagos Electricity Bill 2024 into law, targeted at ensuring 24-hour electricity supply across the state.
According to Ogunleye, the state government intends to crystalise the ramping up of power generation in Lagos to six gigawatts in three years under the new state electricity law.
The state is also funding small businesses. It had, by July 2024, disbursed about N25 billion in grants and loans to small businesses through the Lagos State Employment Trust Fund (LSETF), Sanwo-Olu said. He said the disbursement was targeted at enhancing productivity and economic growth in the state.
Security is relatively better in Lagos, and land titles are faster to acquire for investors.
