A recent study conducted by PwC Nigeria has unveiled the dire financial straits faced by micro, small, and medium-scale enterprises (MSMEs) in the country. The survey, which analyzed the experiences of 567 MSMEs across 13 sectors and 29 states, revealed that these businesses require an estimated ₦13 trillion ($32.2 billion) in financing to survive the current challenging operating environment.
The study identified inadequate access to finance as the most significant challenge facing MSMEs, with 35 percent of respondents citing it as their top concern. Micro and small enterprises, particularly those operating in agriculture and retail, are particularly vulnerable due to their need for loans under $20,000.
PwC noted that limited private sector lending, poor infrastructure, and lack of documentation hinder access to credit. While digital finance is emerging as a potential solution, innovation is crucial to bridge the funding gap and effectively serve the needs of MSMEs.
Infrastructure Challenges Exacerbate Costs
In addition to funding constraints, MSMEs are grappling with a host of infrastructure challenges that significantly impact their daily operations. The survey found that unreliable power supply is a major concern for 21 percent of businesses, with electricity accounting for the biggest cost to their operations.
PwC highlighted the numerous issues plaguing Nigeria’s power sector, including deteriorating plant capacities, poor maintenance, inadequate gas supply, limited distribution networks, and the commercial viability of Distribution Companies (DisCos) operations.
Multiple Taxation, Inadequate Skilled Labor, and Insecurity
Other structural challenges facing MSMEs include multiple taxation (12 percent), inadequate skilled labor (11 percent), and insecurity (10 percent). These factors have created a hostile business environment, contributing to significant economic costs for MSMEs and the broader economy.
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The Importance of MSMEs to Nigeria’s Economy
Despite these challenges, MSMEs continue to play a vital role in Nigeria’s economy, creating jobs, generating income, and fostering skills development. However, their full potential remains untapped due to the persistent obstacles hindering their growth.
Sam Abu, Country Senior Partner at PwC Nigeria, emphasized the importance of supporting MSMEs: “MSMEs continue to contribute significantly to the global economy, creating jobs, generating income, and fostering skills development. These contributions make the sector pivotal to Nigeria’s growth, especially now given our country’s current challenges.”
Mrs. Abisola Atitebi, Partner, and Head of the MSME Help Desk at PwC Nigeria, highlighted the need for urgent action to address the challenges facing MSMEs: “MSMEs are a key driver of Nigeria’s economy, and their success is crucial for overall economic growth. The PwC MSME Survey 2024 highlights the sector’s resilience despite facing significant challenges such as macroeconomic headwinds, limited financing, and the urgent need for digital transformation.”
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If You Ask Me
The survey’s findings underscore the urgent need for policy makers, financial institutions, and other stakeholders to work together to provide the necessary support and resources to enable MSMEs to thrive. By addressing the funding gaps, infrastructure challenges, and other obstacles facing these businesses, Nigeria can unlock their full potential and drive sustainable economic growth.
