The Chairman of the Nigerian Economic Summit Group (NESG), Niyi Yusuf, has highlighted the critical challenges facing Nigeria’s economy and the urgent need for reforms to empower small businesses to thrive in a tough environment.
Speaking at the Lagos Business School on Nigeria’s 2025 economic outlook, Yusuf emphasized the importance of creating a supportive ecosystem for small and medium enterprises (SMEs), which account for the bulk of employment in Nigeria.
Inflation and Rising Costs: A Threat to SMEs
Yusuf noted that inflation, which peaked at 34% in mid-2024 and is projected to stay above 20% in 2025, continues to strain small businesses. He identified food inflation as a significant contributor, driven by insecurity that disrupts farming activities and post-harvest losses.
“High costs, particularly for food and raw materials, remain a huge burden for SMEs. Without interventions to stabilize prices, small businesses will struggle to sustain operations,” Yusuf warned.
Sectoral Challenges and Job Creation
Despite growth in sectors like oil and gas, ICT, and finance, Yusuf pointed out that job-creating industries like agriculture and construction underperformed in 2024. This underperformance limits opportunities for small businesses that rely on these sectors for contracts and partnerships.
He urged the government to prioritize policies that support job creation and promote growth in sectors critical to the SME ecosystem.
Forex and Economic Diversification
Nigeria’s foreign exchange crisis, heavily reliant on crude oil revenues, has left small businesses vulnerable to price volatility. While efforts to unify exchange rates have shown promise, Yusuf stressed the need for economic diversification to reduce dependency on imports and strengthen local production.
“Small businesses need predictable forex policies to plan effectively. Diversifying the economy will create opportunities for SMEs in non-oil sectors,” he said.
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High Interest Rates and Limited Credit Access
Yusuf expressed concern over record-high interest rates, which have made borrowing prohibitive for small businesses. With rates between 10% and 13%, many SMEs face challenges in securing affordable loans to expand their operations.
“Access to affordable credit is critical for SMEs, yet current monetary policies make this difficult. We need a balanced approach to support small businesses while tackling inflation,” he noted.
Infrastructure and Operational Costs
High energy and security costs, which account for over 50% of operating expenses for many businesses, further strain SMEs. Yusuf called for investment in energy and digital infrastructure to reduce costs and improve operational efficiency.
Practical Solutions for SMEs
Yusuf outlined strategies for SMEs to build resilience in challenging times:
Local Sourcing: Reducing dependency on imports to lower costs.
Technology Adoption: Leveraging digital tools and artificial intelligence to optimize operations and reach new markets.
Collaboration: Joining business advocacy groups and chambers of commerce to push for pro-SME policies.
He also emphasized the importance of financial literacy and cost optimization to help SMEs remain competitive.
Call to Action for Stakeholders
Yusuf urged the government to streamline governance by reducing the number of ministries, departments, and agencies (MDAs) to improve efficiency and free up resources for critical investments.
“Policy stability, security, and infrastructure are key to creating a conducive environment for SMEs,” he added.
As Nigeria navigates another challenging year, Yusuf called for coordinated efforts from the government, private sector, and SMEs themselves to address economic vulnerabilities and unlock growth opportunities.
