Nigeria’s micro, small, and medium enterprises (MSMEs) form the backbone of the local economy. With over 39 million MSMEs, they contribute 46% to the GDP and employ over 60 million people.
Yet despite their scale, more than 80% shut down within five years — a staggering loss of economic value and investment potential.
For investors looking to tap into Africa’s largest economy, understanding what drives MSME failures — and what can unlock their growth — is essential.
Here are three key financial insights to help investors position themselves within this critical sector:
1. MSME Failure Is a Market Gap, Not Just a Risk
The high attrition rate (80% within five years) isn’t just a cautionary tale — it signals a gap in business infrastructure and support services that investors can fill.
- Opportunity: Fintechs and SaaS providers can build scalable tools that support MSME survival, from bookkeeping and inventory software to affordable payroll solutions.
- Market example: Platforms offering simple accounting solutions (e.g., digital ledgers) are already gaining traction with informal traders and micro-retailers.
Investors should see MSME support infrastructure as a latent goldmine, not just an aid effort.
2. Nigeria’s Credit Gap for MSMEs is Over N617 Billion
Most MSMEs are invisible to traditional lenders due to poor recordkeeping and informal structures. Yet, the financing gap for these businesses is estimated to exceed N617 billion, according to SMEDAN and IFC reports.
- Opportunity: Investors can back alternative lending platforms or credit-scoring engines that use non-traditional data to underwrite MSME loans.
- Asset class relevance: These platforms represent a strong entry into Nigeria’s fast-growing digital lending sector, with yields higher than traditional banking products, and a built-in social impact upside.
3. Survival = Recurring Returns
MSMEs that cross the five-year mark are twice as likely to grow into mid-sized businesses with recurring revenue streams. Early-stage capital — especially in the form of equity, grants, or revenue-based financing — can enable this survival.
- Portfolio play: Consider building a micro-fund that seeds high-potential MSMEs, not with debt, but with tools and working capital in exchange for revenue-share or small equity slices.
- Exit angle: As formalization grows (with structure, accounting, and digital visibility), these businesses become acquisition-ready or DFI-backed, creating real exit windows.
In other words, helping an MSME survive is not just good economics — it’s smart investing.
The Bottom Line
Nigeria’s MSME space has long been viewed through a development lens. But it is time investors took a second look, not for CSR, but for ROI.
Whether it’s fintech, business infrastructure, credit scoring, or micro-funds, the opportunity isn’t in creating new businesses — it is in helping existing ones stay alive and scale. That’s where the next frontier of value lies.
Mr Seyi Asagun is a finance expert and is the CEO of Entourage Integrated Trust Ltd. You can read more of his deep insights in his publication, The Seyi Asagun Brief, on substack.
