Are you curious about the state of small businesses in Nigeria?
Are you wondering how many small businesses exist in Nigeria and what their impact has been on the economy?
Do you want to know why some small businesses fail and others succeed?
Then you are in luck!
This is because we have curated, vetted and categorized an updated list of important small business statistics you should know as a business owner.
In this post, you will find
- General small business statistics in Nigeria
- Global small business statistics
- An in-depth explanation of the top small business statistics in Nigeria.
Let’s dive in.
Top Small Business Statistics in Nigeria
- In Nigeria, SMEs contribute 48 % to the national GDP
- SMEs account for 96% of businesses and 84% of employment
- One of the most effective ways for SMEs to connect with their target audience is through social media. In January 2023, there were 31.60 million social media users in Nigeria, equating to 14.3 percent of the total population
- At least, 39,654,385 micro, small and medium enterprises (MSMEs) operated in Nigeria as of December 2021 ( Source)
- Research shows that over 50% of SMEs fail in their first year of operation ( Source)
- More specifically, the research shows further that more than 95% of SMEs fail during their first five years
- Over 40% of small businesses fail due to no market demand for their products or services
- Obtaining finance, finding customers and infrastructure deficits are the most pressing problems of SMEs ( Source )
- Electricity is responsible for the highest cost to operations followed by rent and the cost of capital ( Source )
- Local government levies are the most difficult taxes to comply with.
Interesting General Small Business Statistics
- Globally, 90% of all companies are small businesses and they account for 50% of jobs
- 600 million jobs will be needed by 2030 to absorb the growing global workforce, making SME development a high priority for many governments around the world
- One of the most effective ways for SMEs to connect with their target audience is through social media. Social media usage is one of the most popular online activities. In 2021, over 4.26 billion people were using social media worldwide, a number projected to increase to almost six billion in 2027
- There are around 400 million small businesses worldwide
- More than 20% of small enterprises fail in the very first year, and nearly 50% of small startups fail within the first five years (Bureau of Labor Statistics, 2021)
- About 70% of businesses with employees will survive their second year in business
- SMEs represent about 90% of businesses and more than 50% of employment worldwide
- The International Finance Corporation (IFC) estimates that 65 million firms, or 40% of formal micro, small and medium enterprises (MSMEs) in developing countries, have an unmet financing need of $5.2 trillion every year, which is equivalent to 1.4 times the current level of the global MSME lending
- Formal SMEs contribute up to 40% of national income (GDP) in emerging economies
- 64% of surveyed small businesses use social media in their marketing strategy (The Manifest, 2019).
Top 10 Small Business Statistics
1: Social Media is one of the Strongest Channels for SMEs
One of the most effective ways for SMEs to connect with their target audience is through social media. In January 2023, there were 31.60 million social media users in Nigeria, equating to 14.3 percent of the total population. Using social media channels for your advertising operations has a wealth of benefits.
2: Number of SMEs in Nigeria
At least, 39,654,385 micro, small and medium enterprises (MSMEs) operated in Nigeria as of December 2020 as against 41,543,028 million that were in existence in 2017, indicating a decrease of 4.5 %. The agricultural and wholesale or retail sectors accounted for the largest proportions of informal micro enterprises (MEs) operating in Nigeria in 2020. In that year, the number of wholesale MEs reached approximately 12.8 million, while for the agricultural sector, the count reached around 14.8 million.
3: Value of SMEs in Nigeria
Small and medium-sized businesses (SMEs) are essential to the growth of any economy because they have a significant potential to create jobs, advance local technology, diversify output, foster home grown entrepreneurship, and integrate with large-scale industries. In Nigeria, SMEs contribute 48 % to the national GDP. ( Source )
4: Number of Jobs Created by SMEs in Nigeria
Small businesses play a crucial role and contribute to the economy’s expansion and a strong economy typically has a strong small business sector. In Nigeria, SMEs account for 96% of businesses and 84% of employment.
5: Average SME turnover in Nigeria?
In SMEDAN and NBS findings, 64.5 % of micro-enterprises in Nigeria have a monthly turnover of less than N50,000, while 29.4 % have an average income of N50,000 to N300,000, and the remaining have a monthly turnover of N600,000 to N900,000.
6: Percentage of SMEs that Fail
Almost 50% of Businesses fail in their first year of operation, according to research. More specifically, the survey informs us that more than 95% of SMEs fail during their first five years. Although risk cannot be completely eliminated, recognising it better always helps.
7: Over 40% of Small Businesses Fail Due to a Lack of Demand
It is important to conduct deeper market research prior to starting a business. Over 40% of small businesses fail due to no market demand for their products or services. 19% say failure was due to being “outcompeted” while 17% say it was because of their poor product offering.
8: Effect of COVID-19 on SMEs in Nigeria
Businesses were hindered as a result of lockdowns and movement restrictions intended to stop the spread of COVID-19. This created enormous anxiety for the Nigerian business community and investors. A recent survey shows that about 94.3 % of the businesses in Nigeria have been hit by the pandemic. That number is so high considering the number of small businesses in Nigeria.
9: Most Common Reason for Starting Up SMEs
According to a 2019 study by Guidantfinancial, 55% of its respondents established their firms in order to be their own bosses. People’s desire to pursue their passion is the second most important factor. This response was given by 39% of the study participants. Other factors include discovering the opportunity, needing a retirement plan, and being dissatisfied with one’s current employment.
10: Challenges Affecting SMEs in Nigeria
The main challenges affecting the SMEs in Nigeria include poor/ inadequate infrastructure. This has been a major obstacle to the growth of SMEs. Lack of access to funds is another challenge that small business owners face. Asides from power, the lack of good access roads and other social amenities has also hindered the growth of SMEs. ( Source )
The small business economic activities in Nigeria play a significant role nationwide and are essential for wealth generation, job creation, economic diversification, innovation, and poverty alleviation.
With a good financial business partner, most small business can achieve their potential with increase access to infrastructure by government and loan facilities by financial institutions.