Micro, Small, Medium Businesses Dying From High Energy, Loan Costs

The year 2025 has emerged as a defining chapter for Nigeria’s micro, small, and medium enterprises (MSMEs), the unsung engines powering over 80 per cent of the nation’s economic activities and employing nearly 90 per cent of the workforce, according to the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).

From the bustling markets of Lagos to the agro-processing hubs in the North, these ventures—spanning tailoring shops, tech startups, and food processors—have weathered a perfect storm of soaring inflation above 30 per cent, high interest rates, acute liquidity pressures and persistent power outages, naira volatility, and lingering fuel subsidy removal shocks.

Across the year, tight monetary conditions pushed lending rates to punitive levels, weakened cash flows, and limited access to credit for small businesses already grappling with rising input costs, fragile consumer demand and structural infrastructure gaps. For millions of MSMEs, survival, not expansion, became the overriding priority.

Tight Credit, Weak Liquidity

Findings from the Central Bank of Nigeria (CBN) Business Expectations Survey for November 2025 underscored the scale of the challenge. According to the survey, high interest rates ranked among the top constraints facing Nigerian businesses, posting an index score of 67.2, as elevated borrowing costs and restrictive credit conditions curtailed access to finance.

Financial problems, including liquidity stress and weak balance sheets, followed closely with an index score of “64.7”, reflecting the difficulties MSMEs faced in restocking inventories, meeting operational expenses, and sustaining sales volumes.

Economists noted that with the Monetary Policy Rate held at historically high levels for most of 2025, commercial lending rates to SMEs hovered well above 30 per cent, effectively shutting small businesses out of formal credit markets.

“In practical terms, many MSMEs simply stopped approaching banks,” said a Lagos-based SME finance consultant. “At those rates, borrowing guarantees losses.”

Insecurity, Taxes and Power Top the Constraint List

Beyond financing, structural bottlenecks remained entrenched. The CBN survey shows that insecurity topped the list of business constraints nationwide with an index score of 70.1, highlighting the cost of security risks on production, logistics and investment decisions.

High or multiple taxation followed at 69.7, reflecting long-standing complaints by business owners over overlapping levies imposed by federal, state and local governments. Insufficient power supply ranked third at 69.3, reinforcing the centrality of electricity challenges to Nigeria’s MSME crisis.

Taken together, these constraints continue to erode competitiveness and discourage formalisation, particularly among micro and informal enterprises.

Artisans Groan Under Crippling Power Crisis

For artisans, informal traders and micro businesses, unreliable electricity supply was the most visible and immediate threat to livelihoods in 2025.

Across Lagos, Ogun and other commercial hubs, MSMEs reported severe disruptions caused by prolonged outages, high electricity tariffs and the rising cost of alternative power sources. Many operators were forced to rely on petrol and diesel generators, solar inverters and batteries, options that significantly inflated daily operating expenses amid weak revenues.

At the Ajuwon/Akute Market in Ifo Local Government Area of Ogun State, frozen food seller, Toyin Adeyeye, described months of losses driven by erratic power supply.

“We have no power to chill drinks, preserve frozen food or run cold rooms,” she said. “Cartons of chicken, fish and prawns spoiled within a week. Some traders survived with generators or solar, but many went into serious debt.”

Similar accounts emerged from Alagbole, Denro, Akute and other MSME clusters, where artisans complained of dwindling sales, bad debts and shrinking inventories.

Over 40m MSMEs Under Energy Stress

Industry groups estimate that over 40 million MSMEs nationwide are trapped in a prolonged crisis of low energy transmission and frequent power outages, disrupting business models across value chain, from food processing and welding to tailoring, laundry services and light manufacturing.

States most affected by high tariffs and unstable supply include Lagos, Ogun, Oyo, Osun, Ekiti, Delta, Rivers, Cross River and Edo, according to findings by LEADERSHIP.

Despite limited supply, many consumers reported being subjected to steep estimated bills. In Magboro, Ogun State, resident, Uwem Eyo, said prolonged blackouts had plunged small businesses into crisis, with some areas experiencing months without electricity.

A laundry operator in Ogba, Lagos, said he spends about N5,000 daily on fuel to power his generator, yet continues to receive high bills from Ikeja Electricity Distribution Company for power not consumed.

Similarly, Sophia Akodu, a resident of Ojodu Berger, lamented that her household now pays over N100,000 monthly despite not enjoying 24-hour supply.

“We are paying for electricity we don’t use, and nobody holds the power companies accountable,” said barber Mike Uweru, who now relies on rechargeable clippers to cut costs.

Business Closures Mount

The cumulative effect has been business closures, layoffs and rising informality. According to Association of Small Business Owners of Nigeria (ASBON), electricity-dependent businesses have been hit hardest.

ASBON president, Dr. Femi Egbesola, said operators of cold rooms, welding workshops and small manufacturing outfits are increasingly unable to cope.