High Rents Force MSMEs To Close Physical Shops, Opt For Remote Operations

Rising commercial rents and escalating occupancy costs are forcing a growing number of Micro, Small and Medium-sized Enterprises (MSMEs) to shut down physical offices and retail outlets in favour of online and home-based operations, as entrepreneurs struggle to stay afloat amid Nigeria’s harsh business environment.

Across major commercial centres in Lagos, Ogun, Abuja, and Port Harcourt, businesses are increasingly abandoning traditional office spaces as soaring rents, electricity tariffs, logistics costs, multiple tenancy charges, and weak consumer spending continue to erode profitability.

For many entrepreneurs, maintaining a physical office has become a financial burden they can no longer sustain, making digital platforms and remote work more viable options.

An entrepreneur and founder of a Lagos-based branding and digital marketing firm, Adenike Johnson, said the decision to close her office was driven by the sharp increase in rent.

“I had to give up my office after the landlord demanded almost double the previous rent. Most of our meetings now hold virtually. Our clients are comfortable with video calls, and we have significantly reduced our overhead,” she said.

Similarly, Chinedu Okafor, who runs an online fashion accessories business, said he converted his physical shop in Lekki into a warehouse after realising that most of his sales now come through digital platforms.

“Paying millions annually just to maintain a showroom no longer makes economic sense when over 80 per cent of our sales come through Instagram and WhatsApp,” he said.

Mrs Yemisi Ashaolu, another entrepreneur, said she relocated her business to her apartment because of the persistent increase in commercial rents.

“We haven’t closed our business; we are now online and taking customers’ orders. We’ve simply closed our office because landlords continue to increase rents at every opportunity,” she said.

For Mrs Chioma Okoli, who operated from Lagos’ Yaba business district, the rising cost of electricity, service charges, and rent made it impossible to continue running a physical office.

“I can’t continue to cope with outrageous electricity bills, maintenance fees, and constant rent increases at both my home and business premises. Most of our profits were going into operating expenses, so I moved the business back home,” she said.

A cosmetic and perfume dealer in Abule Egba, Funsho Akinajo, said soaring electricity tariffs, service charges, and local government taxes had made physical business operations increasingly difficult.

“We spend more on electricity, maintenance fees, service charges, and council taxes. Most of our profits are ploughed back into the business. Relocating to my house was the only way to reduce operating costs,” she said.

Esther Ajibade also said rising rents and transport costs forced her to shut her physical store and move sales to social media platforms.

“The cost of maintaining a shop became unbearable. Today, we sell through Instagram, WhatsApp, TikTok, and e-commerce platforms, where we have built a loyal customer base,” she said.

The growing migration to virtual operations comes as businesses continue to grapple with inflation, exchange rate volatility, rising energy costs, and declining consumer purchasing power.

According to the Lagos Chamber of Commerce and Industry (LCCI), MSMEs remain among the worst affected by the current economic climate. The chamber’s Business Environment Monitor shows that nearly four out of every five businesses recorded higher operating costs during the first quarter of the year, with rent ranking among the five largest business expenses alongside electricity, logistics, repairs, and staff salaries.

LCCI director-general, Dr Chinyere Almona, said MSMEs remain under severe financial pressure due to inflation and rising operating costs, stressing the need for policies that reduce the cost of doing business and enable enterprises to remain competitive while sustaining employment.

Economists warn that the increasing migration away from physical offices could significantly alter Nigeria’s commercial property market and labour landscape.

Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said businesses are merely adapting to harsh economic realities.

“When occupancy costs become unsustainable, firms naturally seek alternative operating models that reduce fixed costs while maintaining productivity,” Yusuf said.

He noted that digital technology has enabled consulting firms, technology companies, creative agencies, and other service providers to remain productive without maintaining expensive office spaces.

“SMEs are already burdened by high energy costs, expensive financing, logistics challenges, and weak consumer demand. Rent has become another major cost many businesses can no longer absorb,” he added.

Property analysts, however, argued that landlords are equally facing mounting costs arising from inflation, exchange rate depreciation, rising construction costs, security expenses, and higher building maintenance costs, making rent increases difficult to avoid.

President of the Association of Small Business Owners of Nigeria (ASBON), Dr Femi Egbesola, described commercial rent as one of the biggest threats to business survival.

“Many businesses have shut down because they can no longer cope with rising rents, agency fees, legal charges, and other associated costs,” he said.

Egbesola called on governments to introduce comprehensive real estate reforms, regulate rental practices, and strengthen enforcement of tenancy laws.

According to him, Nigeria should emulate countries where tenants are not compelled to pay annual rent upfront and where landlords cannot impose arbitrary rent increases or evictions.

“If more Nigerians can access long-term mortgage financing instead of making huge upfront payments, pressure on the rental market will gradually reduce,” he said.

He also urged the government to establish continuous intervention funds offering single-digit interest loans to MSMEs, improve access to stable electricity, simplify customs procedures, ease access to foreign exchange, and reduce regulatory burdens on small businesses.

Egbesola further warned that many entrepreneurs unknowingly operate at a loss because they lack proper accounting systems, adding that data from last year already pointed to a disturbing increase in business closures.

“If Nigeria intends to build a stronger economy, government must deliberately support nano and micro enterprises because they represent the foundation from which future small, medium, and large businesses will emerge,” he said.

Business development expert, Dr Timi Olubiyi, advised entrepreneurs to approach relocation decisions strategically, noting that while technology has made remote work more feasible, business location remains a critical factor in long-term success.

He said the rising cost of doing business has become the dominant factor influencing where businesses operate, adding that while digital platforms can successfully replace physical outlets for some enterprises, retail businesses should adopt a balanced approach by combining technology with selective physical presence where necessary.