Nigeria’s Micro, Small and Medium Enterprises (MSMEs) may be hemorrhaging between ₦5 trillion and ₦10 trillion each year due to employee corruption and occupational fraud, according to a new policy assessment released by the Centre for the Promotion of Private Enterprise (CPPE).
The projection was disclosed by CPPE Chief Executive Officer, Dr. Muda Yusuf, in a policy brief titled “Employee Corruption and Occupational Fraud in Nigeria’s MSMEs Sector.” The report frames internal fraud within small businesses as one of the most significant but underreported threats to Nigeria’s entrepreneurial ecosystem.
Hidden Economic Drain on Small Businesses
Dr. Yusuf noted that while MSMEs are already grappling with inflationary pressures, weakened consumer purchasing power, surging operating expenses, infrastructure gaps and limited access to credit, internal fraud remains a deeply corrosive but less visible burden.
He stressed that tackling employee corruption is not merely a compliance or ethics matter, but a macroeconomic imperative.
“Employee corruption and occupational fraud constitute one of the largest hidden drains on Nigeria’s entrepreneurial economy, with annual losses ranging from ₦5 trillion to ₦10 trillion,” Yusuf stated.
He added that such losses quietly erode profitability, discourage investment, destroy jobs, diminish government revenue and ultimately undermine inclusive economic expansion.
According to the CPPE, without decisive action, internal financial leakages within MSMEs could continue to weaken the sector’s ability to serve as a stabilising force in Nigeria’s economy.
MSMEs at the Core of Economic Stability
The CPPE emphasised that MSMEs account for the overwhelming majority of businesses operating in Nigeria and contribute roughly half of national output, particularly within the non-oil segment of the economy.
The think tank argued that safeguarding the stability of small enterprises is essential for employment generation, poverty reduction and broad-based economic development.
Given their central role, Yusuf maintained that fraud prevention, stronger governance structures and digital transparency must become integral components of enterprise policy and business operations.
Global Benchmarks and Nigerian Estimates
Drawing from international occupational fraud studies, the CPPE highlighted that organisations globally are estimated to lose between 5 percent and 10 percent of annual revenue to employee-related fraud.
Research also shows that small businesses experience disproportionately higher exposure to fraud risks due to weaker internal control mechanisms, heavy reliance on cash transactions, limited auditing capacity, low detection rates and high informality.
Applying conservative assumptions to Nigeria’s MSME sector—whose output accounts for approximately 50 percent of GDP—the CPPE concluded that annual fraud-related losses could reasonably fall within the ₦5 trillion to ₦10 trillion range.
Yusuf described these losses as “a massive hidden tax on entrepreneurs,” one that erodes profit margins, reduces capital available for reinvestment and constrains employment expansion.
Thin Margins and High Failure Rates
The report pointed out that many Nigerian MSMEs operate on narrow margins, frequently below 15 percent of turnover. Fraud losses ranging between 5 percent and 10 percent of revenue can therefore eliminate profits entirely.
Such financial strain can deplete working capital and accelerate business closures.
The CPPE referenced studies indicating that as many as 80 percent of small businesses fail within five years, with more than half shutting down in their first year of operation. Employee fraud, it noted, is a significant contributing factor to these failures.
This cycle, Yusuf warned, traps businesses in a low-productivity environment, weakens competitiveness and limits enterprise scalability.
He described occupational fraud as not merely a corporate governance concern but a national welfare issue with wide-ranging socioeconomic consequences.
Sectors Most at Risk
The policy brief identified retail and wholesale trade, hospitality, food services, agribusiness and produce trading, as well as the entertainment sector, as particularly vulnerable to employee-related fraud.
These industries typically involve high daily cash volumes, frequent transactions, inventory handling, limited documentation and dispersed supervision structures.
Because these sectors collectively employ a substantial share of Nigeria’s MSME workforce, the macroeconomic implications of occupational fraud become even more significant.
Policy Recommendations and Governance Reforms
To mitigate the challenge, the CPPE advocated a coordinated public-sector response. Yusuf recommended the development of a national MSME internal-control framework that could be linked to credit access and government intervention programmes.
He also called for accelerated digital financial inclusion, stronger enforcement mechanisms, improved asset-recovery processes and expanded governance education for entrepreneurs.
At the enterprise level, Yusuf advised business owners to adopt basic governance improvements that can substantially reduce fraud risks even in small operations.
He recommended separating cash-handling responsibilities from record-keeping and approval functions, conducting regular reconciliation of sales, cash and inventory, and implementing periodic independent account reviews.
Digital adoption was highlighted as a critical anti-fraud measure.
According to Yusuf, the use of digital payment systems and simple accounting software enhances transaction traceability, making diversion and concealment significantly more difficult.
“Digitalisation is one of the most powerful low-cost anti-fraud tools available to MSMEs,” he said.
For businesses unable to afford individual audit services, he suggested accessing pooled bookkeeping and audit arrangements through trade associations, participating in governance training initiatives and engaging periodic professional compliance assessments.
Strategic Economic Imperative
The CPPE concluded that strengthening internal controls within MSMEs is central to unlocking the sector’s full growth potential.
By reducing fraud-related losses, Nigeria’s small businesses would improve profitability, enhance resilience, increase reinvestment capacity and support broader economic transformation.
For policymakers and enterprise leaders alike, the message is clear: combating occupational fraud within MSMEs is essential not only for business survival but for sustaining national economic development.
 may be hemorrhaging between ₦5 trillion and ₦10 trillion each year due to employee corruption and occupational fraud, according to a new policy assessment released by the Centre for the Promotion of Private Enterprise (CPPE).){kind=link}