KEY POINTS

• The Association of Small Business Owners of Nigeria says rising operating expenses, loan obligations and multiple government levies are threatening small business survival.
• LCCI says high energy, logistics, financing and regulatory costs continue to undermine business competitiveness.
• Nigeria’s Monetary Policy Rate fell to 23 per cent in September 2026 from 26.5 per cent, but borrowing costs remain a concern for smaller enterprises.
• AERE estimates Nigeria’s credit deficit at more than ₦130 trillion, limiting access to financing for businesses.

MAIN STORY

The Association of Small Business Owners of Nigeria (ASBON) has warned that rising operating costs, mounting debt obligations and multiple taxes imposed by state and local governments are forcing small businesses across the country to shut down.

ASBON National President, Dr Femi Egbesola, described the situation as a humanitarian crisis in a media chat with LEADERSHIP, saying many entrepreneurs could no longer withstand the financial pressure.

He said escalating operating expenses, difficulties in repaying loans and overlapping government levies were leaving business owners struggling to keep their enterprises afloat, with some unable to continue operating.

“Many businesses simply cannot cope with the harsh economic environment. Owners are closing their shops, unable to meet loan obligations or manage skyrocketing operational costs. Several people have died under the pressure; others are in the hospital. It’s a humanitarian crisis,” Egbesola said.

The association warned that continued business closures could threaten employment, household incomes and economic activity, particularly among low-income earners who depend on small enterprises for their livelihoods.

Egbesola also criticised state and local governments for imposing multiple and overlapping levies, arguing that the charges add to the financial burden on businesses already contending with high operating expenses.

Historical data from the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) show that the country’s micro, small and medium enterprise (MSME) population declined from 41 million in 2017 to 39 million in 2021. The figures were attributed to economic difficulties and financing constraints, although they do not establish the current number of active businesses or closures nationwide.

The President of the Lagos Chamber of Commerce and Industry (LCCI), Engr. Leye Kupoluyi, also warned that the cost of doing business remained excessively high, particularly for MSMEs and manufacturers.

He identified electricity and alternative energy, diesel, logistics, financing, imported raw materials, machinery, regulatory compliance and multiple taxes as major constraints on business competitiveness.

Although the Central Bank of Nigeria (CBN) reduced the Monetary Policy Rate to 23 per cent at its September 21 to 22, 2026 meeting from 26.5 per cent previously, Kupoluyi cautioned that the reduction would take time to translate into lower lending rates for smaller businesses and manufacturers.

The benchmark rate remains high, leaving businesses concerned about the cost of obtaining working capital to purchase inventory, pay suppliers and maintain daily operations. Smaller enterprises often face additional barriers because of commercial banks’ lending requirements and collateral demands.

The Chairman of the Alliance for Economic Research and Ethics (AERE), Hon. Dele Kelvin Oye, put Nigeria’s credit deficit at more than ₦130 trillion, arguing that the shortfall was constraining the growth of about 39 million MSMEs.

According to Oye, limited access to formal credit forces many businesses to depend on informal financing or expensive short-term loans. This can restrict investment in equipment, expansion and recruitment while leaving enterprises more exposed to economic shocks.

Energy expenses have added to the pressure, particularly for businesses that rely on generators because of unreliable public electricity supply.

Dr Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise (CPPE), has also warned that high energy costs, elevated interest rates and weak consumer purchasing power are eroding business margins.

“The real economy remains under considerable pressure despite improvements in the macroeconomic environment. Businesses continue to grapple with elevated production costs, high interest rates, inadequate electricity supply, logistics bottlenecks and weak transport infrastructure, all of which continue to undermine productivity and competitiveness,” Yusuf said.

He added that elevated energy, logistics and raw material costs, combined with weak consumer demand, were squeezing margins and increasing business vulnerability, particularly in consumer-facing sectors.

Yusuf also said rising petrol prices had increased transportation, logistics and production costs, weakening consumer purchasing power and worsening the competitiveness challenges facing MSMEs.

THE ISSUES

The concerns raised by ASBON point to a combination of pressures rather than a single cause of business failure. Enterprises are facing higher expenses while contending with debt repayments, limited access to affordable financing and customers whose purchasing power may not support further price increases.

Multiple taxes and levies can add to these pressures, particularly where businesses face overlapping charges from different levels of government. For small enterprises operating on narrow margins, these costs can reduce the funds available for stock, wages, rent and other essential expenses.

The cost of credit presents another constraint. Although the CBN’s reduction in the Monetary Policy Rate represents a change in monetary policy, it does not automatically mean commercial banks will immediately lower lending rates or relax collateral requirements. Businesses may therefore continue to face expensive financing even after a policy rate reduction.

Energy and logistics expenses also affect production costs and the prices businesses charge customers. Where entrepreneurs cannot pass these increases on without losing sales, their profit margins come under further pressure.

WHAT’S BEING SAID

“Many businesses simply cannot cope with the harsh economic environment. Owners are closing their shops, unable to meet loan obligations or manage skyrocketing operational costs. Several people have died under the pressure; others are in the hospital. It’s a humanitarian crisis.” – Dr Femi Egbesola, National President, ASBON.

“The real economy remains under considerable pressure despite improvements in the macroeconomic environment. Businesses continue to grapple with elevated production costs, high interest rates, inadequate electricity supply, logistics bottlenecks and weak transport infrastructure, all of which continue to undermine productivity and competitiveness.” – Dr Muda Yusuf, Chief Executive Officer, CPPE.

“Energy, logistics and raw material costs are elevated, while weak consumer demand limits pricing flexibility… The result is a tightening squeeze on margins, declining profitability and rising business vulnerability, particularly in consumer-facing sectors.” – Dr Muda Yusuf, Chief Executive Officer, CPPE.

“The recent escalation in petrol prices had increased transportation, logistics and production costs, weakening consumers’ purchasing power… The recent increase in fuel prices also worsened the competitiveness challenges confronting businesses, particularly micro, small and medium enterprises (MSMEs).” – Dr Muda Yusuf, Chief Executive Officer, CPPE.

WHAT’S NEXT

The concerns raised by the business groups point to several areas requiring attention: reducing overlapping taxes and levies, improving access to affordable financing, addressing electricity and logistics costs, and easing regulatory burdens on smaller enterprises.

The impact of the CBN’s monetary policy reduction will also be important to monitor, particularly whether it eventually leads to more affordable loans for MSMEs and local manufacturers.

BOTTOM LINE

ASBON’s warning highlights the financial pressure facing Nigerian small businesses as operating costs, debt obligations and multiple levies combine with expensive credit and weak consumer demand. Without improvements in the business environment and access to financing, struggling enterprises may find it increasingly difficult to maintain operations, protect jobs and invest in growth.

Source: NAN