When visibility is the goal, no one chooses 100 dim bulbs over 10 bright ones. The same logic applies to Nigeria’s Small and Medium Enterprises.
According to the SMEDAN and National Bureau of Statistics 2021 MSME survey, Nigeria has more than 39 million Micro, Small and Medium Enterprises. They account for about 96 per cent of all businesses in the country and contribute close to half of the GDP. They also employ roughly 88 per cent of the workforce, making them Nigeria’s largest job creator by far.
Yet the numbers do not translate into industrial strength. Nigeria remains behind in the number of developed economies in Africa. The country still relies heavily on foreign goods and services, struggles with poor infrastructure, and records insufficient industrial output. This spotlights the gap that raises a fundamental question: what were these 39 million businesses built to do?
Where the Gap Is
No doubts; SMEs matter. Their inadequacies do not lie in job creation but in reducing Nigeria’s dependence on imported everyday goods and basic food that could be produced locally. It is therefore evident that more SMEs is not what the country needs but enterprises with the capacity to grow, merge and take on the big structural problems that hold the economy back.
Consider these four critical sectors:
Telecommunications
Modern commerce runs on connectivity. Yet Globacom is the only major network provider that is fully Nigerian-owned, and it sits in a distant third behind MTN and Airtel, both foreign-owned.
Manufacturing
Dangote, BUA and Innoson are important, but they do not suffice on their own. The many small, disconnected operators in the sector lack the scale to compete globally or to anchor supply chains.
Fashion
Nigeria fashion is renowned for talents and creativity and not yet known for global-scale manufacturing. No Nigerian apparel firm currently operates at the size and export capacity of an international brand.
Transportation
Bolt, a foreign company, runs the ride-hailing space. The absence of a Nigeria-owned platform at scale is a sad reality.
These are not minor omissions. They point to a pattern: Nigerian entrepreneurs are largely absent from the sectors that build national capacity.
Why This Pattern Persists
Simply put, most Nigerian SMEs were built for survival and never to tackle national problems. Research on entrepreneurship in Nigeria supports this claim. It show that necessity-driven entrepreneurship is far more common in Nigeria than opportunity-driven entrepreneurship. Also, a study found that entrepreneurs who are opportunity-driven tend to have far better growth outcomes than necessity-driven ones. Any business built to answer “How do I eat this month?” is optimised for immediate cash flow, low risk, minimal capital, and a fast exit. This explains the clustering in trading, retail, food services, and phone or data resale. These are low-capital, fast-cycle activities. As a result, SMEs are structurally absent from power, water, and heavy manufacturing.
This starting point is not unique to Nigeria. Some countries began the same way and took a different path. For instance, South Korea was majorly known for agriculture and thousands of small, fragmented businesses in the 1960s. Under President Park Chung Hee, the state deliberately backed the growth of large, diversified conglomerates known as chaebols: including companies like Samsung, Hyundai, and LG. The state provided loans and protection in exchange for export and production targets. While fragmented firms were consolidated into industrial giants.
Japan followed a similar model earlier in its industrial history through the zaibatsu, large family-controlled conglomerates that pooled capital, labour, and expertise across banking, shipping, and manufacturing under one roof instead of dissecting into separate small firms.
Both examples prove that fragmentation is a policy choice, not a permanent condition. Deliberate consolidation, backed by the state and coordinated with long-term capital, can transform the landscape.
So What Needs to Change?
For SMEs
A mindset shift is overdue. It is high time entrepreneurs considered partnership and merger as a path to scale rather than a threat to control. When two or three fashion brands merge into one manufacturing operation, outputs increases and competitiveness improves.
For Government
The state must create conditions for ambitious and long-term business. That means stable power supply so manufacturers are not crippled by generator costs; simpler tax administration; and access to long-term, low interest credit. It could also explore adapting the banking consolidation model of 2005 that was led by former CBN Governor Charles Soludo to other sectors, using policy to nudge fragmented operators to merge into stronger entities.
For Investors and Financial Institutions
Quick return retail and trading loans should be replaced with capital products designed for patient, infrastructure-style investment with longer horizons.
For Everyday Nigerians
Survival businesses matter and deserve support, but they are not national development strategy. Nigeria is not short of entrepreneurs; it is short of entrepreneurs positioned, financed, and organised to solve its biggest problems.