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As rising costs, limited access to finance and stiff competition continue to challenge micro, small and medium enterprises (MSMEs), experts have offered a cocktail of strategies to keep them afloat amid sinking tides.
They urged business owners to strengthen their record-keeping, embrace sound financial management and explore new markets to remain afloat. They said adopting better business practices, improving efficiency and identifying fresh growth opportunities would help small businesses overcome economic pressures, attract investors and build sustainable operations in an increasingly difficult business environment.
Experts believe operators in this sector have so much to do to align with the trend and thrive in the field despite economic challenges and the harsh operating environment.
Many SMEs remain trapped in survival mode and a lot must change to unlock growth at scale.
For some operators, meeting daily operating expenses has become more pressing than investing in new equipment, expanding production or exploring new markets. Others struggle to secure loans because they lack verifiable financial records, adequate collateral or the capacity to meet conventional lending requirements.
Yet, despite the difficult operating environment, stakeholders in the MSME sector believe that small businesses can move beyond survival and achieve sustainable growth if operators strengthen their business foundations, embrace digitalisation and explore new opportunities for financing and market access.
They also argue that government policies must address structural constraints, particularly unreliable electricity, expensive credit and limited access to markets, to create an environment where small businesses can compete and thrive.
Beyond access to funding, experts insist that MSMEs must strengthen their business models, maintain verifiable financial records, formalise business, develop relevant skills and explore alternative financing arrangements. Also, to demonstrate the capacity to manage borrowed funds is important.
Stakeholders recommend cooperative lending, equity partnerships, invoice discounting and support from development finance institutions, business associations and government agencies as practical ways to overcome the limitations of conventional bank lending and unlock opportunities for expansion.
Chairman, National Association of Small Scale Industrialists (NASSI), Lagos branch, Gertrude Akhimien, said poor bookkeeping and inadequate financial documentation remain major reasons small businesses struggle to secure bank loans, apart from high interest rates.
She advised MSME operators to maintain proper financial records, formalise their businesses and build credible transaction histories to improve their chances of accessing finance.
“MSMEs must tidy up their books and formalise their records. The number one reason for bank rejection, after high interest rates, is poor bookkeeping. Banks need 12 months of bank statements and audited cash flow,” she said. Akhimien also urged small business owners to join trade associations, where they could learn from experienced operators, access business support and strengthen their bargaining power.
According to her, collective financing arrangements can help small businesses negotiate better lending terms than they would obtain individually.
“Cluster lending through cooperatives and trade associations such as MAN and NASSI gives better negotiating power than individual walk-ins,” she said.
She further advised entrepreneurs to consider equity financing rather than relying solely on expensive loans to fund expansion.
“Use equity more than debt for expansion. Bring in partners rather than taking a 32 per cent loan to buy a machine,” she said, while urging operators to embrace digitalisation to improve efficiency and competitiveness.
Similarly, Chief Executive Officer of Rimax Group, Livinus Okwara, said the prevailing high monetary policy rate and the inability of many small businesses to provide acceptable collateral are forcing lenders to reconsider traditional credit assessment models. He explained that lenders are increasingly exploring alternatives such as cash-flow-based lending, joint-liability arrangements and invoice discounting to reach businesses that could not meet conventional collateral requirements.
Okwara noted that lending rates remained closely linked to the Monetary Policy Rate (MPR), adding that although rates had moderated slightly, the prevailing cost of borrowing continued to constrain productive investment by MSMEs.
He identified informality, inadequate financial records and the absence of established credit histories as major obstacles preventing small businesses from accessing institutional finance.
“Number one, they do not have collateral. They operate in the informal sector, which is not organised, and they have no credit history or credit records,” he said.
According to him, many small businesses operate without formal registration, proper accounting systems or verifiable cash flows, making it difficult for financial institutions to assess their creditworthiness using conventional methods.
Consequently, he said, some entrepreneurs depend on family members, friends, churches and cooperative societies for funding, while others resort to loan sharks whose lending terms can worsen their financial difficulties.
Okwara advocated business models that help informal operators organise their activities, monitor transactions and establish reliable cash flows before extending credit to them.
He explained that such an approach would enable lenders to assess businesses based on their capacity to generate revenue and repay loans rather than relying exclusively on the assets they own.
“In this environment, lending against collateral is difficult,” he said, stressing the need for financial institutions to develop products that reflect the realities of small businesses.”
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He also identified financial literacy as a critical requirement for MSMEs growth, noting that many entrepreneurs lacked a clear understanding of capital, profit, cash flow and the financial obligations associated with borrowing.
He called for continuous financial education and follow-up support to help business owners make informed decisions and manage their resources effectively.
Okwara further highlighted invoice discounting as an important financing option, particularly for businesses whose funds remained tied up in unpaid invoices.
He said allowing SMEs to obtain financing against verified invoices could improve liquidity, enable them to meet immediate obligations and reduce disruptions to their operations.
Beyond financing, he said the operating environment remained particularly difficult for manufacturers and other businesses with high energy requirements.
“Access to finance, power and lack of education on necessary requirements, among others, are constraining their growth. Interest rates of over 30 per cent make it very difficult for SMEs to survive, and collateral requirements are often unrealistic for young businesses,” he said.
Okwara illustrated the pressure of energy costs on business profitability, citing the amount his company spends on generating electricity.
He also called for a review of the multiple taxes and levies imposed on small businesses, advocating clearer and harmonised tax assessments to enable operators to plan their finances with greater certainty.
From the policy and institutional perspective, Director General of the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Charles Odii, identified business formalisation as one of the biggest structural gaps preventing MSMEs from accessing finance, government incentives and organised support.
He said Nigeria has about 40 million MSMEs, but many operate outside formal systems, limiting their visibility to financial institutions and government agencies.
“There are about 40 million MSMEs in Nigeria, but many are not captured in any system,” Odii said.
He added: “If a business is not registered, it is invisible, and when you are invisible, you cannot access finance, incentives or structured support.”
Odii explained that although many entrepreneurs identified access to finance as their biggest challenge, formalisation often determined whether they could qualify for available financing opportunities in the first place.
He said SMEDAN was addressing the challenge through cluster-based approaches designed to reduce individual collateral requirements and facilitate access to zero-interest or blended financing.
Under such arrangements, businesses can benefit from collective structures and institutional support that improve their access to funding while strengthening their capacity to operate sustainably.
The SMEDAN chief stressed the importance of ensuring that small businesses were properly organised and positioned to benefit from government interventions and development programmes.
An SMEs expert, Daniel Dickson-Okezie argued that MSME growth could accelerate when governments actively address the cost pressures confronting business owners.
He emphasised the importance of interventions that reduce operating costs and create a more supportive environment for entrepreneurs to invest, expand and create jobs.
“These interventions are not just about finance; they are about creating an environment where SMEs can think beyond survival and begin to scale,” he said.
For President of the Association of Small Business Owners of Nigeria (ASBON), Dr Femi Egbesola, many SMEs were being shut out of growth opportunities by high operating costs and the absence of platforms through which they could showcase their products, connect with customers and build commercial partnerships.
He highlighted the importance of creating platforms that connect small businesses to markets and potential partners, noting that visibility and access to customers were essential to business expansion.
For MSMEs to thrive in Nigeria’s difficult economic environment, stakeholders agree that business owners must strengthen their internal operations while government and financial institutions address the structural barriers that constrain their growth.
They said affordable and innovative financing, reliable electricity, improved business skills, predictable taxation, digital adoption and access to markets would help move small businesses from mere survival to sustainable expansion.
Ultimately, they argued, unlocking the full potential of MSMEs requires a coordinated effort by entrepreneurs, financial institutions, development agencies, trade associations and government to build an ecosystem in which small businesses can grow, create jobs and contribute more meaningfully to Nigeria’s economic development.
