Nigerian MSMEs Challenges Multiple Taxes and High Energy Costs
posted on Jan 9, 2026
How Nigerian small and medium enterprises navigate a complex tax and cost environment
Small and medium enterprises (MSMEs) are often regarded as the backbone of Nigeria’s economy. They contribute significantly to employment, innovation, and local economic growth. Currently, Nigerian MSMEs face mounting challenges that threaten their sustainability and growth. According to a survey conducted by PwC in 2024, these businesses are heavily affected by multiple tax obligations, high energy costs, and restricted access to finance. Understanding these challenges is critical for business owners seeking to maintain profitability and ensure long-term viability.
One of the most pressing issues is declining sales and weak consumer demand. Over 50 percent of surveyed businesses report falling sales due to rising prices for goods and services, inflation, and reduced purchasing power among consumers. For small business owners, this means that traditional strategies for growth and customer retention must be reassessed immediately.
High operational costs compound these challenges. Taxes at multiple levels, including federal, state, and local levies, place a significant burden on small businesses. It is not just the corporate tax rate that affects profitability but the cumulative effect of many smaller taxes and compliance costs. Businesses must now dedicate resources to tax reporting and compliance, which can divert focus from core operations and expansion efforts.
Energy costs are another major constraint. Nigeria’s unreliable electricity supply forces businesses to rely heavily on generators, increasing operational expenses significantly. Energy-related costs affect manufacturing, retail, and service sectors alike. MSMEs report that energy costs are one of the largest line items in their budgets, limiting their ability to invest in growth initiatives.
Limited access to financing continues to be a critical challenge. About 35 percent of MSMEs cite financing as their primary concern. High interest rates, collateral requirements, and strict lending conditions make it difficult for small businesses to secure loans or credit lines. Financing gaps restrict businesses’ ability to scale operations, purchase equipment, or expand product lines, limiting their competitive edge.
Despite these challenges, MSMEs are demonstrating resilience. Many are leveraging digital solutions to improve efficiency and reach new customers. E-commerce platforms, online marketing, and digital payment solutions allow businesses to reduce costs and expand their market presence. Digitization also helps MSMEs streamline operations and improve record-keeping, which facilitates tax compliance and reporting.
Effective tax planning is another strategy for resilience. By understanding applicable tax obligations, identifying legal tax reliefs, and ensuring timely compliance, MSMEs can minimize unnecessary liabilities. Professional advice from accountants or tax experts helps business owners navigate complex tax regulations and optimize financial outcomes.
Community engagement and advocacy also support MSMEs. Participation in business associations and policy discussions enables small business owners to influence policies that create a favorable operating environment. Collective action can help reduce compliance burdens and enhance access to financing and infrastructure support.
In conclusion, Nigerian MSMEs are currently facing significant challenges from multiple taxes, high energy costs, and limited access to finance. However, through strategic planning, digitization, and active engagement, small businesses can navigate these constraints successfully. Building resilience in operations, maintaining compliance, and leveraging technology are essential steps for MSMEs to survive and thrive in today’s complex economic environment. With the right strategies, Nigerian MSMEs continue to drive economic growth and contribute meaningfully to the national economy.