A recent study conducted by Small Firm Diaries and published by the National Bureau of Statistics (NBS) has revealed that 40 percent of the Micro, Small, and Medium Enterprises (MSMEs) in Nigeria are owned by women.
This significant figure showcases a positive step towards gender inclusivity in entrepreneurship, surpassing the global average of firms with female ownership representation, which stands at 32.9 percent.
However, the study also points out that in larger firms, female representation in ownership drops significantly to only 12.2 percent, indicating the need for further progress in fostering gender diversity in bigger enterprises.
Given the critical role played by MSMEs in the Nigerian economy, constituting 96 percent of companies and employing 86 percent of the total workforce, understanding their operations and dynamics becomes crucial.
The study collected data from 161 firms across Enugu, Kaduna, and Lagos states, representing various sectors such as light manufacturing, agri-processing, and services.
Key insights from the study highlight the financial performance and adoption of digital financial services by MSMEs. On average, MSMEs in Nigeria generate annual revenue of N2.3 million, with an operating margin of N768,000.
However, the study also reveals concerning data, with 62 percent of MSMEs experiencing monthly revenue below N300,000, and 47 percent struggling with monthly revenue lower than N200,000, indicating the need for support in enhancing financial sustainability.
In terms of digital financial services adoption, 97 percent of MSMEs have a bank account, but less than 50 percent use it regularly. Male-owned MSMEs tend to rely more on loans, with 47 percent seeking credit facilities, while 45 percent of female-owned MSMEs turn to loans to support their businesses.
The study also found that over 80 percent of MSMEs own a debit card, 65 percent utilise mobile banking services, and 56 percent use POS machines for transactions. However, only a small fraction (five percent) of MSME owners have utilised credit cards so far.
Challenges faced in adopting digital financial services were also identified, with 60 percent of respondents citing delayed money arrival as the major problem. About 30 percent reported loss of access and missing funds as primary obstacles in using DFS. Interestingly, 63 percent of respondents reported using DFS because they were receiving payments through this medium.
Looking at the adoption of technology for business, over 50 percent of MSME owners consider cost as the major barrier, while 27 percent highlight the lack of necessary skills as the hindrance.
MSMEs, as defined by SMEDAN, are the backbone of the Nigerian economy, employing more people than formal sectors. These businesses are categorised as micro, employing 1 to 10 workers with assets less than NGN 5 million, and small, employing 10 to 49 workers with assets ranging from NGN 5 to 50 million.