The Centre for the Promotion of Private Enterprise (CPPE) says employee corruption and occupational fraud have emerged as a major but often overlooked threats to the stability and survival of Nigeria’s Micro, Small and Medium Enterprises (MSMEs).
The Founder of CPPE, Mr Muda Yusuf, made this known in a statement issued on Sunday in Lagos.
Yusuf noted that employee corruption undermined profits, weakened business sustainability and constrained the capacity of MSMEs to generate jobs and support national economic growth.
He estimated that employee corruption and occupational fraud could be draining between N5 trillion and N10 trillion annually from MSMEs, posing a significant threat to profitability, job creation and inclusive economic growth.
Yusuf described MSMEs as central to Nigeria’s economic resilience, accounting for the majority of businesses, sustaining millions of livelihoods and contributing significantly to non-oil Gross Domestic Product (GDP).
He said their stability and growth were indispensable to inclusive economic development, employment generation and poverty reduction.
According to him, beyond the visible pressures of inflation, weak purchasing power, high operating costs, infrastructure deficits and constrained access to finance, a less visible but deeply corrosive threat persists within the MSME ecosystem.
“These practices manifest in multiple forms, including theft of cash and inventory, diversion of sales proceeds, payroll manipulation, procurement kickbacks and customer diversion,” he said.
Other forms, he added, include collusion with suppliers or clients, abuse of expense reimbursements and falsification of financial records.
“Although often treated as internal management issues, their aggregate economic consequences are profound,” Yusuf said.
He noted that global occupational fraud studies, particularly long-running international workplace fraud surveys, consistently estimate that organisations lose between five and 10 per cent of annual revenue to employee-related fraud.
According to him, evidence also shows that small businesses suffer disproportionately higher losses due to weaker internal control systems, heavy dependence on cash transactions and limited audit capacity.
He said applying conservative assumptions to Nigeria’s MSME economy — which contributes roughly 50 per cent to national output — suggests annual losses could range between N5 trillion and N10 trillion.
Yusuf noted that most Nigerian MSMEs operated on thin margins, often below 15 per cent of turnover.
“Fraud losses of five to 10 per cent of revenue can eliminate profits entirely, deplete working capital and accelerate business closure.
“Occupational fraud is, therefore, not merely a governance issue but a national welfare concern,” he said.
He identified the most vulnerable MSME segments as retail and wholesale trade, hospitality, food services, entertainment, agribusiness and produce trading, transport and logistics services, small-scale manufacturing and processing, as well as personal services and informal enterprises.
Yusuf said fraud thrives in many Nigerian MSMEs due to structural vulnerabilities, weak internal governance, poor bookkeeping, informal hiring practices and slow legal processes.
He advised business owners to adopt simple governance improvements to significantly reduce losses, even within small enterprises.
According to him, business owners should prioritise the separation of cash handling, record-keeping and approval functions; conduct routine reconciliation of sales, cash and inventory; and undertake periodic independent reviews of accounts.
He also emphasised the need to strengthen hiring processes and adopt digital payment channels and basic accounting software to enhance transaction traceability and make diversion and concealment more difficult.
“Reducing occupational fraud in MSMEs requires coordinated public-sector support, including a national MSME internal control framework linked to credit and government programmes.
“We must also accelerate digital financial inclusion for small businesses, strengthen legal enforcement and asset recovery mechanisms, and expand governance education,” he said.
