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About 22.9% businesses were started because people could not find jobs, according to a new report by the FATE Institute, highlighting how unemployment continues to push Nigerians into entrepreneurship as a survival option rather than a choice driven by innovation.
The finding is contained in the 2025 State of Entrepreneurship in Nigeria Report, which surveyed 10,882 businesses across Nigeria’s 36 states and the Federal Capital Territory. The report shows that while new businesses are still being created, a large share is driven by the absence of paid employment and worsening labour market conditions.
According to the report, 22.9 percent of entrepreneurs in 2025 said they started their businesses because they could not secure paid jobs, a sharp increase from 13 percent recorded in 2024. This rise points to growing unemployment and underemployment, particularly among young people and graduates entering the labour market.
The report further revealed that the majority of new businesses were started to meet immediate income needs. About 61 percent of respondents said they went into business to earn extra income, reflecting rising living costs, weak purchasing power, and pressure on household finances. The FATE Institute described this pattern as evidence that entrepreneurship in Nigeria remains largely necessity-driven.
“Entrepreneurial motivation in Nigeria remains largely shaped by income needs and limited employment opportunities,” the report stated. It added that many Nigerians now see small businesses as the fastest way to generate income in a difficult economic environment.
In contrast, the report found that only around 20.2 percent of entrepreneurs said they started businesses to introduce new products or services. This relatively low figure challenges the popular narrative of Nigeria as a fast-growing innovation economy and suggests that opportunity-driven entrepreneurship is still emerging.
Although 28.7 percent of respondents said they started businesses to provide solutions to societal or market problems, the report noted that innovation-led ventures remain a minority when compared to survival-focused enterprises. “While there is gradual growth in problem-solving and innovation-led motivations, necessity-driven entrepreneurship continues to dominate,” the FATE Institute said.
The report linked this trend to broader economic pressures, including high inflation, weak consumer demand, and limited formal job creation. These conditions, it said, have forced many individuals into self-employment, often at very small scales.
Most of the businesses started under these conditions are nano and micro enterprises, with few employees and limited capital. The report noted that such firms often struggle to grow, access finance, or create additional jobs beyond self-employment. This pattern contributes to slow productivity growth and weak job expansion across the MSME sector.
The FATE Institute also highlighted structural barriers that make it difficult for entrepreneurs to move beyond survival. These include limited access to affordable credit, high interest rates, inadequate skills development, policy uncertainty, and poor infrastructure. Without addressing these issues, the report warned that many new businesses will remain informal and vulnerable.
“Shifting the balance toward opportunity-driven entrepreneurship will require deliberate policy action,” the report stated. It recommended stronger support for skills acquisition, improved access to finance, and better market infrastructure to help entrepreneurs scale their businesses.
The report stressed that while entrepreneurship continues to absorb pressure from Nigeria’s labour market, relying heavily on necessity-driven businesses may limit long-term economic growth. It noted that transforming unemployment-driven entrepreneurship into innovation-led enterprise is critical for sustainable development.
