Nigeria’s Micro, Small and Medium Enterprises (MSMEs) may be losing between N5 trillion and N10 trillion every year to employee corruption and occupational fraud, according to the Centre for The Promotion of Private Enterprise (CPPE).
The claim was made in a statement issued on Sunday by the Director General of CPPE, Dr Muda Yusuf. The organisation said the losses are happening at a time when businesses are already battling inflation, weak purchasing power, high operating costs, infrastructure deficits and constrained access to finance.
CPPE described the estimated losses as a major but often ignored burden on entrepreneurs. It stated that the amount represents “a massive hidden tax on entrepreneurs in the MSME space, eroding profits, weakening investment capacity, and constraining job creation.”
The centre said small manufacturing and processing businesses, agribusiness and produce trading, hospitality, food services and entertainment, retail and wholesale trade are among the worst affected. According to CPPE, these sectors are more exposed because of high daily cash turnover, weak reconciliation systems, stock diversion and informal procurement chains.
The organisation explained that occupational fraud remains a “corrosive threat” to MSMEs and occurs in different forms. These include theft of cash and inventory, diversion of sales proceeds, payroll manipulation, procurement kickbacks, customer diversion, collusion with suppliers or clients, expense reimbursement abuse and falsification of financial records.
Citing global occupational fraud studies, CPPE noted that organisations typically lose between five and 10 percent of their annual revenue to employee-related fraud. It added that small businesses suffer even higher losses due to weaker internal control systems, heavy reliance on cash transactions, limited audit capacity, lower detection and recovery rates and a high level of informality.
The centre warned that although such acts are often treated as internal management issues, their wider economic impact is significant. It said these losses can completely wipe out profits, deplete working capital and even lead to business closure, especially as many Nigerian businesses operate on thin margins, often below 15 percent of turnover.
“This dynamic contributes to the high mortality rate of small businesses, where studies suggest up to 80 percent fail within five years and over half fail within the first year, with employee fraud being a significant contributory factor,” the statement said.
“Because many MSMEs are labour-intensive, corruption-induced contraction rapidly translates into job losses, declining household incomes, rising informality and deeper poverty,” it added.
CPPE stressed that occupational fraud should not be treated as a mere governance issue but as a national welfare concern.
