A Strategic Approach to Digitalizing Nigeria’s MSMEs: From Survival to Scale

Nigeria’s Micro, Small, and Medium Enterprises (MSMEs) are the lifeblood of the economy, constituting 96.9% of all businesses and contributing 46.3% to GDP. They account for 6.2% of exports and employ over 87.9% of the national labour force, according to the PwC MSME Survey 2024. Despite their economic importance, most Nigerian MSMEs remain informal, cash-based, and digitally excluded leading to cycles of survival rather than scale.

The digital economy presents a powerful opportunity to unlock productivity, access to finance, and broader markets for MSMEs. However, fragmented registration systems, low digital literacy, limited access to digital tools, and poor connectivity continue to hinder transformation. These barriers, while formidable, are not insurmountable. Other developing economies have shown that strategic policy interventions can successfully bring MSMEs into the digital fold, enabling them to drive inclusive and sustained economic growth.

India’s Udyam portal simplified online MSME registration and integrated it with the tax and credit systems. Coupled with a nationwide digital literacy campaign, this initiative led to a significant increase in formalisation and enabled 19% more MSMEs to participate in e-commerce. Similarly, Kenya’s Ajira Digital program provided digital skills training that improved employment readiness among youth and informal entrepreneurs, contributing to the expansion of Kenya’s digital economy. In Rwanda, a streamlined online business registration system helped reduce bureaucratic red tape and led to a 40% increase in the number of registered MSMEs within three years.

Indonesia’s UMKM Go Digital initiative bundled logistics, digital payments, and onboarding tools to support 8 million MSMEs, boosting their productivity by 26%. South Africa’s digital township strategy, through the Department of Small Business Development, supported informal businesses with mapping tools and integration into e-commerce platforms. These examples demonstrate that with policy coherence, digital public infrastructure and strong private-sector collaboration, governments can create transformative impact at scale.

In Nigeria, the landscape remains challenging. Formal registration for MSMEs involves navigating multiple agencies including the CAC, FIRS, SMEDAN and SON which creates a costly and confusing process for many operators. Over 60% of MSMEs lack access to smartphones or POS devices, particularly in rural areas, limiting their ability to transact or advertise online. Most business owners are unfamiliar with digital finance, inventory systems, or online marketing. Less than 4% of MSMEs access formal credit, largely due to the absence of financial records or verifiable credit histories, as highlighted in the CBN MSME Report.

To accelerate the digitalisation of MSMEs in Nigeria, a unified and strategic policy framework is urgently needed. A strategic policy framework that prioritises simplified formalisation, accessible tools, capacity building and inclusion.

A critical first step would be the establishment of a single Unified MSME Digital Identity Portal, integrating CAC, SMEDAN, tax systems, and regulatory bodies into one digital gateway. This would reduce bureaucracy, improve documentation, enhance data privacy and streamline service delivery. India’s Udyam model has shown that such a platform can serve as a reliable digital footprint for businesses, boosting access to credit and enabling eligibility for capacity-building programs and grants.

Secondly, Nigeria must scale digital inclusion through the subsidisation of Digital Starter Kits for MSMEs. By partnering with fintechs and telecoms, the government can provide discounted smartphones, POS devices, and essential business apps tailored to micro and small businesses. This model, inspired by Kenya’s Ajira Digital and Safaricom’s Lipa Na M-PESA platform, can significantly reduce the cost of digital entry and promote mobile payments, e-commerce, and better financial record-keeping.

In addition to tools, MSMEs need skills. The government should deploy community-based digital skills hubs across Nigeria, especially in market clusters and rural areas. These hubs would offer hands-on training in digital finance, inventory management, online marketing, and bookkeeping. By adopting lessons from India’s Digital Literacy Mission and Rwanda’s regional business centres, and by deploying certified digital consultants, Nigeria can tailor its training to meet the digital maturity levels of local MSMEs and sectors.

Equally important is the creation of state-level digital marketplaces that connect small producers to buyers, logistics partners, and payment systems. These platforms would be particularly impactful in agriculture, crafts, and trade, where fragmented value chains limit scale. Indonesia’s UMKM Go Digital and South Africa’s township e-commerce platforms offer clear blueprints for success. Building similar infrastructure in Nigeria would expand market reach, reduce transaction costs, and grow customer bases.

Access to credit remains a persistent bottleneck. Nigeria should strengthen its regulatory framework to allow the use of alternative data such as mobile money usage, utility payments, and telco data for credit scoring. Fintech platforms like Carbon and FairMoney in Nigeria, as well as Kenya’s M-Shwari, have already demonstrated the viability of digital lending without traditional collateral. Scaling these models nationally would allow millions of MSMEs to secure working capital and insurance.

Finally, the federal and state governments should incentivise adoption of certified digital tools through targeted grants and tax relief programs. South Africa’s SMME Booster Fund offers a model for linking digital adoption with funding support, enabling small businesses to improve operations, track performance and prepare for scale.

Nigeria’s MSMEs are already powering the economy but analog operations are stalling their potential. With a deliberate, well-coordinated strategy rooted in international best practices and tailored to the Nigerian context, government and industry stakeholders can build a digitally empowered MSME sector that drives growth, inclusion and resilience.

Digitalizing MSMEs is not just about access to technology, it is about unlocking prosperity, building economic resilience and future-proofing the nation’s development agenda. The time to act is now.