Employee corruption and occupational fraud are costing Nigeria’s Micro, Small and Medium Enterprises (MSMEs) between ₦5 trillion and ₦10 trillion annually, according to the Centre for the Promotion of Private Enterprise (CPPE).
The organisation said this in a policy brief released by its Chief Executive Officer, Muda Yusuf, on Sunday.
It described employee corruption and occupational fraud as not merely internal management concerns but a strategic economic threat.
It stated that the losses represent one of the largest hidden drains on Nigeria’s entrepreneurial economy, eroding profits, weakening investment capacity, and threatening job creation across the country.
The Centre stressed that while MSMEs continue to grapple with inflation, weak consumer purchasing power, high operating costs, infrastructure gaps and limited access to finance, internal fraud has emerged as a deeply corrosive but less visible threat.
“Employee corruption and occupational fraud constitute one of the largest hidden drains on Nigeria’s entrepreneurial economy, with annual losses ranging from ₦5 to ₦10 trillion.
“Addressing this challenge is therefore not only an ethical or managerial concern but a strategic economic priority,” CPPE said.
It noted that MSMEs account for the vast majority of businesses in Nigeria and contribute approximately half of the national output.
However, the CPPE cited that global occupational fraud studies consistently show organisations lose between five and 10 per cent of annual revenue to employee-related fraud.
It said applying conservative estimates to Nigeria’s MSME sector suggests losses could run into trillions of naira each year.
According to the report, most small businesses operate on profit margins below 15 per cent, meaning fraud losses of up to 10 per cent of revenue can wipe out profits entirely, deplete working capital and accelerate business closure.
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the centre cited studies indicating that up to 80 per cent of small businesses fail within five years, with more than half collapsing within their first year, adding that employee fraud is a significant contributing factor.
It identified common forms of occupational fraud to include theft of cash and inventory, diversion of sales proceeds, payroll manipulation, procurement kickbacks, collusion with suppliers or customers, expense reimbursement abuse and falsification of financial records.
It pointed out the sectors considered most vulnerable to include retail and wholesale trade, hospitality and food services, agribusiness, transport and logistics, small-scale manufacturing and personal services.
These segments, CPPE noted, are often characterised by heavy cash transactions, weak documentation systems, inventory handling risks and limited supervision.
The Centre warned that financial leakages caused by fraud reduce retained earnings needed for reinvestment, technology adoption and business expansion, trapping enterprises in a cycle of low productivity and limited competitiveness.
Because many MSMEs are labour-intensive, the report added, fraud-induced financial distress often leads directly to job losses, declining household incomes and rising poverty.
The CPPE attributed the persistence of occupational fraud to weak internal governance structures, poor segregation of duties, inadequate bookkeeping and reconciliation systems, heavy reliance on cash transactions, informal hiring practices and slow legal processes with low asset recovery rates.
To curb the problem, the CPPE advised business owners to strengthen internal controls by separating cash handling from record-keeping, conducting routine reconciliations and instituting periodic independent reviews of accounts.
It also recommended reducing cash dependence through digital payment channels and basic accounting software to improve transaction traceability.
The organisation further called for background checks, clearer employment terms, rotation of sensitive responsibilities and closer supervision of employees in sensitive roles.
It suggested that where individual audit capacity is unaffordable, MSMEs could access pooled bookkeeping and compliance services through business associations.
At the policy level, CPPE urged the government to introduce a national MSME internal-control framework linked to credit and public support programmes, accelerate digital financial inclusion, strengthen legal enforcement and asset recovery mechanisms, and expand governance education for entrepreneurs.
“For Nigeria’s MSME sector to realise its full potential as an engine of growth, fraud prevention, governance strengthening, and digital transparency must become central pillars of enterprise policy and business practice,” CPPE added.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X
