MSMEs lose N10trn yearly to employee fraud, says CPPE

Nigeria’s Micro, Small and Medium Enterprises (MSMEs) are losing an estimated N10 trillion annually to employee corruption and occupational fraud, the Centre for the Promotion of Private Enterprise (CPPE) has revealed.

The economic think tank warned that the growing incidence of internal fraud is severely undermining business sustainability, eroding investor confidence, and threatening the survival of small businesses across the country. In a policy brief, Muda Yusuf, chief executive officer at CPPE, said that the global occupational-fraud studies, particularly long-running international workplace-fraud surveys, consistently estimate that organisations lose between five and 10 percent of annual revenue to employee-related fraud.

“Applying conservative assumptions to Nigeria’s MSME economy, whose contribution to national output is roughly 50 percent, suggests annual losses from employee corruption and occupational fraud plausibly ranging from N5 to N10 trillion.”

This, the studies said, represents a massive hidden tax on entrepreneurs in the MSME space, eroding profits, weakening investment capacity, and constraining job creation.

“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, employee corruption and occupational fraud within the MSME ecosystem,” CPPE noted.

The report further emphasised that these practices manifest in multiple forms, including 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.

Moreover, the studies revealed that although these frauds are often treated as internal management issues, their aggregate economic consequences are profound.

Besides, CPPE noted that employee corruption and occupational fraud constitute one of the largest hidden drains on Nigeria’s entrepreneurial economy.

“These losses silently destroy profitability, suppress investment, eliminate jobs, and weaken government revenue and slow inclusive growth,” CPPE stated.

To address this challenge, the body emphasised requires not only an ethical or managerial concern but a strategic economic priority.

“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,” Yusuf emphasised in the report.

Yusuf reiterated that the government must ensure digital transparency to curb fraud in the sector bearing in mind the crucial roles MSMEs play in Nigeria’s economic development.

“The MSMEs account for the overwhelming majority of businesses, sustains millions of livelihoods, and contributes significantly to non-oil GDP. “Their stability and growth are therefore indispensable to inclusive economic development, employment generation, and poverty reduction,” Yusuf noted in the report.

Besides, he said that evidence also shows that small businesses suffer disproportionately higher losses due to weaker internal control systems, heavy dependence on cash transactions, limited audit capacity, lower detection and recovery rates, and high level of informality.

The report further said that adopting digital payment channels and basic accounting software creates transaction traceability, making diversion and concealment far more difficult.

“Digitalisation is one of the most powerful low-cost anti-fraud tools available to MSMEs,” it stated.

Yusuf, speaking on the policy imperatives digitalised payment scheme, said, it will reduce occupational fraud, with a coordinated public-sector support, such as a national MSME internal-control framework linked to credit and government programmes, accelerated digital financial inclusion for small businesses, stronger legal enforcement and asset-recovery mechanisms, and expanded governance education.

Such reforms, CPPE say, would strengthen enterprise resilience, protect jobs, and enhance fiscal stability.

Charles Ogwo is a proactive journalist, driving education, and business innovations for over 10 years.

He leads initiatives leveraging tech to enhance storytelling and build topnotch performing team.

Charles is passionate about harnessing technology to inform, engage and empower communities.

Join BusinessDay whatsapp Channel, to stay up to date