CPPE: MSMEs Loses N10trn Annually to Employee Corruption, Occupational Fraud 

Dike Onwuamaeze 

The Centre for the Promotion of Private Enterprise (CPPE) has projected that Nigerian Micro, Small and Medium Enterprises (MSMEs) are losing between N5 trillion and N10 trillion annually to employee corruption and occupational fraud.

This projection was made yesterday by the Chief Executive Officer of CPPE, Dr. Muda Yusuf, in a policy brief titled “Employee Corruption and Occupational Fraud in Nigeria’s MSMEs Sector.”

Yusuf stated that beyond the visible pressures of inflation, weak purchasing power, high operating costs, infrastructure deficits, and constrained access to finance, employee corruption and occupational fraud within the MSME ecosystem remained a less visible but deeply corrosive threat.

He said that addressing this challenge is not only an ethical or managerial concern but a strategic economic priority for the country.

He said: “Employee corruption and occupational fraud constitute one of the largest hidden drains on Nigeria’s entrepreneurial economy, with annual losses ranging from ₦5 trillion to ₦10 trillion.

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

He added that “fraud prevention, governance strengthening, and digital transparency must become central pillars of enterprise policy and business practice” in order for Nigeria’s MSME sector to realise its full potential as an engine of growth.

He advocated that reducing occupational fraud in MSMEs would require coordinated public-sector support, including “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, expanded governance education.”

He said that MSMEs are central to Nigeria’s economic resilience as they account for the overwhelming majority of businesses, sustain millions of livelihoods, and contribute significantly to non-oil GDP.

Therefore, “their stability and growth should be indispensable to inclusive economic development, employment generation, and poverty reduction,” he said.

Yusuf said the perpetration of employee corruption and occupational fraud 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. 

He said that the aggregate impact of these practices has profound economic consequences on the national economy.

The CPPE stated that evidence from global occupational-fraud studies consistently estimate that organisations lose between 5.0 per cent and 10 per cent of annual revenue to employee-related fraud.

It also said that researches have also shown 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.”

He said that applying conservative assumptions to Nigeria’s MSMEs whose contribution to national output is roughly 50 per cent— would suggest annual losses from employee corruption and occupational fraud plausibly ranging from ₦5 trillion to N10 trillion, which is “a massive hidden tax on entrepreneurs in the MSME space, eroding profits, weakening investment capacity, and constraining job creation.”

He pointed out that as most Nigerian MSMEs operate on thin margins, which are often below 15 per cent of their turnover, “fraud losses of 5–10 per cent of revenue can, therefore, eliminate profits entirely, deplete working capital and accelerate business closure.

“This dynamic contributes to the high mortality rate of small businesses, where studies suggest up to 80 per cent fail within five years and over half fail within the first year, with employee fraud being a significant contributory factor.

“The result is a persistent low-productivity trap that weakens competitiveness and suppresses enterprise scaling.

“Occupational fraud is, therefore, not merely a governance issue but a national welfare concern.”

Yusuf identified retail and wholesale, hospitality, food services, agribusiness and produce trade, entertainment as the most vulnerable sectors because of their inherently high daily cash turnover, transactions, weak documentation, inventory handling, and dispersed supervision.

“These sectors collectively represent a large share of Nigeria’s MSME employment base, amplifying the macroeconomic significance of occupational fraud,” he said.

He advised business owners that simple governance improvements could significantly reduce losses, even in small enterprises.

Yusuf said: “Business owners should prioritise separation of cash handling, record-keeping, and approvals, routine reconciliation of sales, cash, and inventory, and periodic independent review of accounts

According to him, adopting digital payment channels and basic accounting software would create transaction traceability and make diversion and concealment far more difficult.

He said: “Digitalisation is one of the most powerful low-cost anti-fraud tools available to MSMEs,” adding that “where individual audit capacity is unaffordable, MSMEs can access pooled audit/bookkeeping services via business associations, participate in governance training programmes, engage periodic professional compliance reviews.”