Muda Yusuf warns that occupational corruption within small businesses is wiping out profits, destroying jobs and threatening inclusive growth….
Nigeria’s Micro, Small and Medium Enterprises are losing between ₦5 trillion and ₦10 trillion annually to employee corruption and occupational fraud, the Centre for the Promotion of Private Enterprise has said, warning that the silent crisis is undermining profitability, investment and job creation across the country.
Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), disclosed this in a policy statement released on February 15, 2026, where he described internal fraud within MSMEs as one of the most underreported threats to Nigeria’s economic stability.
According to Yusuf, MSMEs account for the overwhelming majority of businesses in Nigeria, support millions of livelihoods and contribute roughly half of the country’s non-oil GDP. Their stability, he said, is fundamental to employment generation, poverty reduction and inclusive economic development.
However, beyond inflation, weak consumer purchasing power, rising operating costs, infrastructure gaps and limited access to finance, he said a more corrosive danger continues to eat away at small businesses from within.
He identified employee corruption and occupational fraud as a widespread problem that often goes unnoticed until the damage becomes severe.
“These practices are frequently treated as internal management problems,” Yusuf noted, “but their aggregate economic consequences are profound.”
He explained that occupational fraud in the MSME space takes several forms, including theft of cash and inventory, diversion of sales proceeds, payroll manipulation, procurement kickbacks, customer diversion, collusion with suppliers or clients, abuse of expense reimbursements and falsification of financial records.
Drawing on findings from global workplace fraud surveys, Yusuf said international studies consistently estimate that organisations lose between five and 10 per cent of annual revenue to employee-related fraud. Small businesses, he added, tend to suffer disproportionately higher losses due to weaker internal controls, heavy reliance on cash transactions, limited audit capacity, lower detection and recovery rates, and high levels of informality.
Applying those conservative global benchmarks to Nigeria’s MSME sector, which contributes about 50 per cent of national output, Yusuf said annual losses could plausibly fall within the ₦5 trillion to ₦10 trillion range.
He described this as a massive hidden tax on entrepreneurs, draining profits, weakening their capacity to reinvest and expand, and constraining employment growth.
Yusuf further explained that most Nigerian MSMEs operate on thin margins, often below 15 per cent of turnover. In such circumstances, revenue leakages of five to 10 per cent can completely erase profits, deplete working capital and push businesses toward closure.
He linked this dynamic to the high mortality rate of small businesses in Nigeria, where studies suggest that as many as 80 per cent fail within five years, and more than half collapse within their first year of operation. Employee fraud, he said, is a significant but often overlooked contributing factor.
Beyond profitability, Yusuf warned that corruption-induced leakages reduce retained earnings that would otherwise be available for expansion, technology upgrades, inventory growth and productivity-enhancing improvements. The result, he said, is a persistent low-productivity trap that limits competitiveness and suppresses the ability of small enterprises to scale.
Because MSMEs are largely labour-intensive, he added, any contraction triggered by fraud quickly translates into job losses, falling household incomes, rising informality and deeper poverty.
“Occupational fraud is therefore not merely a governance issue,” Yusuf said. “It is a national welfare concern.”
He identified retail and wholesale trade as among the most vulnerable sectors, citing high daily cash turnover, weak reconciliation systems and significant inventory diversion risks. Hospitality, food services and entertainment businesses were also flagged due to cash-based transactions, stock diversion, revenue understatement and payroll manipulation in shift-based operations.
In agribusiness and produce trading, Yusuf pointed to informal procurement chains, measurement manipulation and weak record-keeping across aggregation networks as major vulnerabilities. Transport and logistics services face risks linked to cash ticketing systems, fuel diversion and limited real-time monitoring, while small manufacturing and processing firms are exposed to procurement collusion, raw-material diversion and ghost worker schemes.
Personal services and informal enterprises, he said, are particularly exposed due to minimal bookkeeping, absence of owners from daily operations and heavy reliance on trust-based employment arrangements.
Yusuf attributed the persistence of fraud to structural weaknesses such as poor segregation of duties, weak financial oversight, heavy dependence on cash, discretionary procurement authority, informal hiring practices, weak disciplinary systems and slow legal processes that limit asset recovery.
“These conditions allow fraud to remain undetected for extended periods, magnifying cumulative losses,” he said.
To address the challenge, Yusuf urged MSME owners to strengthen basic internal controls by separating cash handling from record-keeping, conducting routine reconciliation of sales and inventory, and implementing periodic independent reviews of accounts.
He also emphasised the importance of reducing reliance on cash through digital payment channels and basic accounting software, noting that digitalisation enhances transaction traceability and significantly limits opportunities for diversion and concealment.
Other recommended measures include conducting background and reference checks before hiring, formalising employment terms, rotating sensitive responsibilities and monitoring unexplained lifestyle changes among staff.
Where individual audit capacity is unaffordable, Yusuf suggested that MSMEs could access pooled bookkeeping services through business associations, participate in governance training programmes and engage periodic professional compliance reviews to strengthen oversight at lower cost.
At the policy level, he called for a national MSME internal-control framework tied to access to credit and government programmes, accelerated digital financial inclusion for small businesses, stronger legal enforcement and asset-recovery mechanisms, and expanded governance education.
Yusuf stressed that tackling occupational fraud is not simply a matter of ethics or internal discipline but a strategic economic priority.
“Employee corruption and occupational fraud constitute one of the largest hidden drains on Nigeria’s entrepreneurial economy,” he said, warning that the consequences include destroyed profitability, suppressed investment, job losses, weakened government revenue and slower inclusive growth.
He maintained that for Nigeria’s MSME sector to fulfil its potential as a true engine of growth, fraud prevention, governance strengthening and digital transparency must become central pillars of enterprise policy and business practice.
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