Navigating Uncertainty: The Outlook for Small Businesses in 2025
The economic landscape for Micro, Small, and Medium Enterprises (MSMEs) in 2025 presents a complex and often contradictory picture. While some economic indicators, such as a brief rise in the Purchasing Managers Index (PMI) in December 2024, suggest a potential for recovery, the realities on the ground for many small businesses paint a different story. Many MSMEs are still grappling with the lingering effects of economic challenges from the previous year, including high inflation, rising operating costs, and inconsistent policies. This dichotomy creates uncertainty among stakeholders, forcing them to balance optimistic projections with a cautious awareness of persistent difficulties. The debate centers around whether the brief economic uptick signals a sustained trend or merely a temporary reprieve.
The December PMI, a key economic indicator, offered a glimmer of hope. A rise above the 50-point threshold, based on surveys of purchasing managers in approximately 400 private sector companies, signaled a marginal improvement in production, spending, new orders, employment, and purchasing. This marked the most significant improvement in private sector health since January 2024, following six months of readings below the 50-point mark. However, the sustainability of this improvement into 2025, particularly for MSMEs, remains a key concern. Many small business owners argue that the positive effects of increased holiday sales were short-lived and haven’t translated into lasting relief. This raises questions about the true impact of macroeconomic indicators on the day-to-day operations of small businesses.
Conflicting perspectives further complicate the 2025 outlook. Economic forecasts range from cautious optimism, anticipating stability and reduced inflation, to recommendations for continued financial prudence. Dr. Muda Yusuf, Director of the Centre for Promotion of Private Enterprise, predicted tight monetary conditions, potential fiscal deficits, and inflationary pressures, while acknowledging a moderately positive outlook for the energy sector due to the revival of local refineries. He stressed the need for businesses to develop strategies to manage various risks, including foreign exchange fluctuations, interest rate volatility, inflation, policy changes, cybersecurity threats, insecurity, and political uncertainties. Conversely, Gabriel Idahosa, President of the Lagos Chamber of Commerce and Industry, expressed cautious optimism for business growth in 2025, contingent on sustained policy reforms, improved oil sector output, and investments in infrastructure. He emphasized the importance of public-private partnerships and economic diversification for achieving inclusive and sustainable growth. These differing perspectives highlight the uncertainty surrounding the economic future and underscore the need for businesses to prepare for a range of potential scenarios.
The Nigerian Association of Small and Medium Enterprises (NASME) challenges the rosy projections, arguing they don’t reflect the realities faced by MSMEs. Eke Ubiji, NASME’s Director-General, points to persistently low purchasing power among consumers, forcing them to make difficult choices and prioritize essential purchases over discretionary spending. This "rational choice" behavior, characterized by opting for smaller, more affordable product sizes (sachetisation), created an illusion of increased purchasing capacity during the holiday season. Ubiji contends that the underlying economic challenges, exacerbated by the removal of fuel subsidies, have significantly increased the cost of living and made it harder for businesses to thrive. He questions the accuracy of economic forecasts that don’t account for the widespread struggles of small businesses.
Contrary to NASME’s more pessimistic view, the Association of Small Business Owners of Nigeria (ASBON) expresses cautious optimism, citing a report indicating that 76% of MSMEs are hopeful about 2025. ASBON President, Dr. Femi Egbesola, attributes this optimism to government policies aimed at supporting small businesses, including the proposed Nigeria Tax Reforms Bill, the N200 billion Presidential Intervention Fund, the Startup Act, and the credit guarantee scheme. These initiatives are expected to provide tax relief, access to funding, and easier access to credit for MSMEs. Egbesola highlights the importance of infrastructure development, particularly in the electricity sector, where diversification and private investment are driving improvements in power supply. He also points to the government’s export-oriented policies and recent cabinet reshuffle, bringing experienced individuals into key positions, as positive developments for the sector.
Ultimately, the future trajectory of small businesses in Nigeria hinges on their resilience and adaptability in the face of ongoing challenges. The rising inflation, driven by food prices and holiday spending, coupled with high operating costs and inconsistent policies, continues to pose significant threats. However, strategic government interventions, infrastructure improvements, currency stability, and the inherent resilience of small business owners offer a pathway to recovery and growth. The differing perspectives of NASME and ASBON highlight the complex and uncertain economic landscape. While NASME emphasizes the persistent challenges and the disconnect between macroeconomic indicators and the realities on the ground, ASBON focuses on the potential of government policies and private initiatives to drive growth and instill optimism. The coming year will reveal whether the optimism of projections translates into tangible improvements for small businesses or whether the persistent challenges ultimately define their trajectory.
