CPPE reports Nigerian MSMEs lose up to ₦10 trillion yearly to employee fraud, describing it as a hidden tax threatening small business survival
Micro, small, and medium enterprises (MSMEs) in Nigeria lose between ₦5 trillion and ₦10 trillion each year due to employee fraud and workplace corruption. This figure comes from a February 2026 report by the Centre for the Promotion of Private Enterprise (CPPE).
The economic policy group called these losses a “massive hidden tax” on small businesses. They warned that this trend threatens the survival and sustainability of enterprises that are essential to the country’s economy.
According to the CPPE, these losses represent about 5 to 10 percent of the total annual revenue generated by MSMEs. The sector makes up nearly 50 percent of Nigeria’s Gross Domestic Product (GDP) and provides a large portion of employment in the country.
The report pointed out that ongoing internal fraud cuts into working capital, limits chances for growth, undermines investor trust, and raises the rate of business failures.
For small businesses working with tight margins, even small financial leaks can greatly affect operations.
Common Forms of Occupational Fraud
The CPPE listed several common forms of employee fraud impacting MSMEs throughout Nigeria. These include:
- Cash theft and diversion of daily sales
- Payroll manipulation, like ghost workers and inflated salaries
- Kickbacks related to procurement
- Diversion of inventory
- Inflated expense claims
The report mentioned that these practices often go unnoticed for long periods because of weak monitoring systems.
The sectors most at risk include retail and wholesale trade, hospitality, agribusiness, transport, and informal manufacturing.
The CPPE attributed the increased risk to high cash transactions, limited documentation, and informal accounting systems common in these areas. Businesses in rural or semi-urban regions face even greater risk due to lack of oversight.
The report connected the extent of fraud to structural weaknesses in many MSMEs.
Some of the main factors identified were:
- Weak internal control systems
- Heavy reliance on cash transactions
- Informal governance structures
- High-trust management systems without oversight
The CPPE noted that many small businesses do not have formal accounting departments, segregation of duties, or internal audit processes.
To tackle the issue, the Centre for the Promotion of Private Enterprise suggested moving toward digital payment systems and using basic accounting software to enhance transaction tracking.
The report also encouraged business owners to improve their hiring practices, rotate sensitive responsibilities, and carry out regular audits.
Additionally, the CPPE called for the creation of a national MSME internal-control framework linked to government credit programs.
The organization further promoted stronger legal enforcement mechanisms to help recover assets and discourage workplace fraud.
The report cautioned that continuous losses of up to ₦10 trillion each year could have larger economic effects, such as decreased tax revenue, slower job growth, and a less stable financial sector.
Considering the vital role MSMEs play in Nigeria’s economy, the CPPE stressed that addressing internal fraud should be a priority for policy-makers.
The organization urged cooperation among government agencies, financial institutions, and private sector stakeholders to improve governance standards within the MSME ecosystem.