Improving financial literacy amongst Nigerian MSMEs

Nigeria has an opportunity to be the most dynamic economy in Africa. But, currently, this opportunity is significantly restricted by limited financial literacy.

This report details convincing evidence of the importance of financial literacy for MSMEs (micro, small and medium-sized enterprises). The limited financial literacy of Nigeria’s wider population represents an economic challenge and seriously restricts the development of its MSME sector.

The OECD suggests that national strategies for financial education, where MSMEs are targeted as a specific group, would contribute to addressing some of the challenges they face. Financial literacy for entrepreneurs involves having the knowledge required to plan and manage business finances; identify funding requirements and prepare the documentation required; manage financial risk; understand the financial and economic landscape in relation to the business; and comply with financial regulation.

A survey of Nigeria’s MSME entrepreneurs – conducted by the FATE Foundation, in association with ACCA Nigeria – shows that the vast majority of MSMEs in Nigeria have limited financial literacy.[1] This is despite most entrepreneurs recognising that greater financial literacy would assist them in running their businesses more efficiently. The limited levels of financial literacy among entrepreneurs in Nigeria are a significant factor in the equally low levels of successful access to external finance. However, those entrepreneurs who have undertaken financial literacy training reported significant benefits from having done so.

Defining MSMEs in Nigeria

Nigeria’s definition of MSMEs is based on both the number of staff enterprises employ as well as the value of their assets (excluding land and buildings).



Employee size

Assets (NGN million) (excluding land and buildings)

Micro enterprises

Less than 10

Less than 10

Small enterprises

10 – 49

10 to less than 100

Medium enterprises

50 - 199

100 to less than 1,000

[1] Respondents to the survey included a small number of accountants who would have been likely to possess a higher level of financial literacy skills than most entrepreneurs.

Report recommendations

This report recommends the expansion of financial literacy training in Nigeria, in particular for entrepreneurs in charge of MSMEs. For this approach to be successful, however, more entrepreneurs need to be persuaded of the benefits of financial literacy training.

Standardisation of Business Development Service Providers (BDSPs) and financial literacy training programmes would raise the quality of education and allow all entrepreneurs to broadly access the same level of teaching regardless of where they acquire it. Financial literacy training should include the development of business plans, understanding the differences between available types of external finance and their suitability for various types and sizes of business. There should also be a wider range of options available in terms of how financial literacy is taught.

The provision of practical learning opportunities is a crucial factor in the success of financial literacy training. Continuous support should be available after the financial literacy training has taken place to ensure that entrepreneurs continue to use the knowledge gained.