The Performance Paradox: Analyzing Diverging Trends Among Nigerian SMEs

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This article is the result of a data analysis conducted as part of the UCF Volunteer Challenge – July 2025 Edition, an event that encourages volunteers to transform raw data into powerful insights. The data used for this analysis was carefully sampled by the Utafiti Research Team from a public dataset provided by World Bank Enterprise Survey – Nigeria (2022) : The World Bank did conduct an enterprise survey in Nigeria in 2022. It is available on the World Bank Enterprise Surveys website. The sampling was performed by NDAYAMBAJE Alexis of the Utafiti Corporation team. The data analysis and article writing were conducted by KPIKI Charles, a participant in the challenge.

The Performance Paradox: Analyzing Diverging Trends Among Nigerian SMEs

Introduction

Based on data from the World Bank Enterprise Survey – Nigeria (2022), this study explores an intriguing phenomenon: some Nigerian SMEs are experiencing strong sales growth without significantly increasing employment, while others are creating many jobs despite stagnant sales. This is the case with small retail businesses, which report a remarkable 14% increase in sales, yet their employment growth stagnates at 7.11%. Conversely, medium-sized manufacturing firms, though commercially less dynamic (2.45% sales growth), show a stronger employment increase (9.10%). This study aims to understand the roots of these disparities and identify concrete levers to simultaneously strengthen profitability and job quality in these two strategic sectors.

Analysis of Diverging Trends

Two distinct profiles emerge from the analysis. On one hand, small retail businesses are experiencing soaring sales, well above the national average. However, this commercial momentum is not matched by equivalent job creation. On the other hand, medium-sized manufacturing firms seem more resilient in terms of employment, yet struggle to translate that into commercial performance. To explain these gaps, a correlation analysis was conducted between performance indicators (sales, employment) and four major constraints: corruption, energy, credit access, and informal competition. The results reveal different dynamics across sectors.

Explaining the Disparities

Case of small retail enterprises:
Sales growth appears to be driven by agility in the face of obstacles. The positive correlation between corruption and sales (0.5029) suggests that these businesses have integrated informal practices into their operations, enabling smoother operations and revenue maximization. However, corruption also acts as a brake on hiring, with a significant negative correlation with employment (-0.5196). The financial and human resources diverted to bypass administrative blockages limit recruitment capacity. Informal competition, although seen as a threat, shows a slightly positive correlation with sales (0.2101), likely due to marketing efforts or tactical adjustments that help maintain or gain market share. However, these efforts divert investment away from job creation, which may explain the employment ceiling at 7.11%. Constraints like energy supply (0.2335) and credit access (0.0751) have a marginal impact, indicating that adaptability is key in this segment.

Case of medium-sized manufacturing enterprises:
Here, the picture is quite different. Although they post weak sales growth (2.45%), employment grows significantly. The positive correlation between energy constraints and sales (0.5285) reveals latent growth potential: demand exists but is hampered by energy supply issues. Employment increases nonetheless, possibly because firms are trying to offset productivity losses by hiring more labor. A significant share (38.3%) report facing these energy-related problems. Corruption has little impact on sales (-0.0102), but negatively affects employment (-0.2454), contributing to uncertainty that discourages investment in human capital. Access to credit remains limited, with a slightly negative correlation (-0.1274), which hinders modernization efforts.
Lastly, informal competition—often in the form of counterfeiting or smuggling—heavily affects employment (-0.5206). This is not so much due to direct job cuts as to a strategic retreat: faced with an unclear environment, companies prefer to stabilize rather than invest, explaining why employment growth, though notable, remains modest compared to its potential.

Implications

For small retail businesses, an effective fight against corruption would free up margins for hiring. A shift toward digital, particularly through e-commerce, could support sales growth while reducing reliance on direct employment, thereby improving profitability.
Medium-sized manufacturing enterprises, on the other hand, would benefit from access to reliable energy solutions, such as solar generators or microgrids. This would enable them to meet latent demand. Strengthening the fight against counterfeiting and unfair competition would restore confidence in the sector, encouraging investment and boosting both productivity and sales. Expanding access to credit would act as a common lever for both segments, facilitating structural transformation of business models and improving wages.

Conclusion

The study reveals two paradoxical trajectories: small retail businesses rely on agility to grow despite a corruption-ridden environment, but this growth remains incomplete due to limited job creation. Meanwhile, manufacturing enterprises show a strong commitment to employment, but their commercial potential is constrained by structural issues—especially energy and informal competition. Targeted policies, focusing both on the business environment and investment capacity, could help reconcile job creation and performance in both sectors.