No fewer than nine out of 10 Small and Medium-sized Enterprises (SMEs) in Nigeria operate without insurance cover, exposing them to devastating financial losses, operational disruptions and, in many cases, business failure, NATIONAL ECONOMY can report.
Data from the Nigerian Insurers Association (NIA) shows that while micro, small and medium-sized enterprises (MSMEs) account for the bulk of informal economic activity in Nigeria, they contribute less than two per cent of total gross premiums written in 2024.
The association estimates that fewer than 1.5 per cent of MSMEs are insured, leaving the vast majority of businesses highly exposed to operational risks, asset losses, fire incidents, theft, floods and other natural disasters, with little financial protection when shocks occur.
This means that more than 98 per cent ( 9 in 10) of MSMEs operate without insurance cover, underscoring the extremely low level of protection in the segment even as other parts of the insurance market continue to record growth.
SMEs face a wide range of risks from fire outbreaks and theft to illness of key personnel and economic shocks. Unlike larger corporations with deeper reserves, small businesses often lack the financial buffers to absorb unexpected setbacks.
However, insurance remains one of the most effective tools for risk management, offering financial protection against losses while enhancing productivity and improving access to credit. Yet, across Nigeria and many emerging economies, small businesses remain largely underinsured.
A joint survey by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the National Bureau of Statistics (NBS) shows that over 65 per cent of SMEs operate without insurance coverage, while nearly 95 per cent of micro enterprises remain completely unprotected.
This falls significantly below global benchmarks and highlights a deep coverage gap against losses arising from fire, theft, accidents and business interruption.
Nigeria’s overall insurance penetration is also estimated at between 0.5 per cent and 4 per cent, far below African and global averages.
Industry stakeholders attribute the gap to multiple factors including high premiums, weak awareness, mistrust stemming from delayed or disputed claims, and economic hardship.
For instance, Michael Oluwaseun, a printing press owner in Lagos, said insurance premiums would significantly erode his already tight working capital.
Gladys Ugbode, a salon operator, recounted a frustrating claims experience.
“I once paid for a policy and when I needed to claim, the process was confusing and slow. I had to chase them for weeks and ended up settling the loss myself,” she said.
Tunde Adebowale, who runs a logistics business in Ogun State, admitted he was unsure what type of policy would suit his operations, while Grace Eze, a Lagos-based caterer, described insurance as a “nice to have” amid rising costs of fuel, rent and wages.
Analysts argue that beyond affordability, regulatory enforcement, product design and distribution channels remain weak. Limited microinsurance innovation, insufficient incentives, and poor last-mile distribution continue to hamper penetration.
SMEs contribute nearly half of Nigeria’s Gross Domestic Product (GDP) and account for the vast majority of employment. Yet, without insurance, many businesses collapse entirely when faced with shocks that could otherwise be temporary setbacks.
National president of the Association of Small Business Owners of Nigeria (ASBON), Dr. Femi Egbesola, said about 87 per cent of SMEs operate within the nano sector, making tailored insurance solutions critical.
He urged insurers to redesign products to reflect SMEs’ operational realities and increase awareness campaigns to address widespread ignorance and misconceptions about insurance.
Egbesola also emphasised the importance of corporate governance and business advisory support for MSMEs, noting that structured enterprises are more likely to scale, attract financing and withstand economic pressures.
According to him, in the face of tightening economic conditions globally, SMEs must either reinvent their operational models or risk closure.
He advocated collaboration with entrepreneurial institutes and advisory firms to strengthen operational skills and business resilience.
Also speaking, co-founder and technical officer at Cubecover, Samuel Ishie, identified cost as a primary barrier.
“Many SMEs cannot afford insurance premiums, and even if they can, they often don’t know how to access appropriate products,” he said.
He added that skepticism about insurers’ willingness or speed in settling claims continues to discourage potential policyholders.
Similarly, managing director, the Securities and Exchange Commission (SEC) Emomotimi Agama, noted that the insurance industry has yet to effectively tap into the opportunities presented by Nigeria’s over 40 million small businesses due to weak marketing and limited financial education.
On his own, the former managing director of FSL Insurance Brokers, Alfred Daudu, pointed to inflation and tight cash flows as additional constraints.
“In a country where many are struggling to afford basic needs, paying premiums for an uncertain future feels like a comfort,” he said, while urging insurers to improve claims turnaround and customer engagement to build credibility.
Experts agree that closing Nigeria’s SME insurance gap requires coordinated action among insurers, regulators, SME associations and civil society groups.
Lower-cost micro-insurance products, simplified policy language, faster claims processing, stronger enforcement of compulsory covers and sustained financial literacy campaigns are seen as essential steps.
Ultimately, stakeholders stress that insurance should not be viewed as a luxury, but as a survival mechanism, one capable of safeguarding Nigeria’s most vibrant economic segment against avoidable collapse.
