By Emmanuel Enitan
The survival of more than 36 million small businesses in the country is under growing threat as new insurance industry data shows that a vast majority operate without adequate insurance protection against fire, flood, theft,others risks capable of wipe out years of investment and disrupting livelihoods.
The new finding, contained in the data from the Insurance Sector Strengthening Programme (ISSP), shows that only 3.17 million, representing about eight per cent, of Nigeria’s estimated 39.65 million Micro, Small and Medium Enterprises (MSMEs) have insurance coverage, leaving about 36.4 million businesses exposed to potentially crippling losses.
The scale of the protection gap has renewed concerns among insurance stakeholders over the vulnerability of the country’s small business ecosystem, particularly at a time when rising operating costs, economic vitality, climate-related disasters and other business risks are putting pressure on already fragile enterprises.
The exposure is significant because MSMEs remain the backbone of Nigeria’s productive economy, accounting for 96.7 per cent of businesses and contributing 46.31 per cent to Gross Domestic Product (GDP), according to the joint national survey by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the National Bureau of Statistics (NBS).
The sector also provides more than 84 per cent of total employment in the country, while micro-enterprises alone account for over 98 per cent of the 36.65 million registered and informal businesses.
Yet, despite their enormous contribution to economic activity and employment, insurance remains largely absent from the risk-management plans of small business owners.
Players in the insurance sector have attributed the low uptake to poor awareness of insurance, the cost of premiums relative to the scale of many businesses, concerns over claims settlement and the limited availability of simple, affordable products designed around the realities of informal operators.
The situation has now placed greater pressure on regulators and insurers to close the protection gap, particularly as the Federal Government and other stakeholders seek to use MSMEs as a major driver of economic growth and job creation.
It was against this backdrop that the National Insurance Commission (NAICOM) unveiled the ISSP, a strategic blueprint designed to deepen insurance penetration and expand coverage across critical segments of the economy.
Launching the initiative, the Commissioner for Insurance, Olusegun Omosehin, said financial inclusion and protection of small businesses were central to the commission’s strategic vision.
According to him, the programme provides a structured framework for moving insurance beyond regulatory compliance to make it an accessible financial safety net for vulnerable economic units.
Under the ISSP, NAICOM plans to raise Nigeria’s overall insurance penetration from about 0.5 per cent of GDP to 1.5 per cent by 2028, with a longer-term
Target of 10 per cent by 2031.
A major component of the programme is MSME and value Chain Development, through which the regulator plans to work with microfinance institutions, trade associations and technology companies to bring more small businesses into formal insurance arrangements.
The strategy targets more than 250,000 MSMEs for structured insurance coverage over the next five years, while also focusing on specific groups within the sector, including 2 million women-led businesses and 1.5 million young entrepreneurs between 18 and 35 years.
For the insurance industry, the opportunity is considerable, but stakeholders say capturing the largely uninsured market will require more than simply selling conventional policies to small businesses.
Insurers will need to develop products that match the size, income patterns and risks of micro and small enterprises, while using digital platforms and existing business networks to make distribution cheaper and easier.
The industry will also have to address the trust deficit surrounding claims, as small business owners whose entire livelihood may depend on a single shop, workshop, farm or trading operation are unlikely to commit scarce funds to insurance if they are uncertain about receiving timely compensation when disaster strikes.
The convergence of the SMEDAN/NBS data with NAICOM’s ISSP therefore presents both a warning and major commercial opportunity for insurers.
With more than 36 million businesses still outside the insurance net, industry operators face the challenge of converting Nigeria’s MSME population from a largely uninsured economic base into a protected and more resilient business community.
Beyond expanding premium income, closing the gap could help prevent individual shocks from becoming business and job losses and deeper economic hardship, making MSME insurance a critical component of Nigeria’s broader financial inclusion and economic resilience agenda.
