Challenges Of Starting a Business in Nigeria

Have you ever thought of establishing your business here in Nigeria?

While Nigeria is the most populous nation in Africa, economic hardship seems to be the order of the day.

A large percentage of its populace wallows in poverty; youths lament how job opportunities are fast vanishing into thin air. For this reason, an average Nigerian youth is battling this thought:

Travel out or fight hard?

In an attempt to seek a way out, many want to travel out of the country by all means. 

That said, a few others still look forward to setting up businesses, even though they would like to travel abroad.

But the category of people in the latter would start a small business before that dream comes true instead of folding their arms idle or working around in a five-to-nine job.

What is a small business?

Defining a small business enterprise can be quite daunting, as there is no generally accepted definition.

Therefore people have described small business enterprises in different ways.

And these descriptions vary from country to country, business organization to organization, and from study to study.

According to the European Union Commission, small and medium-sized businesses are those enterprises that have fewer than 250 employees. But on the other hand, those businesses with not more than 50 employees can be grouped as small enterprises.

Since this is not an academic journal, I don’t intend to bog you with many possible definitions of small business enterprises.

Nigeria perspective: Small business enterprises

According to the report from the international conference tagged Financial System Strategy 2020, SMEs are defined as businesses that record an annual turnover of not less than ₦100 Millions, and have not fewer than 300 employees.

 

Challenges that militate against Small business enterprises

 

1. Financial problems

As someone just starting in business or about to launch a new business, finance is a challenge you must first overcome. Financial challenges are an agelong constraint and are very common in Nigeria.

But in developed countries, people seem to experience it at a very minimal level compared to developing countries. In Nigeria, many entrepreneurs or small business owners get discouraged by the issue of inaccessibility to suitable and adequate loan facilities.

The banks supposedly created to help alleviate this challenge seem to frustrate them. Except for a few reasons, banks tend to weigh the risk level of giving loans to small businesses, which they see as a high-risk investment, so to say.

Thus, they demand collateral and other strict legalities that small business owners can barely put up with. And in most cases, aspiring entrepreneurs resort to their savings, support, and soft loans from friends and family.

2. Documenting Your Plan

Many think that the first and BIG challenge to any new business or person newly threading the path of entrepreneurship is the issue of finance. But the truth is that having finance without a solid plan on what to do will lead to losses and wastages. 

Yes, loss of tons of money.

That’s why business owners must take the time to plan their businesses carefully. Through this, they will act with ease and a clear sense of direction, as issues like determining the amount of capital or finance required for their businesses, fundraising, and other things get settled on paper.

Indeed, all aspects of a business demand meticulous planning. That is why you must write a plan for your business, that is, a business plan. It serves as a road map for any business.

3. Government policies

Small businesses play a significant role in the economic development of a country. Despite this, the Nigerian government yet to give the SMEs sector the adequate attention that it deserves.

And giving attention to ways to create an enabling environment for startups and entrepreneurs goes beyond formulating good policies. But the question is, what significance will a good policy or set of standards and regulations have without no implementation?

Yes, just a change in policy and proper execution can change the narrative for the owners of thousands of startups out there and individuals who want to go into business.

The creation and implementation of good policies can enhance the application of credit facilities, softening the incidence of taxation on startups, or as the case may be. For example, the government can influence the operations of banks in terms of making suitable loans accessible to help alleviate small-business owners’ financial challenges.

4. Poor Managerial skills

Indeed, you can’t give what you don’t have.

In the same way, any business managed by an individual or group of persons that lack managerial competencies is bound to shut down in no time. Even though it may take a while.

Management involves planning, organizing, coordinating, and effectively using all assets and resources (both human and non-human) to attain set objectives.

While workers need managerial skills, business owners need them more.

Yes, more than anybody else.

As the saying goes, “To whom much is given, much is expected.”

Sadly, many small businesses shut down within the first five years of their life because of little or no managerial knack. Therefore, to overcome this challenge, every entrepreneur or business owner must be committed to learning and mastering the art of management and managing a business. It can be through reading, taking courses, or attending seminars designed for that purpose.

5. Insecurity challange.

Animals do not run business entities; humans do. Even animals take off at the appearance of anything that can endanger their lives.

Gloomily, there are businesses and business people in a country where insecurity is a national issue; they find themselves in this situation.

Taking the current security state of the nation, imagine a fellow who does interstate business that will require him to travel frequently from state to state. No doubt, robberies, kidnapping, killings, attack from bandits, amongst others, are eventualities that may arise from the problem of insecurity.

You can now see the issue of insecurity is a challenge that you rarely have a direct influence on. But the government does.

That statement will seem a lie until the government decides to take the bull by its horn. When the government handle the issue of insecurity with zero tolerance, there will be a colossal decline in criminalities. And the aftermath effect will be an enabling environment for trade and legal businesses of all kinds.

6. Poor power supply

No one can gainsay the importance of power supply in successfully running a business. Yes, especially at this age.

The epileptic power supply in Nigeria is something to cry over. In short, it is the reason for the brooding (and, of course, loss) of many small and medium-sized enterprises.

Its absence creates a BIG gap in business. Consequently, in an attempt to gap, more than often, managers of startups for alternative sources of power, which are relatively expensive.

As a blogger, I do know what it means for power to go off in the middle of a writing or research project, let alone businesses in the manufacturing industry, where electricity is needed to produce utility, in whatever form or stage.

7. Competition

No matter the size of a pond, we will find the big fishes and the small fishes. And as it is usually cases– the small fishes tend to be the victims whenever things go sour– when the need for competition arises.

In the same way, small businesses tend to suffer from competition with the sharks (the big enterprises) in their niches.

Thus, as an entrepreneur or someone about to kickstart your first business, this is a challenge you would need to think over and then come up with a strategy. This should be carefully reasoned about at the planning phase while conducting your feasibility study and business plan writing.

8. Lack of technology skill

Technological skills become very handy when a change occurs. Essentially, these changes are often consequential on a business productivity level.

It may be the acquisition of new equipment or tools. And this will bring about change in the procedure of doing things.

For instance, before the advent of computers, the use of typewriters in creating documents was prevalent. Even used even in courtrooms. But with the speed, ease, and efficiency computers (with some word processing software) offer, businesses started to acquire computers and adopted this sophisticated way of creating documents, amongst other things.

Thus, there was a need for both employers and employees to gain computer literacy to retain relevance in their workplaces and to attain a greater level of productivity.

9. Corruption

The term corruption is broad in scope; it covers all practices outside the law. And as someone just starting in business, you will experience corruption, directly or indirectly, that emanates from different quarters. It could be the effects of a political decision from those in power or a drastic change in one policy or the other.

Regrettably, all of this has consequential effects on your business, as far as its growth and expansion are concerned.

10. Getting a good workspace

With adequate finance in place, this may not seem like a challenge.

But it is.

Getting a very suitable workspace in a perfect location is quite taxing. It may require consulting with one or more real estate agents, as well as your time.

For example, in places like Lagos, where getting accommodation or a business place, one would have to dedicate time in a careful search for one– which will chop out a good amount of funds.

11. Poor infrastructure

Many things external to a business determine if it will become successful or not. Most of these things are the social infrastructures we talk about frequently. And they include things like road network, power supply, health care, communication network, etc.

Good infrastructures are in relatively abundant supply in developed countries. Indisputably, that explains why small and medium-sized enterprises strive there with ease.

But that is not the case in Nigeria. Therefore, poor infrastructure is a challenge you must be ready to face as an entrepreneur or small business owner without giving up on the vision of your business. 

 

Note: The items above are in no order of significance.