With a population of about 200 million people and touted as the largest market in Africa, one will be quick to assume that doing business in Nigeria will be a walk in the park. But, small business owners would tell you otherwise. Many challenges confront small business owners here making it difficult for many businesses to reach their full potential.
According to a , Nigeria ranked 131 out of 189 countries regarding the ease of doing business. As a result, 80% of new small businesses fail in 3 years. This is not to say that there aren’t business succeeding. But not enough business owners are well equipped for the challenges ahead and so, a lot of the business enterprises either pack up completely or remain redundant without growing.
In this piece, we will be highlighting some of the common challenges facing small business owners in Nigeria. Small business owners and prospective entrepreneurs must be aware of these challenges to enable them to prepare adequately. We will also be providing recommendations on ways these challenges can be averted or overcome.
Some of the common challenges facing small businesses in Nigeria are –
- Access to Financing
- Little business knowledge
- Government Regulations and Policies
- Visibility and Marketing
- Inadequate Public Infrastructure
- Finding the right staff
Access to Financing
Pending when the financial inclusion drive is achieved in Nigeria, small business owners will still find it difficult to access finance to either start or scale their business. Access to financing has been made even more difficult with a greater percentage of our population still being unbanked.
With a growing population of about 200 million people, over 73.2 million adults in Nigeria, an equivalent of 40.6% of the total adult population are financially excluded. In other words, over 40% of households and adults in Nigeria don’t have a formal bank account.
Furthermore, many small business owners don’t keep proper records of their business activities. Their business lacks proper structure and without this structure investors and banks find it difficult to access a business’s creditworthiness to provide the venture capital or loan needed to support the business venture.
Small business owners can avert this by ensuring that they operate a personal and a business account to make it easy for the banks to identify with you. Secondly, develop the habit of keeping proper accounting records of your business operations. This will make it easier for you to access funding.
Also, small business owners can seek out financing from online lenders instead of banks and other financial institutions which prove difficult to access. Some popular online lenders for business loans in Nigeria are Renmoney, Carbon, Lydia, Credit Direct, Quickcheck, and of course, Lendigo. If you are interested in a Loan from Lendigo, .
Little business knowledge
A lot of small business owners in Nigeria ventured into the business space by chance with little or zero knowledge of business management. Lack of adequate business management knowledge is one of the greatest undoings of the average small business owner in Nigeria. It reflects in how they run the business without structure or adherence to industry best practices. It also shows in their lack of people management skills which results in having demotivated staff cares less about the success of the business.
We recommend that small business owners should take time and invest in learning not just the dynamics of their trade, but basic business management skills like accounting, people leadership, customer relations, government relations, marketing, and branding. Adequate knowledge will give your business an edge in a highly competitive environment.
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Government Regulations and Policies
Some Government regulations and policies contribute to some of the challenges small business owners are facing. First, some small business owners find the bureaucratic nature of government too tedious in procuring the necessary certificates, licenses, registrations, and other permits needed to run their business. We also have different levies from different agencies of the government targeted at small business owners. Though these regulations and levies are put in place to check and maintain order in the business space, it has become so much for small business owners.
Various harsh macroeconomic conditions like unstable exchange rate, inflation, and hike in the price of fuel are also contributing factors to the many challenges small business owners face frequently. The government can do more in providing a more conducive macro-economic environment and simplify the process of acquiring licenses and certifications to encourage the growth of small businesses.
Visibility and Marketing
So many small business owners are struggling to reach the critical mass of their target market. A lot of the brick and mortar businesses are located in one corner of the market without reaching its full sales potential. This has led to poor sales, low revenue, and stunted business growth, giving small business owners a lot to worry about.
Small business owners can invest more in platforms and digital solutions that will help get their products or services seen by more of their target market. There are various e-commerce platforms that small business owners can leverage to increase their sales. They should also invest in digital marketing tools like websites and social media channels to improve their visibility. Some business owners are already taking advantage of these platforms to generate sales and increase revenue.
Inadequate Public Infrastructure
The poor state of public infrastructure in Nigeria is posing a serious threat to the growth and development of small and medium scale enterprises. Small business owners are faced with a number of these infrastructural challenges ranging from inadequate power supply to poor transportation infrastructure, insecurity, and access to potable water. But of the many challenges, lack of stable electricity is the most common amongst business owners in Nigeria. The state of electricity has hindered the growth of small businesses with an interest in manufacturing and production, killing a lot of industries, mini-factories, and other businesses.
In Nigeria, a lot of small business owners have opted to provide themselves with alternative infrastructures. But the cost of providing parallel infrastructural support for the business is higher, contributing to high operational expenses. Besides, some commercial banks in Nigeria have alluded to the fact that these challenges have made SME financing a high-risk venture for them, hence while it is difficult for small business owners to access financing from them.
The government should do more in the area of infrastructural development especially in underserved regions. However, pending when that is done, small business owners must include the provision of necessary infrastructure as part of their cost of production. Take the bull by the horn and salvage your business.
Finding the right staff
A lot of people have the wrong attitude to work and so it is always difficult finding people with the right attitude to work and learn in the process. With the right people, a business can confidently navigate through hard times and still emerge strong.
Small business owners can employ the services of an HR expert to help them with their staffing needs. Also, they can explore productivity tools as against employing people. Productivity tools are efficient and dependable and there are a number of them that can help small businesses across different tasks.
Entrepreneurs are the ones who develop and build the economy of a place. We still need more people to embrace entrepreneurship and create small businesses that will contribute positively to our collective economic growth as a Nation. However, we recommend that current and small business owners be aware of these challenges and prepare to confront them. This way we can rewrite the statistics of failure that has plagued small businesses in Nigeria.