Top 8 Challenges Encountered By Nigerian Entrepreneurs And Possible Solutions
Nowadays, entrepreneurs face a lot of challenges in the highly-competitive world of business. Nigeria has survived difficult times of colonisation which resulted in a lack of entrepreneurial spirit that was suppressed by the British. Fortunately, today entrepreneurs have more resources to learn how to run a business and tackle different problems more effectively. So, let’s take a look at some challenges of entrepreneurship in Nigeria nowadays.
WHAT ARE THE PROBLEMS CONFRONTING ENTREPRENEURSHIP DEVELOPMENT IN NIGERIA?
Becoming a successful businessman in Nigeria is not that easy, especially at the beginning. Starting a business is associated with many challenges and difficulties. While some of them are minor, others cause a lot of headaches. To identify the reasons for the business-related problems in Nigeria, one needs to make a journey into the history of entrepreneurship in this country.
As for today’s state of business in Nigeria, entrepreneurship development in Nigeria has never been so high in the history of the country. Nevertheless, despite the increasing need for entrepreneurship, doing business in Nigeria still needs to be improved. One of the crucial problems of entrepreneurship consists is wrong understanding the concept of entrepreneurship.
While some understand it as just starting a business, it should be understood as the process of providing goods and services to people in exchange for money. A businessman is not only a person who acts but thinks. Being an entrepreneur nowadays should involve thinking of new ways of solving problems and creating value. It cannot be imagined without innovation and risk-taking.
The lack of risk-taking might be caused by a complicated history of entrepreneurship in Nigeria. Before Nigeria was colonised, a lot of citizens were traders. Nigerians always had a business mindset and high m0ral standards of doing business. Though, when the colonial era began, British colonial masters were those who had more rights than Nigerians. A lot of companies were established by the colonizers, and a lot of young people were employed by these firms. There was a hugely important disadvantage of this quasi-development. Many Nigerians were joining the labour force so their entrepreneurial mindset was fading away.
THE CHALLENGES OF ENTREPRENEURSHIP IN NIGERIA
Today, a lot of attention is paid to the development of entrepreneurship in Nigeria, and many resources are spent on improving entrepreneurship in this country. The entrepreneurs in Nigeria are facing a lot of challenges. Let’s take a closer look at the major problems that have been affecting the development of entrepreneurship in this country.
1. LACK OF CAPITAL
This challenge is one of the main reasons why entrepreneurship in Nigeria hasn’t improved over many years. A lot of startups fail because of the lack of investment. That’s why thousands of incredible ideas couldn’t be implemented. The lack of capital can be caused by two reasons: insufficient potential or innovation or entrepreneur’s uncertainty and fear to promote the business.
As a beginner, an entrepreneur wants to get his business running, but not so many people are willing to invest their money in an untested or unpractical idea. A business must show that it can be profitable with no funding as investors do not want to risk their money. Alternatively, they need to see that the business idea is 100 percent practical. It should be new and fill the gap or need in the particular market niche.
Also, the businessman must show that he is able to manage the resources he already possesses. Besides, every businessman must be talented at making money from “nothing” that is using different possibilities for his own goal.
When it comes to starting a business the most important thing perhaps is that entrepreneur himself could be confident in the idea he finds innovative. Top 8 Challenges Encountered By Nigerian Entrepreneurs And Possible Solutions
But what is the best way to raise money for the business startup? Basically, you can either rely on your own or others’ financial potential, that uses your own personal savings, ask for money from your family and friends or find people who would like to invest in your business. Another way is to find people who could become your partners and invest their money in your business idea that they find interesting as well.
When talking about the external channels, the possible options are bank loans and angel investors. As you can see, there are many channels to raise money for a startup, but lack of capital remains a challenge for Nigerian businessmen.
Here is the possible solution for those who do not wish to rely on the external sources of investment. If you want to start your business with little or no capital, you can choose the self-fueled growth model that implies funding your own business endeavors. Start with marketing and advertising. You might agree that business to a great extent depends on how much the customers are familiar with it, especially in this hustling world. You can cut your expenses on the labour force, rent, equipment, innovative solutions but the advertisement is a must.
The alternative way is riskier. If you find your idea innovative enough, you can develop it until you will be ready to present it to the world. If you already run a business, you can experiment with it a lot. If you don’t have enough in the budget to market your company to its full potential, you can prioritize your marketing efforts with maximum efficiency.
It takes a lot of experience and time to find out where the money actually works. Look closer what areas can be cut so that some funds could be freed up. Sometimes funding is not what the business actually needs. There may be a lot of things every businessman could improve to make the enterprise more profitable and efficient. Think of your new and current customers and how to be remarkable to them. It depends on the advertisement as well as the quality of the product or service. Also, it is essential not to sacrifice quality for saving money on the current expenses as well.
2. DIFFICULTIES IN GETTING LOANS
While the problem number one of most Nigerian people in business is the lack of capital, the second challenge they face is related to securing loans from financial institutions. Many potential Nigerian entrepreneurs go through many difficulties when trying to get a loan for their business.
When Nigerians turn to banks to fund their business idea, they understand that getting a loan is not as easy as it might seem to be. The thing is banks and other financial institutions do not wish to risk lending money to businessmen who don’t have any experience in running a business. The banks are more loyal to those who already have at least a small business. There are higher chances that the loan will be paid back.
Another reason why securing a loan is so difficult is the requirements needed for securing this loans. Banks ask for high-interest rates so that small business owners or start-ups cannot afford. It sometimes works like a filter that defines which ideas are not practical, but most often high-interest rates simply discourage Nigerian businesspersons.
3. POOR STATE OF INFRASTRUCTURE
Someone living in the developed countries of Europe or America might be surprised, but the lack of good infrastructural facilities is a serious problem affecting the development of businesses in Nigeria. The state of infrastructure in Nigeria is just destitute. The infrastructure challenge is faced by all the entrepreneurs, especially those who work in the agricultural or industrial sectors. The unstable power supply and poor transportation system have forced a lot of businesses to close down. To run the business, most entrepreneurs need to use generators and spend a lot of money on buying the fueling generators and on fuel to run them.
Sometimes businesses do not even get up to 5 hours of electricity in a day, and some companies introduced night shifts as power often comes on at night. The insufficient supply of electricity has negatively affected many businesses. The truth is that many businesses have even moved from Nigeria to other countries due to electricity problems.
Lack of good roads and railways is the second infrastructural challenge affecting entrepreneurship in Nigeria. As many entrepreneurs need to move raw materials and final products to the customers living in different cities, means of transportation are a kind of must-have for every developing country. This is one of the challenges facing entrepreneurship in Nigeria that the government is trying to solve.
The outcome of these problems is increased production cost which makes the products noncompetitive. Such economic challenges definitely belong to the Nigerian government’s things to do to promote successful entrepreneurship.
4. UNSTABLE NIGERIAN ECONOMY AND POLITICS
The state of the Nigerian economy and politics is another serious challenge for entrepreneurs. The state of the country plays an essential role in any country’s development. All the socio-economic problems and political instability don’t help in the successful development of businesses. Moreover, any economic or political instability K-ills businesses.
5. INCONSISTENT GOVERNMENT POLICIES
There is a problem with continuity in Nigerian government policies. In general, the existing policies are not good enough to create the necessary conditions for the development of businesses in Nigeria. The entrepreneurs need more freedom and flexibility for running their businesses. The challenges start at the beginning. Entrepreneurs usually need to wait 30 days to register a business with the Corporate Affairs Commission (CAC). When it comes to registering with NAFDAC, or accessing funding from the Bank of Industry (BOI), it gets even more complicated.
While businesses are going on somehow, the government is trying to do its part. Nigerian government does not forbid the businessmen to speak out and share their experiences. This way the government knows what challenges entrepreneurs face and what could be the possible solutions to the arising problems.
One problem the Nigerian government has recognized is insufficient industrialization and cultivating the entrepreneurial culture. To solve this problem, the Nigerian Investing Commission (NIC) has introduced a policy that requires university students regardless of their area of study to take courses in entrepreneurship to promote entrepreneurship in Nigeria.
Another serious challenge faced by many Nigerian entrepreneurs is multiple taxations. While businessmen are responsible for funding the government through paying taxes, in Nigeria entrepreneurs are charged too many taxes which negatively affects the businesses. While Nigeria’s Companies Income Tax Act (CITA) has approved only 39 taxes, over 500 various taxes are imposed by local governments that are in most cases duplicated and not lawful.
6. POOR KNOWLEDGE ON HOW TO RUN A BUSINESS
Sometimes the success of the business depends not on the government politics, economic problems or insufficient capital but on the lack of the entrepreneur’s experience and knowledge on how to be a successful businessman. While some people have a chance to take entrepreneurship courses, many start a new business from scratch with no economic background. Top 8 Challenges Encountered By Nigerian Entrepreneurs And Possible Solutions
Those who venture into any kind of enterprises, do not always know how to manage and grow a business properly. They need to learn to get relevant and adequate information about management and marketing. What is needed is sufficient problem-solving skills in case problems arise. Every entrepreneur faces a challenge of getting familiar with high-tech trends that are especially hard to embrace in the modern business environment.
7. MARKETING STRATEGY CHALLENGE
Many businessmen face this challenge which consists of the knowledge on how to market products and services: print, online, mobile, advertising, etc. Businessmen want to maximize their return on investment with efficient, targeted marketing that results in increased profits. This challenge depends on the economic state of the country. With no appropriate knowledge about the most effective marketing strategies, most Nigerian entrepreneurs are trying to save money and cut their spendings on basic needs. The solution to this challenge is to investigate the market and produce only those products and services that are currently or in demand or all time high-in-demand commodities.
Advertising is also helpful though if the quality of the product is not high enough, people will not be interested in this product. Businessmen should be adapted to creating marketing plans. Another way to get a marketing plan is by outsourcing the marketing strategy to professional. It is important to find out what marketing activities are effective in motivating purchases. The business might need to know what is your budget to craft a good business plan. If businessmen do not make a business plan, they usually get stuck, that’s why the business fails. It is advisable to imagine what you will achieve in 5, 10 years or more. Top 8 Challenges Encountered By Nigerian Entrepreneurs And Possible Solutions
A lot of entrepreneurs choose the wrong path that leads to business failure. Being a businessman means being a good manager of finances. This is the main reason why many businesses start, run for a while, and fail. The solution is to manage cash effectively by limiting diverting funds from the business to the unprofitable liabilities.
8. LACK OF PATIENCE
A lot of businessmen who just started a business expect to make money quickly. The statistics show that if the entrepreneur is more money oriented his efforts to gain a fortune quickly will not succeed.
It’s true that people mostly go into business for money but if they need to have enough patience to grow a business to fully realize its potential. Investors who want to get the quick returns, lose their patience. Sometimes they lack entrepreneurial mindset which might be considered a result of the post-colonial mentality. When many Nigerians were taught to be in the labour force and not to be entrepreneurs, they forgot that being an entrepreneur in Nigeria means to face many problems and challenges.
POSSIBLE SOLUTIONS TO THE ENTREPRENEUR CHALLENGES IN NIGERIA
Despite all the potential challenges, there are many positive prospects for the development of entrepreneurship in Nigeria. Currently, the Nigerian government is developing an economic transformation plan for the economic growth of the country. There have been a lot of efforts undertaken to create a comfortable environment for fast business growth.
Solving the problems and challenges entrepreneurs face needs putting a lot of efforts by both the businessmen and the government. The small- and medium-sized businessmen need to increase their knowledge and develop the needed skills in the particular area of business. The entrepreneurs need to collect information about the target audience and seek help from partners and professionals to gain the experience.
Another way consists in applying the freshest and creative ideas of doing business. Increasing popularity of technology trends help businesses to grow fast, but this challenge requires people in business to be quick learners.
When talking about supporting institutions, Nigerian businesspersons have great possibilities to benefit from their financial assistance fully. Despite the fact that some financial institutions are quite reluctant to provide financial assistance to the businesses, some of them are open for giving out loans at reasonable rates under the condition that the business idea seems to be practical.
For Nigeria, it is essential to achieve its economic goals by stopping relying on oil alone. There is a great need to focus on the private sector needs and creating a comfortable atmosphere for business growth.
Businesspersons face a lot of challenges, and many books have been written about the ways to overcome them. While economic education doesn’t make a person businessmen, it is important to get a relevant information about the mechanisms of running a business. Many difficulties the small and medium-sized businesses struggle with can be solved, but entrepreneurs need to be willing to face them and put the needed efforts to build the successful business. Top 8 Challenges Encountered By Nigerian Entrepreneurs And Possible Solutions