According to a World Bank report, Nigeria ranked 131st out of 189 countries regarding the ease of doing business.
As a result, 80% of new small businesses fail in 3 years. Most of the failures are due to numerous challenges facing the sector which are the parameters that determine the sustainability of small businesses.
Small and medium scale (SMEs) businesses are companies with a workforce of fewer than 300 individuals.
Small business enterprises are a sector of the economy that needs the attention of the Nigerian government and other developing nations due to the role it plays in job creation and economic growth in the nation’s economy.
The Nigerian Economy like other African countries has been facing a fight against unemployment since Independence.
The Nigerian government through its economy regulatory agencies have recognized the importance of small business in the provision of employment to the citizen.
Because of the importance of small businesses in the Nigerian economy local, state, and federal government recognized the need of stimulating small businesses to provide employment, reduce poverty rate, and improve economic growth.
However, while small business is being acknowledged for its development contribution, it still faces many obstacles that limit their long-term survival and development.
Some of the common challenges facing small business owners in Nigeria and recommendations are
1. Access to finance:
Limited access to capital:
Many small business struggle to secure loans or venture capital due to high interest rates, lack of collateral, and stringent landing requirements.
High interest rate:
Nigerian banks often charge high interest rates on loan, making borrowing expensive and reducing profitability for small businesses.
Recommendation:
Financial literacy programs:
Educating SME owners on financial management, accounting practices, and alternative funding options can help them navigate the financial landscape effectively.
2. Infrastructure Development:
Inadequate infrastructure, including unstable power supply, poor road networks, and limited technology access, hampers the productivity and efficiency of SMEs, leading to increased costs and operational challenges.
Recommendation:
Government investment:
Prioritizing infrastructure investments to improve power generations, upgrade transportation networks, and expand reliable internet connectivity is essential.
3. Inadequate skills and capacity:
The unavailability of skilled labour, including technical expertise, management capabilities, and entrepreneurial skills, poses a significant challenge for SMEs in Nigeria. The lack of a skilled workforce can hamper growth and innovation.
Recommendation:
Vocational training and skill development programs:
Collaborating with government and private sectors entities to provide training programs that equip individuals with the skills required by SMEs is crucial.
4. Regulatory and administrative burdens:
Complex regulatory frameworks, excessive bureaucracy, and corruption create barriers for SMEs in Nigeria. Cumbersome business registration processes, obtaining permits, and complying with tax regulations to the administrative burden faced by SMEs. Navigating the regulatory landscape can be challenging and time consuming for small business owners.
Recommendation:
Digitalization of government policies:
Implementing e-government initiatives and online platforms for business registration, tax filing, and other administrative processes can enhance efficiency, and transparency, and reduce corruption risks.
5. Other challenges:
Time management:
Balancing the demands of running a business with personal life can be difficult.
Market fluctuation:
Economic downturns and changing consumer preferences can significantly impact small businesses.
Conclusions
Small business enterprises are seen as an important sector of a nation`s economy which should be adequately given attention. Small business owners face a complex web of challenges, from securing funding and managing cash flow to building strong teams and adapting to market shifts. While these hurdles are significant, they also present opportunities for growth and innovation. Through strategic planning, effective management, and a commitment to continuous learning, small businesses can not only survive but thrive in today’s competitive landscape.
The writer:
