Challenges of entrepreneurship in Nigeria and potential solutions

Entrepreneurship is one of the essential pillars onto which most economies are built. Entrepreneurs play a huge role in a country’s trade balance, job employment, and tax revenue generation. In Nigeria, like in other developing countries, entrepreneurs face numerous challenges, some related to factors beyond their control and some not. Which are the main challenges of entrepreneurship in Nigeria, and what can be done to address them?

The entrepreneurial scene is remarkably different from those in more developed countries, such as those in European and American nations. Some of the challenges entrepreneurs face have to do with the government and its policies, while others have to do with an individual’s business prowess or lack thereof.

What are the challenges of entrepreneurship in Nigeria?

What are the challenges of entrepreneurship development in Nigeria? Here is a look at the most prominent challenges faced by Nigerian entrepreneurs.

1. Capital problems

For any entrepreneurial venture to take off, there must be sufficient capital to cater for the wide-ranging startup costs. For most businesses, these initial costs include premise fees, licenses, opening stock, logistics, business registration, hiring, and so on.

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In Nigeria, the financial sector is hugely biased against startup entrepreneurs. This is because most entrepreneurs who are just starting up often have little to no capital. This comes as no surprise since most are just getting into the business scene. In addition, those who can access loans often find the lenders’ fees and interest rates to be somewhat exorbitant.

Possible solutions

Like in many developed countries, the Nigerian government can come up with ways to alleviate the capital problem amongst beginner entrepreneurs. Here are some possible solutions.

• Create, facilitate, and sustain a government-owned fund to lend capital to entrepreneurs based on the soundness of their potential ventures.
• Work with private lenders to avail low-interest loans to the owners of promising business ventures.
• Encourage wealthy Nigerians to create venture capital firms that can then create funding and ownership deals with potential entrepreneurs.

2. Insufficient business knowledge

A successful business venture largely depends on its founder(s)’ understanding of numerous aspects of the modern-day business environment. To succeed, one must understand how to place and promote their product or service, who to hire, where to market, what to charge, where to source materials, and so on.

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For some Nigerian beginner entrepreneurs, this knowledge is either lacking or inadequate. With the unforgiving nature of today’s business world, a venture created by an unknowledgeable founder is almost guaranteed to fail.

Possible solutions

Here are some possible solutions that can help improve entrepreneurship in Nigeria.

• The challenges of entrepreneurship education in Nigeria can be alleviated by encouraging entrepreneurs to enrol in online and offline courses on how to start, run, and grow a modern-day enterprise.
• Improve the quality of business education in Nigeria’s universities and colleges.
• Create platforms where students can interact with successful entrepreneurs and begin to hone their business skills while still in school.

3. Poor infrastructure

This is one of the most prominent government-related challenges to Nigerian entrepreneurship. For enterprises to succeed in a country, there must be adequate infrastructure. Some of the most important infrastructural requirements include good road networks, reliable electricity, and adequate water supply.

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Unfortunately, all the above requirements are significantly lacking in Nigeria. Up until recently, power has been quite unreliable in Nigeria, and road networks in some states are barely existent. This means that budding entrepreneurs in such states would be forced to abandon their venture since there would be no means of transporting their finished goods to the market.

Possible solutions

Here are some possible government-initiated solutions to entrepreneurship problems in Nigeria.

• Invest in infrastructure development through external and internal borrowing, public-private partnerships, and internally generated revenue.
• Encourage private power providers to compete with the primary national provider. This will reduce monopoly power and possibly improve the power supply throughout the country.

4. Multiple taxations

This is a huge hindrance to entrepreneurs in numerous developing countries. In a bid to increase tax revenue, governments in these countries tend to have multiple taxes. A budding entrepreneur, for example, would be required to pay some federal tax for their business, pay VAT for the goods they produce, pay state-based taxes, renew their operating licenses each year, and numerous other tax-related obligations.

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Today, Nigeria has over 30 forms of tax and more than 300 levies, most of which affect entrepreneurs in various economic sectors.

Possible solution

The easiest way to deal with these is through tax consolidation. This would mean that a potential entrepreneur will know the exact amount of the only tax they will ever have to pay once their venture is up and running. This would make it easier for such a person to know beforehand whether their venture makes sense considering the payable tax.

5. Impatience and lack of commitment

Most successful business ventures have a story behind them, often riddled with failure, setbacks, and growth on the entrepreneur’s part. Today’s generation, commonly labelled as ‘the microwave generation,’ likes to have things happen overnight.

This has led many business owners to abandon their ventures at the first challenge encountered. A successful enterprise calls for a lot of patience and resilience. Most Nigerian youths need to be reoriented and invest some commitment into their new ventures.

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Possible solution

This is mostly a mentorship issue. People need to be trained that business ventures take time, at times years, to succeed. By encouraging potential business owners to seek mentorship, numerous new enterprises can be saved.

6. Inconsistent government policies

Businesses usually thrive in an environment with good government policies. When there is a lack of continuity with government policies, entrepreneurs feel the heat. In Nigeria, for example, regimes are known for overturning policies put in place by previous regimes. This puts business ventures in a state of confusion, hampering their growth.

Possible solution

The existing regime should put in place policies enshrined in the laws of the land. This means that the policies will remain in place regardless of the reigning government.

What is Nigeria’s VAT rate?

The Nigerian government charges 7.5% VAT on all taxable goods and services, effective from April 1st, 2022.

What is Nigeria’s GDP?

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The Gross Domestic Product (GDP) in Nigeria was worth 440.78 billion US dollars in 2021, according to official data from the World Bank.

There are numerous challenges of entrepreneurship in Nigeria, some related to entrepreneurs and others to do with the government. Luckily, these challenges have possible solutions that can be implemented to improve the Nigerian entrepreneurial space.

READ ALSO: What are the 10 economic problems that Nigeria is facing?

Legit.ng recently published an article exploring the main economic problems plaguing Nigeria. Like numerous other middle-income countries with emerging markets, Nigeria has witnessed gradual expansion in the communication, technology, finance, manufacturing, and service sectors.

However, numerous economic problems continue to hamper the country’s development. These issues have contributed to the country’s current undesirable economic status.

Source: Legit.ng