There are a lot of challenges faced when it comes to owning and running a successful business in Nigeria. Small businesses tend to suffer the most and the survival rate is very low for new businesses. Statistics say that 80% of businesses fail within the first 18 months. This is not because of a lack of genuine effort from the entrepreneurs. Rather it is largely due to the harsh conditions of the market and business climate they find themselves.
There are some rather common challenges that businesses in Nigeria are bound to face. These are a few of them, to help you get a grasp of what is ahead. Taking note of these 6 challenges and preparing for them will be of great help to you and your business.
1. Getting Access to capital/funding
One of the first challenges you have to deal with as a business owner is getting access to adequate capital. A lot of people with great business ideas are forced to watch their ideas die before they can even secure enough funding. Most parts of the world offer have support programs laid down so would be entrepreneurs know where to go when they need financing. The truth is that a lot of those programs are available in Nigeria but they are not well publicized. Bank loans come to mind first when a person decides to start a business but bank loans nowadays are unattractive to a lot of people. The interest rates on bank loans are on average 25%, this is relatively high and a lot are not willing to take the risk. Learning to navigate the financial system is something you have to learn quickly. Doing this will help you find the best way to get the funding you capital you need.
2. Poor Infrastructure
Another hurdle you have to overcome is using inadequate infrastructure to run your business. Optimal productivity becomes a real issue when you don’t have good roads or constant electricity supply. This region is fairly famous for having alternative sources of power on every corner you can find. Even though the country is making strides towards providing better infrastructure for people and businesses like the privatization of electricity distribution companies, there is still a long way to go.
3. Government Policies
The climate for doing business in Nigeria isn’t conducive enough. This isn’t helped by the government policies affecting business dealings in the country. Because the country’s main policies favour the oil sector, with it being its main export. The regulations and policies have not been tailored towards helping other sectors. Taxation policies have also been hard on businesses, especially small businesses. This why keeping abreast of policy changes in your sector is very important.
4. Bribery & Corruption
With Nigeria being the largest economy in Africa the check for corruption has not been effective. Most people in this region are forced into bribing officials one way or another. According to the “National Corruption Survey” released by Nigeria’s National Statistics Agency, 32% of people who come in contact with officials are asked to pay bribes. These challenges also extend to business to business dealings. Many businesses give wrong estimates and misrepresent information. Having a firm grip of the system comes in handy.
5. Limited Market Information
Nigeria and Africa, in general, is making great strides in technology and automation of information. Nevertheless, market information and data is still not adequate and readily available. A lot of businesses have to do their own market research. A lot of this information you would need for strategy development is not reliable. This leaves a lot of people looking to international sources for data on their own region.
6. Building Trust
Building the right ecosystem for your business is also one of the challenges business owners face. From stakeholders to collaborators, building a trust circle is not easy. The good thing is if handled with patience and care this can be built in time. You have to identify those you want to do business with early. Set proper regulations and make sure your transactions are backed legally. This would make it easier for you to do business in general.