Entrepreneurship development in Nigeria: problems and prospect
The need for entrepreneurship development in Nigeria has never been so high in the history of the country. However, despite the increased call for entrepreneurship, it still requires much improvement. The reason for this is the huge number of the challenges that entrepreneurship development in Nigeria is facing today. This article has highlighted some of the major problems and how we can overcome most of them.
What is entrepreneurship?
Entrepreneurship is widely understood as the process of starting and owning a business that provides goods or services to people in exchange for money. A person who has created and owns a business is known as an entrepreneur. But some people believe entrepreneurship is more than just starting a business. It is a mindset, a way of thinking and acting. Entrepreneurship in these modern age involves thinking of new ways to solve problems and create value. An entrepreneurial spirit is said to be characterised by innovation and risk-taking.
Brief history of entrepreneurship in Nigeria
History very often has a direct impact on what the nation is facing in the present. Entrepreneurship in Nigeria today is not what it used to be. Majority of Nigerians used to be entrepreneurs. Before the colonization era, a lot of Nigerians were majorly involved in trading. In fact, the wealthiest at the time were the traders. Even before money was generally accepted as the ledger tender, people exchanged what they had in surplus for what they don’t have. Entrepreneurship was a way of life for most people then. Nigeria always was full of people with a business mindset and Nigerians always had a high moral standard and value system for doing business.
During the colonial era, the mode of entrepreneurship changed. The colonial masters brought their goods and made Nigerians their middlemen. Then came formal education and the companies established by the colonial masters. A lot of young Nigerians were employed by these companies. As many Nigerians began to accept formal education, most people were being trained to join the labour force and not to be entrepreneurs. The entrepreneurial mindset began to fade away.
READ ALSO: Federal Government loan scheme for youth in Nigeria 2017 - Youth Ignite Project
Nowadays, there is a high need for entrepreneurship in Nigeria and many organisations and the government have been working on improving entrepreneurship development in Nigeria. However, due to the set of challenges the entrepreneurship in Nigeria is not flourishing as in many other countries. Let's have a closer look at these problems.
Major problems of Nigerian entrepreneurs
As the need and call for entrepreneurship increases day by day, the development of entrepreneurship has been stalled in the last few years. This is because of the problems affecting and limiting its development. Many Nigerian entrepreneurs face a lot of challenges. Here are the major ones that have been affecting the development of entrepreneurship in Nigeria.
1. Lack of capital
There are thousands of Nigerians with wonderful ideas that could be turned into a real business. However, most of them lack the capital to push their ideas into reality. The lack of capital is the number one reason why the development of entrepreneurship has not improved over the years.
2. Difficulty in securing loans from financial institutions
In the first point, we established that the first problem most Nigerian entrepreneurs face is the lack of capital. Most people then try to turn to banks and other financial institution to secure loans to fund their idea or business. But getting a loan is very difficult and most times impossible for average Nigerians who are looking for funds to start up a business or who already have a small business. The reason for this is that the banks and financial institution feel it is a huge risk lending money to them. Financial institutions are not sure if entrepreneurs will be able to pay back the loan.
Another major reason why securing a loan is so difficult is the requirements needed for securing this loans. Most of the financial institutions demand huge collateral and high-interest rate that small business owners or start-ups cannot afford. This discourages most Nigerian entrepreneurs and kills many promising ideas.
3. Poor state of infrastructure in Nigeria
The lack of good infrastructural facilities is another major problem affecting the development of entrepreneurship in Nigeria. The number one issue of infrastructure affecting entrepreneurship is the unstable power supply that has forced a lot of businesses to close down. Most entrepreneurs have to rely on generators to run their businesses. They have to spend a lot of money on fuel to run their generators. Also, lack of good roads and transport system in another infrastructural challenge plaguing entrepreneurship in Nigeria. The poor state of infrastructure in Nigeria makes the cost of running a business or company high. Most small businesses and start-ups can’t afford it.
4. Unstable state of Nigerian economy
The state of the Nigerian economy is also a major challenge for entrepreneurs in Nigeria. The state of a country and its economy plays a significant impact on the level of entrepreneurship in any country. The socio-economic problems and the unstable economy of Nigeria has killed a lot of businesses in the last couple years. All these mixed with political instability is not helping businesses at all.
5. Inconsistent government policies
There is no continuity in Nigerian government especially when there is a change in governance. Unfortunately, there are no good policies that could create necessary conditions for the development of entrepreneurship in the country. The government needs to create policies and an environment that will give more freedom and possibilities for entrepreneurs.
6. Poor knowledge on how to run a business
Not all the problems are from the government or capital related. Another problem is that most people don’t know how to manage and grow a business properly. They don’t seem to learn or have the resources to learn how to manage and grow a business.
7. Inadequate planning and poor execution
This is the result of the poor knowledge on how to run a business. Most people don’t plan properly before they start their business. They don’t make researchers about the business, the market for the business, the cost of production, etc. Many do not even make a business plan. So, after they start a business, they get stuck and the business fails. Also, a lot of people start off the wrong path and eventually the business ends up failing.
8. Lack of patience and greediness
A lot of new business owners and young entrepreneurs are looking to make money quickly. They are more money oriented and not entrepreneurship oriented. In fact, a lot of people go into business because of the money and they want it fast. Many people want quick money but as a result, they don’t have enough patience to grow a business that has the potential of becoming big. Also, due to the desire for quick returns and greediness, a lot of people try to find easier means of making more money in business and ends up getting duped.
9. High risk involved in starting a new business
Many are afraid of the risks and give up the idea to start own business. However, it is important to understand that a business and risk go hand in hand. no pain, no gain.
10. Lack of entrepreneurial mindset
This is the result of the mentality that was brought instilled in us in the last decades. This is how the colonial era influenced the mindset of many Nigerians. As we have already mentioned, most people were taught to be in the labour force and not to be entrepreneurs.
What are the prospects of entrepreneurship in Nigeria?
You have read about the problems of entrepreneurship in Nigeria. However, you also need to know that despite all challenges there are great prospects for entrepreneurship in Nigeria. With the present on-going economic transformation plan by the Nigerian government, solid foundations for economic growth are being made. Also, the government is making effort to create an environment that will allow businesses grow profitably. Entrepreneurship development can affect the future of Nigeria in the following ways:
1. Entrepreneurship will promote Nigeria’s economic development
The role entrepreneurship development has to play in the economic development of Nigeria cannot be overemphasised. Even though there are a lot of barriers limiting entrepreneurship in Nigeria, it is still needed for the country to develop.
In 2009, reports showed that small and medium-sized enterprises (SME) in the industrial sector contributed about thirty-seven percent (37%) of the Gross Domestic Product (GDP) for that year. It was the second largest contributor after the oil sector. So, entrepreneurship development has got a lot to offer and improve the economy of Nigeria.
2. Entrepreneurship will create employment opportunities and help to reduce the level of unemployment in the country
Entrepreneurship creates new opportunities of employment for many Nigerians. More programmes are being laid out to encourage and facilitate Small and Medium-sized businesses (SME’s) in Nigeria. In most developed countries, the existence of SME’s has provided more jobs for their citizens. And so, if entrepreneurship continues to develop in Nigeria, more SME’s will arise and in turn reduce unemployment in Nigeria.
3. Development of entrepreneurship will also improve the standard of living of Nigerians
Finally, we would like to suggest some moves we believe will foster entrepreneurship development in Nigeria:
- The government needs to work with other organisation to foster the creating a better environment for entrepreneurship and the private sector in Nigeria. This will include improving the level of infrastructure in the country.
- Also, formal education needs to be revised to produce more innovative mindsets rather than ordinary job seeking dummies.
- Also, easy access to capital should be provided by the government and financial institutions. The government should also increase the funding of financial institutions that provide loans to SME’s and start-ups.
- Modern technology needs to be incorporated in the country and also in the educational system.
- The agricultural sector needs to be actively revitalised. It has a lot of entrepreneurial potentials and it is embedded in the culture of Nigerians.
Nigeria is said to have the second largest economy in Africa. So there is a great potential and prospect for entrepreneurship development in Nigeria. All that is needed for everyone involved, is to work together in advancing the course of entrepreneurship in the country.
READ ALSO: How innovation will help Nigeria diversify its economy - Experts