SME’s are regarded as the backbone of the economy as they generate about a third of the country’s GDP, only in Nigeria; they only generate about 1% of it GDP compared to 40% in other developed economies. There are a few challenges most of these businesses face that hinder their growth and potentials
The infrastructure in Nigeria is very poor. Basic amenities are not regular and are deemed luxurious.
Power in Nigeria is a major source of high cost of doing business in this economy. Manufacturers and other SME business owners resort to alternative power supplies which increases their overhead cost and shoots up the prices for such products in the market.
Good roads are also not available in rural areas or areas considered as being the sources of raw materials. Getting these products and raw materials from the farms and mines down to the market or factories is quite difficult, expensive, and dangerous (one might loose the goods to road accidents).
Insecurity is also a challenge as parts of the Country are not stable. Businesses in those areas will have to shutdown and if they service clients outside their region or are clients to Businesses outside that region, their clients loose their business with them.
Access to Funds
SMEs in Nigeria are not easily funded and if they finally do get these funds, the interest rates alone consumes a huge chunk of their profits. Only until recently, the Bank of Industry (BOI) and Bank of Agriculture (BOA) through the Federal Governments initiative and the Central Bank of Nigeria (CBN) SME’s initiative started providing funds at low interest rates.
The major challenge in this sector is that Banks don’t fund startups in this part of the world, and will never fund businesses with not enough collateral to back the loans.
This cash crunch is a reason most businesses can’t meet demands, expand their market and ultimately remain in business on the long run.
SME’s especially the One man business model businesses are usually faced with this leadership challenges from the get go. Accepted that leaders aren’t born but made, these owners need to expose themselves to trainings and books that deal with leadership. A business’ longevity and growth rate can also be determined by the Leadership skill displayed by its owner.
Richard Branson once said “if you take care of your staffs, they will take care of your clients”. There is no way in the world a happy staff won’t see to the satisfaction of the customer in front of him or by ensuring the product leave his table is the same premium quality that has been assured to all potential customers.
Most SME owners in Nigeria are in it to maximise profit and don’t put into considerations the welfare of staffs under their employ. Most believe the only thing the owe the staff is their Basic Salary at the end of the month; no trainings, no benefits, no allowances, no insurance policies, no raise, no future etc., and they end up loosing their best staffs to the competition and they ultimately remain stunted or die out on the long run.
Demand and Competition
Nigeria is a consuming Nation and as such, people prefer imported items than locally made items. The Government also isn’t helping matters by not partnering with local manufacturers in supplying them with their products eg. Furnitures made from local woods, cars made by local manufacturers, electronic appliances etc. This alone will kill a business that can’t cover its Operations cost on the long run.
Another problem is the unfair competition as locally made products are made to compete with those made in Asia (especially China), and the Government isn’t doing enough in regulating the influx of fake and substandard goods into the economy as well as those being smuggled.
Taxes and Bureaucracy
SMEs in Nigeria suffer from multiple taxation’s from Federal, State and Local Governments. These tax laws need to be reviewed as soon as possible, they nibble away what is left as profit from these SMEs.
Also, getting required license or certificates to run a business in Nigeria can be vexing. The likes of CAC, NAFDAC, SON etc., usually frustrate businesses and make them spend more than the official rate for twice as long as the official duration just to get approvals and certificates. These bodies need to be checked and restructured as they also add to the challenges of SMEs in Nigeria.
Well haven’t analysed all these challenges, one can be prepared to tackle the Nigerian business sphere well prepared and well-informed.