Are Nigerian businesses doomed to fail?
by Ronke Macaulay

Many Nigerians have turned their vision of owning a business into reality, only to find that despite their best efforts, the dream becomes a nightmare that threatens to engulf their hopes, their finances and their very sanity. 

One of the major factors that militate against successful entrepreneurship in the Nigerian context is the prevailing economic situation. Since no business exists in isolation, the fact that the majority of the population is struggling in abject poverty means that the available purchasing power in the marketplace is low. With the best will in the world, even if prospective customers love the goods or services you provide, if they cannot afford them, you will fail to make any money. Chronic bad debt has been the death knell of many businesses, which fell into the trap of selling to people who could not or would not pay. 

Another vital external factor is the infamous lack of basic infrastructure in the country. When a business has to provide its own power, water and security, its hard-earned profits are being eaten up by factors beyond its control and this may quickly make the business unviable. Many small tradesmen, hairdressers, business centres and others who rely on a regular supply of power have been forced out of business by the high cost of maintaining a generator. It is not unusual to find that customers are charged higher prices when the generator is running and are therefore put off patronising the business at such times, or worse still, some businesses are temporarily closed whenever there is a power outage. Soon enough they are permanently shut down. 

Any entrepreneur who decides to brave the world of commerce despite the above factors, will have to contend with other stark financial realities, such as the lack of start-up finance.

Banks in Nigeria seem to exist purely to gather deposits from customers, as opposed to lending to companies to create or expand businesses, and thereby boost the economy. The chances of getting a bank loan for a new start-up are slim to non-existent, and most entrepreneurs fund their businesses through personal savings or family backing, which may not be sustainable in the long run.

Business owners themselves may unwittingly contribute to the failure of their enterprise through unskilled management.

Lack of adequate strategic planning is a critical issue.  Nigerians often start copycat businesses because they have seen others do something similar and believe huge profits will be instantly forthcoming. Total lack of experience and expertise notwithstanding, they dive into an endeavour without adequate preparation and soon find they are in above their heads.

The fact that our maintenance culture tends to be poor, means that even businesses which start off well may soon become run down through lack of attention to detail and sufficient ongoing maintenance. 

Every employer seems to have a tale of woe to narrate concerning staffing issues. The huge population and grim unemployment statistics in Nigeria might lead one to assume that there is a mass of suitable people just waiting eagerly to step into every vacancy. In fact, there is a dearth of employable, qualified people on the market. Many of our “graduates” can barely string together a correct sentence in English, customer service culture is primitive at best, and the work ethic of young people especially leaves a lot to be desired. Because salaries are low and living costs high, after the essential expenses have been paid, workers often find they cannot manage until the end of the month, hence the temptation to indulge in “PP” and other sharp practices on the side. Absenteeism and slack working practices are rife, even in the private sector. There are also the more serious issues of disloyalty, fraud and sabotage, which occur all too frequently in Nigerian workplaces partly due to the gulf between the owner and staff. Many bosses are notoriously unfair to their workers, hiring and firing at random and cheating them of their entitlements for spurious reasons, yet there is little or no recourse against such abuses in the workplace. All this does not make for cordial employer-employee relations, which ultimately impacts upon service delivery. 

There is a further hurdle for the unsuspecting business owner, which I have termed the “I no go gree” factor. It consists of a range of unprovoked attacks that can seriously undermine you, simply because individuals and organisations, who in an ideal world should be supportive, prefer to place obstacles in your way for reasons of sheer greed. This comes in various guises, including demands for “protection money” from local thugs, law enforcement officials, etc. Officially sponsored extortion can also occur from PHCN workers, local government officers, and others who may come armed with a list of unexpected requirements before a new high profile business can start operations. In some cases, a “client” may play the same sinister game; for example, by subtly threatening to make life difficult for the new business in some way unless placated. The owner can either stand firm and refuse to be intimidated, or give in quietly and hope for the best. 

All of the above in combination create a very difficult environment. Together, they are the cause of the demise of many new small businesses in Nigeria, mostly within a year of start-up. Entities, which, if permitted and encouraged to flourish and grow, would have created employment, boosted the economy through tax revenues and profits being ploughed back into the system. Instead we are faced time and again with a sorry scenario of debt, shattered dreams and lost jobs. For those people who are bold enough to step out of the comfort zone of paid employment, or desperate to escape unemployment by creating their own opportunities, there should at the very least be a level playing field for them to build a business they can be proud of, and which will make a positive impact on society.