Problems of entrepreneurship in Nigeria has become a matter of great concern for businessmen as the economy is getting badly affected by the recession. Many businessmen are finding it difficult to cope with the problem of running a business while the government is unable to provide businesses enough funds.
Problems of entrepreneurship in Nigeria are many, and the list could go on. The challenges that Nigerian entrepreneurs face are very similar to those faced by international entrepreneurs in many ways, yet the conditions on the ground in Nigeria are a lot worse than they are for their international counterparts.
The reasons for this are many and include
- Low investment returns
- Lack of market penetration
- Endemic corruption
- Lack of access to technical skills, etc.
All these are barriers to entrepreneurial success. The government and private sector need to work more closely together to address some of these issues. That is why we have launched a project named “Nigerians in Entrepreneurship” which has been working since 2021 with a focus on these key issues of entrepreneurship in Nigeria.
In addressing some of these key challenges, the Programme highlights five key strategies for African entrepreneurship development. These strategies form the foundation of a well designed system of pro-actively supported innovation and commercialization in the country.
These innovative processes should be coupled with a highly institutionalized, scalable, and sustained support system for its execution. There are also challenges to overcome when it comes to women’s entrepreneurship development.
The program identifies two key barriers that keep women away from entering and progressing in business: systemic gender discrimination and the absence of a supportive network and infrastructure. Problems of entrepreneurship in Nigeria can be addressed through strategic planning and innovation.
This includes the need for greater entrepreneurial visibility and the creation of new business plans (business plans are called strategies or goals if you are going to use a formal framework to help you map out your journey or achieve your goals).
A significant factor in creating a new business plan or strategy for an enterprise is having a clear idea of what you want to achieve. Without clearly defined goals, there is no direction to which you can move, or no roadmap to guide you towards that desired destination.
The inability of the government to provide funds is one of the major reasons why the flow of capital into Nigeria’s economy is almost drying up. This is why many people are blaming the government for the problems of entrepreneurship in Nigeria.
Problems of entrepreneurship can be defined as anything that impedes the proper functioning of the entrepreneurial system. Any hindrance in this process puts obstacles in between the entrepreneur and success.
The first challenge faced by the entrepreneur is cash flow
A cash flow crisis occurs when an enterprise finds itself unable to cover its monthly cash outs because of insufficient funds. Note that such a cash flow crisis isn’t always the same as suffering a cash flow deadlock.
Such a condition frequently exists when there’s been a net outflow, for instance when making a large sale of raw materials, new machinery, or where there’s a seasonal decline in sales. Entrepreneurs face cash flow problems in many types of businesses.
Problems with working capital are very common problems of entrepreneurship for small enterprises. Entrepreneurs must find a way to raise money from other sources in order to keep the business going while its funds are short and its credit lines are low.
There are two major routes by which small enterprises can obtain working capital
- Borrowing from banks
- Asking investors for a loan
Some small businesses use the first method, while larger ones rely on the second. Lenders are leery of giving loans to small enterprises that are experiencing cash flow problems because such enterprises are more likely to default on repayments.
That said, banks will usually provide loans to businesses that are in a steady process of making profits and which have a history of meeting their credit requirements. Moreover, banks usually offer better interest rates when dealing with borrowers having credit problems than when dealing with those who don’t.
Businesses must thus weigh the pros and cons of borrowing from banks versus issuing discount rate securities to raise working capital. From a more holistic perspective, business owners should consider all possible sources of financing available before deciding how to raise money.
It is essential for entrepreneurs to source their necessary cash on time and constantly keep track of their cash flow. Forcing businessmen to get the sources of cash when they are not ready can be very counterproductive to the cause of entrepreneurialism.
Another major problem faced by most businesses in Nigeria is the lack of a business plan
Most business plans offered by organizations are too general in nature. They do not provide any solutions for problems faced by the enterprise. For solving problems of entrepreneurship it is important to create a detailed business plan that would address all the necessary factors involved in the business and would provide a clear picture of how the business would be executed.
Lack of awareness about education and skills are other major problems of entrepreneurship that stand in the way of entrepreneurship development in Nigeria. Many young people have not been able to complete their secondary and higher education. Even though
Nigeria has an excellent educational system, many students drop out before completing their graduation. The situation is even worse in urban areas where students face problems in finding employment. These students may end up being jobless when they finish their studies.
Other problems of entrepreneurship in Nigeria include lack of knowledge on budgeting and cash flow management. Entrepreneurs must be aware of the importance of budgeting and cash flow in running their ventures. Proper budgeting helps them avoid the dangers that come with over-spending and debts.
Knowledge about legal documents is another challenge for most business owners in Nigeria
Business owners should conduct proper legal transactions in order to protect themselves from liability and other related problems of entrepreneurship in Nigeria. Nigeria’s legal system is not highly developed. Most entrepreneurs in Nigeria fail to understand the requirements and procedures of different legal transactions and end up in legal disputes and are sometimes even bankrupted.
In order to avoid these problems of entrepreneurship, most entrepreneurs try to seek professional help from lawyers. Over the years, the number of new businesses has significantly reduced in Nigeria. Lack of resources and infrastructure constraints entrepreneurs to start a new business.
Entrepreneurs may not be able to undertake the required financial obligations in time. Lack of access to capital also poses problems for most new businesses in Nigeria. In addition, it can be said that most innovations in the field of technology and the application of information and computing have failed to penetrate the market due to the lack of infrastructure and business ideas.
Nigeria is still dependent on oil and gas for its economy. This means that the country is dependent on oil and gas prices which are unpredictable. If oil and gas prices increase drastically, so does the cost of production for all businesses including the cost of operations for entrepreneurs. All these problems of entrepreneurship in Nigeria are significant and cannot be ignored.
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