It’s Hard To Be An Entrepreneur In Nigeria: 7 Big Challenges
The Nigerian business environment is fraught with challenges that hinder entrepreneurs’ ability to succeed. A significant factor contributing to this is the laws governing businesses in Nigeria, which often put entrepreneurs at a disadvantage. Join us, as we examine how seven laws governing businesses in Nigeria limit the ability of entrepreneurs to do business in the country and suggest potential solutions.
Nigerian Startup Act
The Nigerian Startup Act is a law that aims to promote and support startups in Nigeria. While the law is a step in the right direction, it does not cover holding companies or subsidiaries of existing companies that are not registered as startups. Also, the law requires that a Nigerian startup must be a registered liability company that has been in operation for less than ten years and have at least one Nigerian as a founder or co-founder who shares profit or revenue from the sale of shares. This part of the law may not be favourable to startups, as a startup shouldn’t take too long to be registered.
African countries rank low on the World Bank’s ‘Doing Business’ ratings because of some requirements of the Companies and Allied Matters Act (CAMA). The law which regulates the formation and management of companies in Nigeria has been criticised for its stringent requirements. The process of setting up takes between 2 weeks and 1 month which always involves jumping through a number of regulatory hoops. This can be time-consuming and expensive.
The challenge of electricity is one that mostly affects Nigerian entrepreneurs as they need the power to charge their electronic devices and run their industrial machines. Reports say most average households in Nigeria can only access 6 to 10 hours of uninterrupted power supply out of the 24 hours that exist in a given day. While this is sad, it makes doing business difficult for entrepreneurs. This is because they may have to source for alternate power supply and struggle with the increasing cost of fuel as they try to navigate their businesses.
Lack of capital
Securing loans from a Nigerian bank can be a herculean task. From the harsh requirement to the accompanying delays, and an average interest rate of 25%, businesses struggle to find enough capital to fund their enterprise. Worse is when they eventually secure a bank loan, they spend a large number of their returns repaying it. This factor can be highly discouraging for business owners.
Lack of trust
Investors find it difficult to entrust huge amounts of money to entrepreneurs because they can’t ascertain if their business venture will succeed or not. On the other hand, entrepreneurs struggle with entrusting their business ideas to employees and personnel. This lack of trust birthed from betrayals from colleagues and a corrupt political system makes the entrepreneur struggle with his business.
Tax imposition is another delicate challenge faced by Nigerian entrepreneurs. While the CIT Act is essential for generating revenue for the government, it puts entrepreneurs at a disadvantage. Small businesses often struggle to pay taxes due to limited resources, which can result in fines, and penalties. It can also discourage entrepreneurs from investing in the country.
Limitation of Logistics
Securing the necessary links in a business supply chain can be hard and expensive in Nigeria. Some entrepreneurs have to struggle with how to transport their products from one place to another and sometimes have to engage the services of logistics solution providers. Employing the services of a logistics provider can be expensive for small businesses, which makes it a potent challenge for entrepreneurs.
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