Essential Need For Small Business Growth

In about all economic systems, little concerns are indispensable for continous growth.A immense failure rate, has a destructive result on any economic system. This is the position quo in Nigeria, notwithstanding legion claims by the authorities, of inaugurated programms to help entreprenuers.Different studies assembled from little concerns in Nigeria, find the primary restraint to success, to dwell of ; lame infrastructural support, absence of capital, corruptness, and hapless record maintaining. Unfortunately many of the solutions are confined to the political environment every bit good as the educational advancement ( Opara, John, Wynn & A ; Pamela, 2007 ) . “ Common sense suggests and academic surveies concur that an ameliorating concern environment enables entrepreneurial activity and encouragements enterprise and public presentation ” . ( Mary Agboli and chikwendu Christian ukaegbu, 2000 ) .

At the clip Dunlop commenced the production of Surs at its premises in Lagos Nigeria, in 1963, the vision of its initiation male parents was to do it a tyre maker of testimonial in Africa. And it achieved this, bring forthing the first tubeless Sur in Nigeria. Consiquently, it won awards both locally and internationally. However Its activities were stifled, due to the unconducive concern environment in Nigeria.

For the intent of this essay, we will follow the construct of a concern environment as noted by ( Bird, 1989 ) , to be the events, fortunes, state of affairss, scenes, and niches, which surround entrepreneurial activity in Nigeria. In the same vena ( Gnyawali & A ; Fogel, 1994 ) see the concern environment as the “ overall economic, socio-cultural and political factors that influence people ‘s willingness to set about entrepreneurial activities. It besides refers to the handiness of aid and support services that facilitate ” get down up procedures ( Gwyawali & A ; Fogel, 1994 ) . A good concern will promote foreign investors and engender an enabling environment for the society to develop as a whole and comparatively cut down poorness.

This essay aims to show the consequence that the Nigerian infrastructural environment has on the success rate of concerns. The 2nd subdivision Begins by explicating the construct of the concern environment, factors responsible for the ill-timed decease of concerns, comparing between Nigeria and India, what the authorities is making to cut down the volatility rate.

2. The Nigerian Business Environment

The Nigerian concern environment as used in this essay comprise of little, medium and big endeavors but accent will be placed on little concerns as they represent the engine of growing and economic development of any economic system ( Ogunsiji and Ladanu, 2010 ) . The definition of SMEs in Nigeria, differ from one bureau to another due to the different variables used that scope from figure of employees to capital and turnover. Fig 1 below shows definition of SMEs as defined in the National Policy of MSMEs, ( 2007 ) .

Fig. 1

Types of Enterprises


Asset Base ( Excluding Land and Buildings )

Micro Enterprises

Less than 10 Persons

Less than N5 Million

Small Enterprises

10 – 49 Persons

Less than N50 Million

Medium Enterprises

50 – 199 Persons

N50m – Less than N500 Million

Beginning: Nigerian National Policy on MSMEs 2007

Nigeria is a state of about 140 million people located in the West African sub-region. The state is a aggregation of a figure of cultural groups with over 250 linguistic communications. The bulk folks are the Yorubas in the South West, the Igbos in the South East and the Hausa-Fulanis in the North which accounts for approximately 50 % of the entire population ( Adegbite 1986 ) By the 2006 population figures they account for approximately two tierces ( NPC,2006 ) .

This potentially signifies a immense market and expectedly a vibrant concern environment. It is a state with tremendous homo, stuff and natural resources with an internal market that can non be rivalled in the African continent and besides owns the most extremely trained work force in the continent ( Bala, 2003 ) . Indeed there are really few states in Africa with the immense economic potencies it enjoys.

Olusegun Obasanjo ( President of Nigeria, 1999-2007 ) , against the background of identified obstructions to investing and economic growing of the state, ensuing from over dependance on oil, articulated some steering policies to regenerate the Nigerian economic system and promote foreign direct investing. ( Porter, 2010 ) argues that states in the Investment-driven phase have efficiency in bring forthing standard merchandises and services as the beginning of their competitory advantage.

Government ‘s program at this phase of the state ‘s development to put in efficient substructure, have a business-friendly authorities with strong investing inducements and better entree to capital for improved productiveness was in consonant rhyme with Porters theory. Specifically, it was to turn to three rehabilitation of Socio-Economic Infrastructure such as:

a. Electricity. This was up graded from 2000MW to 4,500MW with programs to acquire to 10,000MW by 2005 which is yet to be attained. A World Bank study showed that houses suffer from an extraordinary load imposed by fickle, low quality electricity in Nigeria ( universe )

b. Telecommunication. Prior to the licensing of nomadic telecoms operator Nigeria had merely 363,284 fixed radio installed capacity with 120,771 endorsers. The licensing of Mobile operators in 2002 has made the telecommunication industry Nigeria one of the fast growth in the universe.

c. Railways, airdromes and Roads. The railroads were to be rehabilitated utilizing the standard gage while new roads webs were to be built and the international Airports improved ( Bala, 2003 ) .

In add-on to the socio-economic substructure is the stance of authorities to stomp out corruptness by the creative activity of EFCC and ICPC. Support was besides provided for the preparation of officers and work forces of security bureaus while more forces were recruited into the Police force for the security of life and belongings. Long term fund for investing was besides on the Government ‘s precedence list. Furthermore, it tried to advance industrial and technological development through assorted inducements ( Okejiri, 2000 ) .

In malice of its oil-dominated economic system, Nigeria has been the topic of considerable instability and has suffered from highly hapless administration.

Handiness of resources and substructures seem to be a cardinal forecaster of the regularity of new concern start-ups, many investors are unwilling to put or hold the inclination to keep back support until houses have been successfully established. ( Pennings, 1982 ) .Even where financess are available the costs at which they are available are really high, and accordingly limit the growing of the state ‘s economic system adversely impacting every sector. The term infrastructures conveying to mind installations such as roads, airdromes, telecommunications, and transit. Lack of these basic comfortss pose a large job and accordingly repel investors. The challenge is non that substructures are non erected, but that the 1s that are, ne’er live up to standard, or are mismanaged, and finally prostration, go forthing the economic system worse than it was ab initio. A good illustration is the failure of the brooders in Nigeria.

Business brooder programmes are frequently initiated by private companies or municipal entities and public establishments.Its primary aim is to spread out the concern to a phase where it can stand entirely therefore increasing its opportunities of success and growing.

The concern brooders that existed in Nigeria were expected to execute a figure maps, speed uping growing of little and average endeavors, every bit good as exciting the velocity of socio- economic development in general. The industrial brooder was expected to back up autochthonal entrepreneurship by supplying enterprisers with an exceeding base of operation in to the full built up mill edifices with back uping substructures. However, after a few old ages, the brooders in Nigeria were assessed, it was discovered that most of them failed because, tenant houses refused to go forth the premises even after their term had expired. The chief ground claimed by renters for their failure to travel out was the inability of authorities to offer an low-cost replacement site, besides was the fact that the brooders were characterized by weak direction, being run more or less by section of the oversing ministry with all the attendant ruddy tape and bureaucratic awkwardness ( Oyeyemi and Adegbite, 2000 ) .

3. Comparison between the Investment Climates Nigeria and India

The determination to compare both states stems from the fact that both are developing states and are both to a great extent populated.

3.1 Power supply

The term concern environment is defined by Eifert as the link of policies, establishments physical substructure, human resources and geographic characteristics that influence the efficiency with which different houses and industries operate ( Eifert et al 2005 ) .

Dissimilarities in investing clime organize the beginnings of national and regional spreads in productiveness ( Lall and Mengistae, 2005 ) This is in consonant rhyme with Dollar et Al ( 2004 ) who reported the same finds of international spreads in fabricating efficiency based on World Bank ‘s Investment clime Surveys ( Lall and Mengistae, 2005 ) .

Like Nigeria, power outages take topographic point in India. But whereas it occurs every two yearss India it happens more frequently in Nigeria and periodically thereby non giving room for equal planning. This is opposed to one time in two hebdomads in China and one time in one hebdomad in Brazil. In both India and Nigeria power outages lead to loss of gross revenues by restraining breaks, i. e. idle capacity on concerns and accordingly wastes of natural stuffs ( Lall and Mengistae, 2005 ) .

The job of unequal power in India is one of regulative policy and ownership in the energy sector in add-on to under-investment in transmittal and distribution. On the other manus, unequal power supply in Nigeria is a consequence of corruptness, selfishness and sabotage emanating from generator importers.

3.2 Financing concerns

The important deciding factors of an economic system ‘s ability to build wealth, increase occupation chances and fight are invention and entrepreneurship argues ( Hochberg et al, 2010 ) . Entrepreneurs hence have demand of changeless watercourse of financess to get down their concerns and besides for the daily running of same. It is for this ground that the Nigeria authorities set up the Small and Medium Industry Equity Investment Scheme ( SMIEIS ) in add-on to a partnership with commercial Bankss whereby authorities provides support and bank provides counterpart funding.In malice of this proviso, retained net incomes is largely used by companies as costs associated with alternate beginnings are highly high ( Okoyeuzu, 2010 ) where they are available. The funding behavior of Nigerian houses is a affair of constrained operational and fiscal market construction and non needfully a affair of pick. While in the instance of India, authorities makes all attempts to run into the fiscal demands of enterprisers by supplying fiscal strategies and assorted support options. India ‘s fiscal system consists of Bankss fiscal establishments, non-financial companies and venture capital companies. The most of import beginning of institutional recognition in India are Bankss, therefore giving India a sound fiscal agreement capable of supplying a strong base for puting up of concern units in the state ( 2010 ) .

Venture capital fund is really vivacious in India ( 2010 ) with houses that are involved are seeable to the enterprisers and are considered as believable beginning of funding being really good known ( Hochberg et al 2010 ) . They finance SMEs with limited beginnings of support but possessing immense potency for big net incomes.


With about 140 trade names of Surs now introduced into the state, most of which are garbages, the state is merely helping to better other economic systems at the disbursal of theirs. But the job of unequal electricity supply made Dunlop at full capacity spend an norm of N190 million monthly on power coevals entirely. This includes a 150 million on the care of generators, every bit good as 40 million naira paid to the Power Holding Company of Nigeria ( PHCN ) for the public power supply that it consumed ( Adegboyega, 2010 ) . Unfortunately 47 old ages after, Dunlop could no longer get by with the state of affairs and its operations came to an terminal in 2009 ; going a victim of Nigeria ‘s worsening substructure. The cause of Dunlop ‘s diminution is complex and interrelated. Dunlop ‘s focal point on systematic publicity and restricting competition became nucleus rigidness, the way dependence and the subsequent inaction inhibited Dunlop from developing universe category production competencies indispensable to vie in the planetary environment.

5. Causes of volatility of Nigerian Businesss

Nigeria is a multi-cultural society with an increasing population. Unfortunately, most of Nigerian leaders are inspired by cultural and sectional truenesss and lack the intelligence that is needed to construct a executable program for the uninterrupted growing and development of an abundant, multicultural state ( Iyoha, 2010 ) that has the capacity to warrant concern endurance and growing. Consequently, the under listed among others have contributed to the ill-timed decease of concerns in Nigeria. The causes of concern volatility unluckily, are a barbarous rhythm as represented in fig. 2 below.

Figure 2 Some of the causes of concern volatility.

5.1 Corruptness

Transparency, Rule of Law, Checks and Balances, have become foreign constructs in the state. This has fostered a uninterrupted economic diminution and the decay of basic substructures. The most obvious of all is the fact that Africa ‘s prima oil bring forthing state, can non tout of an active oil refinery, and we are invariably haunted by fuel deficit. ( Lewis, Robinson, & A ; Rubin, 1998 ) . For a state that is extremely reliant on transit, for the motion of natural stuffs from one location to another, it is damaging to the economic system.

5.2 Infrastructure- Power supply, roads and telecommunication

Businesss in Nigeria are faced with high operating costs originating from inadequate or hapless infrastructural installations. A World Bank Study found that several houses acquired wireless devices for communications. Furthermore, the survey found that “ 92 % of Nigerian makers own their ain electricity generators ” ( Fisman and Khana 2004 ) . The inefficiency in electricity supply lead to terrible losingss and the eventual failure of concerns.

Public telecommunication is undependable, roads are in hapless province of disrepair and electricity is short supply. These basic substructures ( Cukierman, Hercowitz, & A ; Leiderman, 1992 ) shows are germane for proper development of concerns and to be provided by authorities.

5.3 Managerial incapableness.

Managerial incapableness manifest in signifier of deficiency of basic accomplishments and clear vision, neglecting to program and deficiency of or improper book and record maintaining among others have contributed in no little step to the failure of concerns in Nigeria.

5.4 Inadequate finance and High dealing cost

Research shows that the creative activity of investing companies, proviso of low involvement loans and the handiness of recognition warrant strategies for little concern financing contribute to the constitution of new concerns ( Hawkins, 1993 ) . But most bankers peculiarly commercial 1s frequently hesitate to finance start-up houses due to the high cost involved in processing and supervising of the loans. This

6. What is Nigerian Government making to cut down the volatility rate of concerns?

In the last subdivision we discussed the factors that lead to volatility of concerns in Nigeria. In this subdivision, we will take a critical expression at what the Nigerian authorities is making to do the concern environment in the state less volatile. Several policy pushs were planned by past disposals since the 70s aimed at bettering the concern bomber sector in Nigeria ( Yusuf and Schindehutte, 2000 ) .

The democratic authorities of the Obasanjo disposal shifted more to the private sector by reconstituting the economic system in order to do it private-sector led, market oriented and engineering driven. This the authorities did by set uping assorted administrations and bureaus while reorganizing and reconstituting the bing administrations concerned with the development and publicity of concern activities in the state.

Recognizing the indispensible function of little concerns as the engine of growing of any economic system and Nigeria as a fast developing economic system with unfastened doors to multi-national corporations, authorities encouraged public-private engagement ( Okpara et al, 2007 ) . In add-on, it established the Small and Medium Enterprises Development Agency of Nigeria ( SMEDAN ) , portion of whose authorization is to advance and supply entree to industrial substructures such as layouts, brooders and industrial Parkss and besides to work in concurrence with other establishments in both public and private sectors to make a good investing environment for concerns in general and Micro Small and Medium Enterprises ( MSMEs ) in peculiar ( SMEDAN, 2003 ) . By2006 the administration had developed bunchs across the geo-political zones in the state.

Abeokuta- – Necktie And Dye

Oshogbo – Necktie And Dye

Figure 3.Clusters in Nigeria as at 2006

6.1 Curbing Corruptness

In turn toing the job of corruptness, which was and to some extent still is an hindrance to the growing and endurance of concerns in Nigeria, the authorities set up the Economic and Financial Crimes committee ( EFCC ) . The act set uping the committee empowers it to look into all fiscal offenses including progress fee fraud, money laundering, forging, illegal charge transportations, hereafters market fraud, deceitful encashment of negotiable instruments computing machine recognition card fraud, contract scam etc. ( EFCC Act, 2000 ) . Despite this establishment, “ a study of the major apprehensiveness of concern executives shows that offense and corruptness represent 75 % and 71 % severally of the serious obstructions to making concern in Nigeria ” ( NBS/EFCC study 2009 ) . President Obasanjo during his 2nd term in office vowed to contend corruptness declaring that “ corruptness must be stamped out of the Nigerian society ” and go oning he stated that any curate or top authorities functionary found to be corrupt will be dismissed and prosecuted ( Djebah 2004 in Nwabuzor 2005 ) . Indeed, a cabinet curate was dismissed during his term of office and later prosecuted over bloated individuality card contract ( Nwabuzor 2005 ) .

6.2 Reducing Power Outages

In malice of one million millions of naira of investing disbursement devoted to the state-owned electricity public-service corporation company ( PHCN ) over the past 25 old ages, it failed to present satisfactory and reliable service in Nigeria, this produced an exigency of assurance and the demand for exigent reforms in the industry ( Iwayemi 1994 ) . The ceaseless power outages climaxing in the usage of generators by concerns create immense operations costs and invariable the decease of concerns. Government ‘s planned reforms led to the startup in 2005 of the Nigerian Electricity regulative Commission charged with the duty of modulating duties and supervising the quality of service offered by PHCN ( Okoro and Chikuni, 2007 ) . However ( Amobi, 2007 ) points out that a speedy deregulating of the power sector will take to tremendous operation cost and the advantage derivable will be negligible. On the other manus, the survey carried out by Adenikinju, ( 2003 ) supports the attempt of authorities to “ privatize and liberalize the Nigerian electricity market ” . The power sector in the state is presently undergoing reforms to develop and enlarge the capableness of coevals and the transmittal web. ( Gujba et al 2010 ) . Possibly this attempt will diminish concern outgo on generator care and operating cost, thereby bettering their net income borders and increasing their lifetime.

6.3 Road Care

Possibly the most matter-of-fact route proviso to day of the month is the creative activity of board of directors for Foods Roads and Rural Infrastructure ( DFRRI ) in 1986.This was the consequence of the precedence placed by the so Federal authorities on roads. Subsequently, in 2002 the Federal Road Maintenance Agency ( FERMA ) was established to provide for the care of Nigerian roads in order to cut down the cost of motion of natural stuffs. Although, FERMA is Limited to the care of Federal roads it is the first institutional instrument for “ concrete national policy platform, best patterns and quality control in roads care ” ( FERMA, 2010 ) . There is the Local Government Roads Maintenance Agency ; nevertheless, it merely exists on paper ( Ipingbemi 2008 ) . Undertakings started were normally abandoned therefore the attempts towards bettering the rural roads from where most agricultural merchandises emanate achieved small as ( Olarewaju, 1992 ; Kraxberger. 2003 in Mijinyawa et al 2005 ) .

6.4 Accessing finance and cut downing high dealing costs

In the country of funding concern authorities launched establishments such as Small Scale Industry recognition Scheme ( SSICS ) , Nigerian Bank of Commerce and Industry ( NBCI ) , National Economic Recovery Fund NERFUND ) , with the aid of international fiscal establishments World Bank Loan Scheme ( SMEI & A ; SME II Loan Scheme ) to turn to the jobs of high dealing costs and hazards by making subsidized recognition programmes and supplying loan warrants ( Abereijo and Fayomi, 2005 ) . Assorted policy attempts have put in topographic point to act upon the way of bank credits through structural policy steps concentrating on bank consolidation. This unluckily has non worked in favor of minority concerns ( Ezeoha and Amaeshi, 2010 ) . A senior economic expert with the World Bank, Ismail Radwan, speech production at the recognition consciousness conference in Lagos on 31/08/2010, pointed out that “ less than 1 % of Nigerian concerns have entree to bank finance ” ( Microfinance Africa, Sept 1, 2010 ) . In Nigeria accessing finance from Bankss can be really hard due to the high involvement rates and equity funding is still at its babyhood. Equity funding is yet to be to the full accepted as a financial construct by both the enterprisers and the fiscal establishments coupled with the market that is still mostly ailing developed ( Abereijo and Fayomi, 2005 ) .

6.5 Making Business in Nigeria

Trade in Nigeria a state with about 140 million people, have the capacity to spur industrialization and contribute enormously to poverty decrease in Nigeria. Export of fabrics to the US made possible by the African Growth and Opportunity Act ( AGOA ) of the Clinton government was ne’er truly tapped into by Nigeria as a consequence of the cumbrous nature of export certification. The state needs a sound and implementable trade policy. A policy formulated demoing the jobs or spreads and how those policies will work out the jobs. In add-on there should be the political will to implement with cipher being above the jurisprudence. Policies decently outlined and that are non swayed by personal involvements is bound to farther common good and constantly progress the state ( Nigeria Muse, 1st June, 2010 ) .

Recently, the Minister for Finance, Olusegun Aganga, said the authorities met with cardinal operators of concerns to happen out what the issues are and the function authorities can play, because it was concerned about the status of making concern in the state. Continuing, Aganga stated that “ we met with the Bankss and asked what we need to make in order for them to impart to the existent economic system. There are a figure of things we need to make. One is legislative that we need to alter the Land Use Act, Evidence Act and Bankruptcy Act. Second thing is establishment of commercial tribunals ” .

6.6 Business and Entrepreneurial Skills

To better the direction capableness and entrepreneurial accomplishments of concern proprietors, the authorities established the Abuja Enterprise Agency ( AEA ) co-funded by federal Capital Territory Administration, UKs DFID, United Bank for Africa and Diamond Bank. This establishment provides concern advisory and information services while advancing ethical patterns in the concern community in add-on to the publicity of the usage of engineering enterprises to the Federal Capital Territory abode at a nominal fee.

7. Decision

We have in this essay looked at the investing clime of Nigeria, discussed the causes of concern volatility, and so we compared Nigeria with India with mention to entree to concern finance and infrastructural installations, eventually we analysed some of the actions authorities has taken or is taking to cut down the volatility of concerns in Nigeria and conclude as follows.

The Political instability in the state that has placed built-in injury on most concerns has non hindered shell ‘s activity as net incomes in Nigeria seem to be higher than elsewhere. Therefore instead than go out the Nigerian market like Dunlop, Shell is spread outing its investing in the state ( Frynas, J. 1998 ) . This may non be unconnected with Shell ‘s first mover advantage of the fifties that possibly has been turned into a nucleus competency.

The development of successful concern brooder in Nigeria will further concern endurance and growing. The Brazilian concern brooder “ histories for 98 % of bing companies and using 60 % of the active population while lending 21 % of its GDP ( Mendoza, 2009 ) . These brooders are tied to universities and research Centres located in close propinquity to the installations. Nigeria ‘s concern brooders should be increased and tied to her over 100 Universities scattered across the state. In add-on, it is of import to supply full-blown concerns with alternate locations to enable them relocate and give room to subsequent brooders. To be feasible, admittance should be streamlined so that “ echt enterprisers are admitted alternatively of political appointees and top authorities officials ” . Consequently no dramatic consequences have been recorded ( Adegbite, 2001 )

Harmonizing to the US president Barak Obama in the study: Nigeria 2010, we must recognize the truth: development depends on good administration ( The Oxford Business Group, 2010 ) and this is one major factor that is losing in the Nigerian economic system. The promotion that the United States experiences did non fall upon them like ripe cherries, it took difficult work and committedness, one ingredient that Nigerian leaders have a high lack of.Although assorted techniques have been put in topographic point to guarantee good administration in the state, drastic steps are still needed to be taken to turn to the state of affairs. It is more than the people vote and electing authorities functionaries, it is impossible for a state to make wealth if the leaders take advantage of the economic system to intensify their ain pockets and no concern will put in a topographic point where the authorities skims 20 % of the top.

In malice of all the attempts that has been made to do the concern clime conducive for concerns to run ; it is obvious that a batch more demands to done. Paraphrasing Oronsanye in eNext of 14th November, 2010 the Nigerian economic system is in despairing demand of restructurings as there are legion restrictions to local concern activities in Nigeria says a recent World Bank study on the easiness of making concern in Nigeria.

Nigeria is a turning economic system ; the entrepreneurial construct has non been to the full embraced. Entrepreneurship will non thrive if members of a society position it with intuition. Government and concern development organisations can organize programmes in order to develop social consciousness towards entrepreneurship and do people acknowledge the importance of being enterprisers. Over the old ages, the overall environment of making concern in Nigeria has become comparatively easy ( World Bank, 2010 ) .

An enterpriser, through personal thrust and/or fresh proficient or managerial penetrations, is able to accomplish important growing for a house he or she owns or manages for other suppliers of capital ” Nigeria is non recognised for being an advanced or imaginative state. For this to alter at that place will hold to be investing in Research and Development. States like the UK are individualistic in nature, but like Japan Nigeria is a conformist society but to accomplish great advanced steps a different attack demands to be taken that involves constructing single accomplishments.

In a recent study, Ghanese governments set rigorous conditions for foreign investors to pay about 43 million sedimentations before get downing operations. There is perfectly no ground for companies to prefer Ghana to Nigeria sing the population of Nigeria which is more than five times that of Ghana. But the hapless infrastructural installations are one of the humiliations that should actuate the Nigerian Government to take the issue more earnestly. Although concern environments do non hold to be perfect, they should be good plenty on a figure of important dimensions to excite investing and competition sufficient to establish the self-reinforcing procedure of industrial growing.

Although concern environments do non hold to be perfect, they should be good plenty on a figure of important dimensions to excite investing and competition sufficient to establish the self-reinforcing procedure of industrial growing.


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