By Christabel Tim-Edema
Due to the unemployment rate in Nigeria, small businesses and startups are the new oil well.
The growth of entrepreneurship in Nigeria has grown to become a fast rising poverty alleviation scheme.
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According to a report by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), there are over 37 million Micro, Small and Medium-sized Enterprises (MSMEs) in Nigeria, which accounts for over 84% of jobs in the country.
This shows enterpreneurship is becoming a popular career choice for Nigerians. The success of small businesses in Nigeria is evident in their contribution to the economy.
According to the National Bureau of Statistics (NBS), MSMEs contribute over 48% of Nigeria’s GDP and employ over 84% of the country’s workforce.
Additionally, small businesses help to diversify the economy away from oil, which has historically been Nigeria’s main source of revenue.
There are many types of small businesses in Nigeria, ranging from retail shops to tech startups. A few to be mentioned are: Food vendors and restaurants who have taken over the food industry in Nigeria.
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Some worthy of mention are; Nuli Juice, My food by Hilda, Calabar pot, Jevinik Restaurant and Sml bakes.
These are notable and credible small businesses that have aided growth. Another is the Fashion industry who have taken Nigeria’s vibrant colours and batik and turned it into a multi-million business venture.
Some include: Adelkiel, Veekee James, Mai Atafo, Ugo Money, Duro Olowu, Zizi Cardow and so many others.
Other types of small business venture include Content creation, Hair salons and barber shops, Tech startups, Retail shops and Savings or Investment banks e.g Sml Savings.
Small businesses play a significant role in reducing unemployment and poverty in Nigeria. They help by creating jobs. The rate of unemployment has grown from 25.5% in 2012 to 52.7% in 2023.
Small businesses are often labour-intensive, meaning that they require a lot of workers to operate thereby creating jobs and reducing the unemployed statistics in the country.
They also aid economic growth. They contribute to the economic growth of a country by producing goods and services, paying taxes and stimulating demand for other goods and services.
Small businesses are also often more innovative that larger businesses as they are more agile and able to respond quickly to changes in the market.
This can lead to the development of new products and services, which can help to drive economic growth. They also aid local development.
Small businesses are often rooted in the communities in which they operate, and can help to drive local development by providing goods and services that are tailored to the needs of the community which brings development to rural areas and to the country at large.
Small businesses also provide opportunities for workers to develop new skills and gain experience, which can help them to find better paying jobs in the future.
The growth of small businesses in Nigeria is also driven by the country’s large population, which provides a ready market for goods and services.
Furthermore, the rise of technology and social media has made it easier for small businesses to reach customers and promote their products.
However, the percentage of businesses that fail increased to 31.4% in 2018 then 39.3% in 2020, then 44.5% in 2021 and in 2023, it increased to 49.8%.
Despite the growth of entrepreneurship in Nigeria, small business owners still face a number of challenges.
Access to Finance is a major issue, as many small business owners struggle to secure loans from banks. This is partly due to the high interest rates charged by Nigerian banks, which can be as high as 20%.
This makes it difficult for small businesses to invest in their operations and expand their businesses.
Another challenge is the lack of infrastructure, such as reliable electricity and transportation, which can make it difficult for small businesses to operate efficiently and can increase cost which would additionally increase the standards of living and make it more difficult for the poor and unemployed. It could even lead to the pack up of some small businesses.
Corruption and bureaucracy can make it difficult for small businesses to navigate the regulatory environment. Small businesses also face weak support from the government.
The government tend to make things difficult for small business owners by increasing taxes, cost of factors of production and not giving them the required facilities and cooperation, they deserve and need to increase and grow.
Other factors include poor inventory management, limited production capacity, low level of technology adoption and so many others.
Despite these challenges, small businesses in Nigeria continue to thrive. One reason for this is the resilience of Nigerian Entrepreneurs, who are able to adapt to changing circumstances and find innovative solutions to problems.
Additionally, the government has taken steps to support small businesses, such as through the establishment of the Bank of Industry (BOI) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).
In conclusion, the future of small businesses in Nigeria is a positive development that has the potential to transform the country’s economy.
While they face a number of challenges, their success is evident in their contribution to GDP which is about 65% in Nigeria according to the Central Bank and employment, and their ability to diversify the economy away from oil.
It is important for policymakers to continue to support small businesses in order for them to ensure that they continue to thrive and contribute to the growth and development of Nigeria.
Tim-Edema Christabel is 100 level law student of Delta state university, Abraka, Delta state, Nigeria.
