The Nigerian business terrain and why most businesses fail

The Nigerian business terrain

In Nigeria, business terrains are war zones for entrepreneurs and investors, it is a terrain not easily treaded upon except you have got extra ordinary courage and support from the government. Business development and start-ups are not encouraged by the system or government. The Nigerian business terrain is such a rough and tumble system, it has been either consciously or unconsciously designed to naturally choke start-up and frustrate entrepreneurs, here comes the interesting part, an average Nigerian is entrepreneurially driven, not government nor the society at large has been able to annex this great strength, the call from business owners and entrepreneur is to find a means to savage the frustration that encompasses the fresh starter entrepreneurs in this country.

Nigeria business terrain is the most stringent and most expensive in the world, in Nigeria, young entrepreneur grow up in the hustle, hostile and tough business terrain by facing challenges ranging from power, to lease, to competition, to distribution, statutory agencies and government bodies seeking various kinds of fees. Nonetheless, Nigeria is still an untapped treasure ground for businesses, there are well over 100 natural resources in this country, and her wealth has only come from one out the many, which is Oil and Gas, so if an investor or entrepreneur will look away from oil and gas and focus on solving more pressing needs, that business will boom like the oil and gas does for the oil magnets.

The above-mentioned issues make Nigeria a potential advantageous environment for business. A nation with over 180 million populace, a multicultural nation with over 500 ethnicity, with plenty of underdevelopment, this is sure a place to thrive in witty inventions. A potential entrepreneur considers Nigeria for three reasons, the large market, the ever increasing desire to be amongst the first to have it and be different.

Why most businesses fail in Nigeria

Businesses in Nigeria have a long of challenges which lead to business failure. The most daunting reasons why businesses fail in Nigeria include:

1. Lack of infrastructure

The first business challenge you will face when doing business in Nigeria is infrastructural challenge. Nigeria lacks the basic infrastructure and logistics to support entrepreneurship. If you are going to run a successful business in Nigeria; then you must have the financial muscle to provide your own infrastructure.

Take for instance you want to start a manufacturing firm in Nigeria; you will need to build your own factory, provide your own water supply and other amenities that smoothens business operations. This single factor lengthens the time frame from initial planning to full business operations when compared to developed countries that have the basic infrastructure in place. Infrastructural challenge will directly or indirectly increase your startup overhead cost so you have to properly factor in this challenge in your business plan.

  1. Poor power supply

Poor power supply is the next challenge militating against the successful growth of small business startups in Nigeria. Successful companies operating in Nigeria has found a way to deal with the challenge of power supply by providing their own power.

  1. Inadequate security

Security is the next challenge you must deal with especially if you are a foreigner wanting to invest in building a business in Nigeria. But I think it’s worthwhile I add that there has been a massive step up by the government with respect to security and based on this; I can confidently say that I am impressed with the way the government is handling the security of the state. However, I don’t think the security challenge is going away anytime soon; so you have to be prepared to deal with it.

  1. Inconsistent government policies

Government inconsistency is really a challenge you will have to tackle if you must succeed in Nigeria as an entrepreneur. Governance is something entrepreneurs have no control over; all entrepreneurs can do is try to influence government’s policy with respect to enacting favorable business laws. But you must have political clout and massive resources to be able to influence government laws.

Now you may not have the political clout or financial muscle to influence government’s policy so the best strategy to combating the ever changing policy of the government is to keep a keen eye on government laws and swiftly adjust your business to align with the policies.

  1. Transportation challenges

The next challenge of doing business in Nigeria is the poor transportation standard. As expected; the dependable source of raw materials you need may not be situated close to your target market. So you will have to decide if to locate your business close to the raw materials or close to your market. Either way; transportation of either raw materials or finished goods will be involved and this will pose a great challenge if you intend operating in Nigeria.

Poor transportation standard and road network is a factor militating against industrialization in Nigeria but I believe this challenge is being tackled by the government through the upgrading of roads and construction of railway lines.

  1. Inability to access funds

Of all the business challenges involved with starting a small business in Nigeria; this one interest entrepreneurs the most. Inability to access funds and banks unwillingness to support entrepreneurship and small business is the major barrier to massive entrepreneurship growth in Nigeria.

However, this challenge can be surmounted if you are a die hard, creative entrepreneur. Hard core entrepreneurs are not held back by the lack of support from banks; they are not discouraged by the unavailability of startup capital. Rather than lament over the predicament, they look for creative ways to finance their business plans and ideas.

So if you are in this category of entrepreneurs; then I want to believe that your plans of doing business in Nigeria will not be thwarted or held back by the challenge of capital.

  1. Lack of governmental support

The last but not the least challenge of doing business in Nigeria is government’s insensitivity to the plight of entrepreneurs and small business owners. And the result of these insensitivity surfaces in the form of double taxation, corruption, unnecessary levies and duties, bureaucratic bottlenecks at various government agencies like CAC, NAFDAC, etc; and high cost of obtaining business licenses.

But Nigeria operates as a free economy; which favours capitalists, so I don’t think you will be discouraged by this challenge. A good strategy to balance the excesses of the government is to have a strong business team that will strategically position your business to withstand the ever increasing demand of the government.

Possible remedies to business failures in Nigeria

The following are remedies to business failure in Nigeria:

  1. Prepare for failure

As an entrepreneur in Nigeria, to guide against business failure, he or she must prepare for bad times. Preventing your business from failing starts with you the entrepreneur because the survival of your business rest solely on your shoulders. Get yourself ready to fail but do all within your power to avoid failure and you will never fail. One of the primary reasons entrepreneurs fail is because they fear failure and that fear of failure prevents them from trying new innovations on their business.

“Most people say that the fear of failure is the beginning of hard work; that might be true in the world of employees and academic professionals but it’s doesn’t work that way on the street. When you fear failure, you become over cautious and over cautiousness is a requisite for failure. I believe the fear of failure is the beginning of failure. Entrepreneurs don’t fear failure; they thrive in the face of failure.”

As an entrepreneur, I will advice you prepare to face failure should in case it shows up. Preparing your mind for failure will help you bounce back quickly to success when you fall. Another way to prepare and prevent failure is to keep learning how to build a business. The business world is dynamic so you shouldn’t be static. After all, entrepreneurship is a process; a journey, not a destination. Use every free time you have to learn something and increase your knowledge; It will help your business in the long run.

  1. Be careful of the decisions you make

You are an entrepreneur and that makes you the pilot of your business. Therefore, the survival of your business tomorrow is dependent on the decision you make today. So don’t make hasty decisions; if you are in doubt over the effect of a decision you are about to take, discuss it with professionals and sleep over it. Even if it means seeking advice from external advisors; do it. A piece of advice from a seasoned professional can prevent your business from failing.

“Before making an important decision, get as much as you can of the best information available and review it carefully, analyze it and draw up worst case scenarios. Add up the plus or minus factors, discuss it with your team and do what your guts tell you to do.”

  1. Watch your cash flow

Cash flow is the life blood of business and I believe you have heard that a couple of times. Always keep an eye on the cash flow and work closely with your accounting department to keep your cash flow strong. Effective cash flow management is the bedrock of business growth. Make sure there’s a continuous flow of cash into your business even if it means making a few strategic moves on your creditors, debtors, suppliers, customers and investors. A business with poor cash flow management or a consistent negative cash flow is as good as dead. There is one paradoxical characteristic every entrepreneur must possess to succeed. An entrepreneur must be able to persuade his debtors to pay their debts promptly and at the same, must tactically delay payments to his creditors.

  1. Move your business swiftly with the trend

Your ability as an entrepreneur to rapidly align your business with the changing trend can be a competitive advantage for your business. A company’s ability to respond to an unplanned event, good or bad is a prime indicator of its ability to compete. Be swift to carry your business along with the current or upcoming industrial trend and innovation. Taking advantage of every available trend can help your business stay on course and prevent it from failing. Every company can choose whether to lead or follow the emerging digital trends.

  1. Increase your sales and marketing budget

The aim of marketing is to know and understand the customer so well that the products or service fits him and sells itself. One of the silly mistakes made by most managers during a recession or decline in sales is to cut back on the marketing budget. Instead of cutting back on the marketing budget, I advice you spend more on marketing. Instead of going into hiding, I will advise you do some marketing and let your customers know you will stand by them; while at the same time letting competitors know that you are still in the game. Advertising is the mouth piece of business.

  1. Build good relationship with your employees

Your employees are part of your business so treat them as you will wish they treat your business. Occasionally surprise them by either sending them an unexpected birthday gift or acknowledging their extra effort in presence of other staff. If possible, give incentives and promotions to staff with outstanding performance. It will encourage them and also motivate others to strive for excellence. People are definitely a company’s greatest asset. It doesn’t make any difference whether the company’s product is cars or cosmetics. A company is only as good as the people it keeps.

  1. Hire employees slowly but fire them fast

If you own a butcher shop, don’t hire vegetarians. To hire the right people, you have to let the wrong people go. Hire the right people in sensitive positions. You will know they are the right people after testing them. Never compromise the quality of your staff in the name of cutting cost; it will hurt your business in the long run. Another golden rule to preventing your business from failing is to fire employees fast.

There will be times when you will have to be abrasive, even brutal to members of your staff. Don’t worry that your people will say bad things about you because of this. They already have. But in general, try to be pleasant and accommodating. Try to please the greatest number who work for you that you can; antagonize the fewest.

Do not hesitate to let go of bad members of your staff. If you don’t get rid of them fast, they will negatively influence or demoralize other good employees with their bad attitude and inevitably, your good employees might leave.

You must fire bad customers just as you would fire a bad employee. If you do not get rid of your bad employees, the good employees will leave. If I do not fire bad customers, not only will my good customers leave but many of my good employees will leave as well.

  1. Take care of your existing customers

There is only one boss; the customer. And he can fire everybody in the company, from the chairman down, simply by spending his money somewhere else. Without them, your business will not be in existence. From analysis carried out by the marketing experts, it has been reveal that it costs more effort and resources to find new customers than to retain existing ones. Business is not just doing deals; business is having great products, doing great engineering and providing tremendous service to customers. Finally, business is a cobweb of human relationship. Treat them with care and they will spread the word about the wonderful experience you gave them. “Courteous treatment will make a customer a walking advertisement. Spend a lot of time talking to customers face to face. You will be amazed at how many companies don’t listen to their customers.


Ajaero T. M. (2013). How to Prevent your Business from Failing. Retrieved on 30th November, 2015 from http://www.mytopbusinesside

Ajaero T. M. (2014). The Cost and Challenges of Doing Business in Nigeria Retrieved on 30th November, 2015 from http://www.mytopbusinesside

Krames, J. (2008), Inside Drucker’s Brain, Portfolio – Penguin Books, p. 163

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