5 Problems of Small Scale Business in Nigeria

The problems of small scale businesses in Nigeria are enormous, but the importance of Small scale businesses in sustaining the economy of a country can in no way be overemphasized.

Have you ever wondered why governments at all levels often call on the people in their jurisdiction to come up with ideas that can be turned into businesses? It is because the services of small scale enterprises ensure community-level engagement and can contribute significantly to the economy.

In Nigeria, policies have it that small scale businesses are those that function with less than 50 workers or has a total of N10,000 to N2,000,000 investment (exclusive of landed properties). Meanwhile, the Central Bank of Nigeria (CBN)’s credit policy for merchant and commercial banks recognizes a business to be small scale if it worths between N1 million and N10 million, excluding landed properties, but including the business’ working capital (source: Northshore Advisory).

We all know how hard it is to come about funds to start a business in Nigeria – even on a small scale. But have you wondered why many small scale businesses usually don’t make it long before folding up? In the following aspects, I present to you the 5 among the major problems of small scale businesses in Nigeria.

#1 Problem of Small Scale Business in Nigeria: Financing and Capitalisation

Many Nigerians may need to move a camel through the eye of a needle before getting funds for their small scale business ideas. This is not unconnected to the impending economic dilemma that we often have to contend with in the country. Getting finances to implement your small scale business may sometimes be difficult in a country like ours.

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However, the big brother of getting fund to run your business is the capitalization issues. The problem of capitalization in a small scale business is that it may be too much (overcapitalization) or too little (undercapitalization).

When your business is undercapitalized, you may find yourself jammed amidst the needs to keep dipping your hand into your small scale business to fund your daily needs. From personal to family needs, undercapitalization may make a business suffer irreparably.

However, pumping too much than needed fund into small scale business often makes it unclear whether you are making profit or not. You really have to do your homework to be sure of how much you will need exactly and the various sources of financing to sail your business above the tides.

#2 Problem of Small Scale Business in Nigeria: ‘Otondolism’

Yes, I know that’s a strange word. Do you remember or have heard of people undergoing their NYSC camping being called ‘Otondo’? Oh oh… that’s it! That’s where my ‘otondolism’ comes from. That is the problem of small scale businesses that are run without the needed skills or experience. Many small scale businesses in Nigeria do not go far in age because the owner possesses little or no skill and experience in what they are doing.

This often affects their business plans and moves as well. Try investing some time in learning and you’ll have yourself to thank. A shortcut to this could be to partner with a guru in the industry of your business, but you still have to keep your eyes wide open and learn fast.

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#3 Problem of Small Scale Business in Nigeria: Time Management

There is no gainsaying about it – if you don’t manage your time to grow your business, you will mismanage your time to harm your business. Many Nigerian small scale business owners have challenges with time management. The fact that you own and run your business does not give you the freedom to behave anyhow.

There are ethics in business; you have to be up and doing. Remember the saying: time for this, time for that; make your business time conscious and your customers/consumers will praise you for it.

#4 Problem of Small Scale Business in Nigeria: Poor competitive skills

In Nigeria today, competition is one of the major problems of small scale businesses; developing working strategies to deal with competition is therefore important. Due to the large pool of the unemployed citizens, many people plunge into ventures they believe is doing well, but the competitive skills to make their business sell are often lacking.

The truth is: competition is one important problem of small scale business in Nigeria; you just have to know how to survive with competition rather than hoping or praying for none.

#5 Problem of Small Scale Business in Nigeria: Lifestyle

Without mincing words, the lifestyle of many Nigerians is the bullet for their small scale businesses. Quite often, small scale business owners find it difficult to separate personal fund from the one they are running the business with. This is often compounded by extravagant lifestyle that tends to weigh down the life in their businesses. Living a realistic and cautious lifestyle could safe many small scale businesses – but wont they argue with you they have to attend that party next weekend?

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The problems of small scale businesses in Nigeria highlighted above are by far not exhaustive, but not being realistic with oneself could make it difficult to see those things that are actually problems against those that are simple challenges that can be manoeuvred.


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