Changing Narratives on Small Scale Businesses in Nigeria

ECONOMY

As the twin problem of poverty and scourge of unemployment drives many youths to embrace entrepreneurship via participation in the Micro, Small, and Medium Scale Enterprises, which have failed to lift people out of poverty, economic analysts are divided on the issues contributing to business failure in Nigeria, reports Festus Akanbi

As Nigerians get set for another season of political campaigns in preparation for next year’s elections, economic analysts predicted that as usual, prospective public office seekers would build conversations on economic prosperity around Micro, Small, and Medium Enterprises (MSMEs).

This is because, apart from contributing to the nation’s export earnings and Gross Domestic Product (GDP), MSMEs have proven to be a major job provider for the teeming youths.

According to the Chairman, Proshare Nigeria Limited, Mr. Olufemi Awoyemi, MSMEs, otherwise simply called small businesses can be described as the engine of growth in many economies. 

Drawing inspirations from the work of a popular  American author and founder of Michael E. Gerber Companies, a business skills training company, Michael Gerber, Awoyemi listed 10 reasons that usually cause the collapse of small businesses to include lack of management systems; lack of vision, purpose, or principles; lack of financial planning and review; over-dependence on specific individuals in the business and poor market segmentation and/or strategy. 

 Others are failing to establish and/or communicate company goals; competition or lack of market knowledge; inadequate capitalisation; absence of a standard-quality programme; and owners concentrating on the technical, rather than the strategic, work at hand. All the ten factors are quite evident among Nigeria’s small businesses.

 Why Businesses Fail

However, from the experiences of small-scale business promoters in Nigeria, business failures are majorly caused by lack of access to adequate financing, poor and almost non-existent infrastructure, double taxation, and unreliable policies of the government, among others.

  According to Mr. Stephen Ogunshola, a manager with a small-scale fish farm in Olambe, Ogun State, most of the initial gains which could have been plowed back into the business are being diverted to other uses which include the provision of basic infrastructure like power generation. He told THISDAY that he spends an average of N20,000 every week to power his two generators, which he uses to run his pumping machines.

  He lamented that banks are not ready to assist small-scale business operators like him while all his efforts to benefit from the Central Bank of Nigeria’s assistance didn’t yield any positive results.

  Another issue that came up was the constant harassment by local government officials. “We pay all manners of the levy but we don’t enjoy anything. We find it difficult to convey our products to the market because commercial vehicles are avoiding Lambe-Akute roads. After all, the Ogun State government has abandoned us.

THISDAY reports that the issue of bad roads and unstable power supply is a common denominator across the various states, a development which has continued to form small businesses to close shops.

Awoyemi explained: “Since most small businesses are too weak to provide an alternative power source, the epileptic electricity supply situation in Nigeria has drastically reduced capacity utilisation, causing (in addition) damage/loss of equipment and ultimately the total demise of many small businesses. For the few that have continued to weather the powerful storm, their high cost of production has resulted in the loss of product price competitiveness. Generally speaking, Nigeria is known as a high-cost origin and this explains why the country is not doing well in the export market – be it of goods or services.”

   Another issue raised by the Proshare Chairman was the lack of cluster parks in Nigeria, a development that makes it necessary for small-scale businessmen to look for space for their operations. 

“Apart from the poor road conditions, alternative means of transportation are either literarily non-existent (e.g. rail) or beyond the reach of small businesses (e.g. air transportation). Closely related to the power and transportation bottleneck is the lack of a dedicated workspace for small businesses. There are literarily non-existent cluster parks in Nigeria. Virtually every small business promoter has to secure its location at usurious costs from shylock landlords who, through sudden and frequent rent alterations can bring flourishing small businesses to sudden grief. In the absence of any compensatory effort for these inadequacies, it becomes quite easy to see why the mortality rate of small businesses in Nigeria is quite high,” he said.

However, National President, Association of Small Business Owners of Nigeria (ASBON), Femi Egbesola was recently quoted as saying that the inconsistency of government policies, not having the right skills, insufficient access to funding, high cost of registering business are the major reasons for the failure rate of Nigerian start-ups.

  “Government policies are not stable and this has been limiting the success rate of start-up businesses. The high poverty rate in Nigeria also makes many start-ups not go for the right businesses and right skills.

“Furthermore, the weak economy of Nigeria has made it difficult to access funding and the infrastructure to help business has not been enough. Also, the government has not given soft incentives like tax holidays, reliefs, and intervention loans to businesses,” Egbesola further said. 

False Sense of Economic Liberty

However, despite all the myths woven around small and medium scale enterprises, analysts are beginning to dismantle the old narratives that presented small-scale economic initiatives as the surest answer to poverty and youth unemployment.

 In his submission, Chief Executive Officer, Global Analytics Consulting Limited, Dr. Tope Fasua, dismantled the myths around SMEs as a fallacy, claiming that experience has shown that the small-scale businesses merely provide a false sense of economic liberty to their patrons in Nigeria and beyond.

“The idea that the continuous encouragement of Micro, Small and Medium Scale Enterprises (MSMEs), is a sure bet approach to economic development is false, foolish, unscientific, fraudulent, wasteful, mediocre, lazy, and deleterious of our effort at achieving economic development,” he submitted. 

 Fasua argued further that the concept of small-scale business hasn’t worked for as long as we have been implementing it. “It has not worked anywhere and could never work. At best, it lulls us to sleep, miniaturises our dreams, keeps us permanently at a point where we could never compete with larger, well-established ones, keeps us hooked only on importation economics, helps to retain our woeful unemployment indices, and ends up frustrating our youths out of their minds.”

The economist pointed out that it has not been easy for youths who started as SMEs promoters to break even, saying most of those pushing out the ideas of MSMEs are not entrepreneurs but politicians.

  He said, “Check the odds… out of 1,000 youths who become half-baked, import-dependent entrepreneurs, only one or two will be able to build to sustainable levels in five, 10 years. Most will crash out or live on the fringes of poverty all their lives. Funny though, that most of those pushing these ideas – government people and politicians – are not entrepreneurs themselves and if they are, they started with monies they got from being government officials or politicians (to create a façade and make ill-gotten wealth less recognisable). Otherwise, we should have asked a person like Rauf Aregbesola, who as a minister told graduating students of Osun State not to bother looking for work, how he made his money. I think it is a callous strategy.” 

Fasua said most people mistake SMEs for goods importation, a development which he said positions Nigeria as an import-dependent nation. 

“The strategy of relying on SMEs to lift and transform Sub-Sahara African economies is a very much failed one already. Our SMEs cannot do better than sell imported goods. Almost all of them have neither the patience, perseverance, time, resources, finance, personnel, structure, and indeed inspiration, to be innovative in a way that can inch black Africa closer to relative self-sufficiency, or even help in solving our existential problem.   And anyone who continues to push that strategy should understand that we are merely markets for foreign importers from China and Western nations by promoting MSMEs. 

It is hoped that government will find an escape route to salvage the MSMEs as a way of addressing the problem of youth unemployment and the attendant surge in crime rates in the country.