Challenges of managing small businesses in Nigeria

Lagos, the mega city hosting over 20 million people, is the commercial hub of Nigeria. Over the years, it has proven to be a city of opportunities where the average Nigerian would like to reside and do business, depending on their capacities.

But just like every other city in the country, petty traders, operators of small and medium scale business (SMEs) are not finding it easy doing the business of their choice in Lagos, especially in an economy under recession.

Speaking to The Guardian, Chijioke Ezebu, an electronics dealer at the Alaba International Market said that the high cost of doing business here has forced many to close down shops, while others have relocated to other cities, and in some cases to their villages.

“We pay a lot of bills here in the name of tax. Whether you sell or you do not sell, you must pay taxes and other bills to government. In this market, we pay seven different bills to the state government. Most times we are confused and worried, asking if all these monies are going into government account. But there is nobody to explain things to us.

“Sometimes if you refuse to pay, they will close your shop. This has made a lot of my colleagues here to relocate to Ota, Ogun State and other places. I am not against paying taxes because it is my civic responsibility to do so. But the three tiers of government be it local, state or federal, should streamline the means and mode of collecting taxes to avoid multiple taxation,” Ezebu said.

On other challenges, Ezebu said: “We don’t have good facilities in this market despite all the monies we are paying to government. We have no good roads. Even inside the market, we cannot move our goods easily. It is very bad. We don’t get soft loans from government. Commercial banks offer loans with high interest rates and they are very discriminatory of small businesses like ours.”

To Chocho Okam, a barber, who owns a shop on Taiwo Street, Okota Ago palace way, the way and manner area boys hide under the guise of council workers to exploit shop owners and traders financially is annoying.

“Is Lagos State government pretending that they are not aware that people are being over taxed and harassed in the name of tax collection? Look at this our road. Whenever it rains season it becomes impassable. Customers find it difficult coming here during the raining season. Because I know most of the area boys who parade themselves as council workers don’t come here to disturb me.”

These are a few cases and challenges of running small businesses in Nigeria. This is when small and medium scale enterprises are supposed to be the engine of growth and catalyst for socio-economic transformation, especially in a developing country like Nigeria. But running small and medium scale enterprises in Nigeria appears to be the most difficult thing because of the harsh economic environment. It is as a result of the harsh economic environment that many of them collapse or are operating on the margins.

Among the challenges include discrimination by banks which are averse to the risk of lending SMEs especially start-ups, high incidence of multiplicity of regulating agencies, taxes and levies that result in high cost of doing business and discourage entrepreneurship. This is due to the absence of a harmonised tax regime which would enable business owners to build in recognised and approved levies.

Others are wide spread corruption and harassment by some government agencies over unauthorised levies and charges, exorbitant interest rates charged by banks and other financial institutions on loans. This is a big disincentive to seeking financial support from these institutions thereby stifling the growth of these small businesses.

On the way forward for small business operators, an entrepreneur and economist, Dr. Olufemi Akinlola told The Guardian that government should create an enabling environment devoid of corruption and bureaucracy. Government should create a motivating and entrepreneur-friendly business climate.

“Corrupt officials who harass and extort monies from SMEs operators should be sanctioned to serve as deterrent to others. Similarly, tax regime should be harmonised and the administration of these taxes and levies should be transparent. For the government to succeed in its drive to stimulate the growth of SMEs sector; it has to intensify efforts in reforming our educational system to make it more functional and result oriented.

“The thrust should be more of modern technology and entrepreneurial development. Efforts should be intensified to enlighten entrepreneurs about various credit opportunities, which are cheaper and entrepreneur-friendly. Activities of organisations like Small and Medium Scale Enterprises Agency (SMEDAN) should be more vigorous particularly at the local government level,” Akinlola added.