Fostering entrepreneurship with favourable policies

Nigerian entrepreneurs have demonstrated remarkable resilience and adaptability, employing innovative approaches to sustain their operations amid rising inflation and exchange rate volatility. The 2024 State of Entrepreneurship in Nigeria survey by the FATE Institute captures the entrepreneurial spirit that has helped businesses navigate the complexities, GLORIA NWAFOR reports.

Recent economic developments and corresponding policy shifts have significantly impacted Nigeria’s business environment over the past year.

The inflationary environment, juxtaposed with the devaluation of the currency, the removal of petrol subsidy, the increase in the minimum wage, consistent hiking of the monetary policy rate, and adjustments in electricity tariffs have resulted in opportunities and challenges for Nigerian entrepreneurs.

These changes, which represent a welcome return to orthodoxy for the financial markets, have unfortunately also increased operating costs for many businesses.

The survey revealed that Nigeria’s entrepreneurial index stands at 0.46, down from 0.52 in 2023 and 0.58 in 2022, indicating a deterioration in the state of entrepreneurship in the country.

This, the report stated, reflected lower business growth rates, fewer jobs created, lower levels of skill adoption among entrepreneurs, and the persistence of challenges such as local currency depreciation, high inflation, insecurity, and poor power supply.

It observed a decline in the business birth rate from 30 per cent in 2023 to 24 per cent, showing a slowdown in new business creation.

However, it noted some green shoots, particularly among female and youth-led businesses, showing that female-led businesses have shown a notable increase in both market participation and growth, while youth entrepreneurs have become a driving force, leading to technology adoption at an impressive rate of 72 per cent.

The trends, according to the report, underscore the potential of inclusive policies and technology-driven interventions to foster sustainable growth.

In her remark, Executive Director of FATE Foundation, Adenike Adeyemi, said findings from the report are expected to support the design and implementation of suitable policies and incentives for a more enabling entrepreneurial an ecosystem where businesses could thrive despite the challenging operating landscape.

She said data used in the report covered 10,595 businesses across the 36 states and the Federal Capital Territory (FCT) in Nigeria, with a decline in innovation and digital technology adoption, business performance, and skills acquisition relative to last year, while that of enabling business environment remained the same.

She said the survey identified the top five most problematic factors for businesses – limited access to finance, poor power supply, insecurity, foreign exchange difficulties, and infrastructure challenges, while the top two factors – limited access to finance and poor power supply – remained unchanged from the previous year.

However, Adeyemi stated that insecurity, foreign exchange issues, and infrastructure challenges emerged among the top five concerns in 2024, replacing unstable government policies, multiple taxation, and poor market access, which fell out of the top five.

The shifts, the FATE boss said, are unsurprising given the state of insecurity and major policies over the past.

The report noted that only 30 per cent of entrepreneurs said they were able to access finance from financial institutions in the past year, while many entrepreneurs raise funding from personal savings and funds from family and friends.

It stated that in assessing the access to finance challenge, high interest rates, huge collateral requirements, and limited public finance are some of the factors that inhibit access to finance for businesses.

It stated that the challenges persisted in 2024 and continued to affect the growth of businesses in Nigeria.

In addition, the report stated that Nigeria’s electricity supply was unable to meet the country’s demand.

According to it, limited electricity coverage arising from the frequent collapse of the national grid is a major problem that businesses faced in the past year.

The year aimed at reforming the foreign exchange market.

On business opportunities, the report stated that despite the challenging business environment, Nigerian entrepreneurs remain positive about the future.

“There is a decline in the share of entrepreneurs who plan to expand their businesses in the coming year. In 2024, only 68 per cent of entrepreneurs expressed plans to expand their business, a significant drop from 78 per cent in 2023 and 82 per cent in 2022 .

Conversely, the share of businesses not planning to expand increased to 32 per cent in 2024, from 22 per cent in 2023 and 18 per cent in 2022.

On policy recommendation and looking at Nigeria’s macroeconomic environment, which has been challenging for businesses over the past year, and the ongoing reforms by the federal government in the long term, the report stated that they are likely to prolong the strain on businesses in the short term.

It said: “In this context, it is essential for the government to not only communicate a message of hope but also to prioritise short-term support for nano, micro, small, and medium-sized enterprises (NMSMEs). These businesses are fundamental drivers of job creation and income generation in the country, and they must be supported to achieve their potential.”

In the survey, entrepreneurs identified the top five areas the government should focus on to improve the business environment such as security, power supply, access to finance, infrastructure, and training, as well as business support.

It said it was essential for the government to not only communicate a message of hope but also to prioritise short-term support for NMSMEs.