Problems of Small Scale Businesses in Nigeria And Solutions

What are the solutions to problems of small scale businesses in Nigeria? This article is about those problems facing small businesses in the most populous Black nation in the World; Nigeria and their possible solutions.

Nigerian economy has mixed fortunes within the last 10 years, there have periods of steady growth, followed by periods of recession. Tightening of spending, resulting in lower purchases, resulting in job loses and many other problems associated with this.

Nigeria, which is often called the giant of Africa is a country blessed with human, mineral and natural resources. Most notable among Nigerians is their entrepreneurial spirit which is auspicious across the world.

This entrepreneurial spirit has not found the most encouraging or fertile ground in which to grow and blossom. In this article, we look at some of the problems or challenges facing business in Nigeria, what local entrepreneurs or a small businessman faces. But before that let us have a clear idea of what a small business is.

Solution To Problems of Small Scale Businesses In Nigeria

As we have stated in a previous article on a similar subject, The Third National Development plan of Nigeria (1975 – 1980) gave a definition of  a small scale business as a manufacturing firm that has a staff strength of  9 people or less, and whose machinery and cost of equipment (excluding land) is also less than N600,000. Although there are many varying definitions of what a small business is, let us stick to this definition for the purpose of clarity.

We would first state the problem then follow up with the possible solution to problems of small scale businesses in Nigeria

Solution To Problems of Small Scale Businesses In Nigeria

  1. The Nigerian Environment is Difficult to Operate Business in:

The Nigerian populace has for a long time been conditioned to prefer foreign or imported goods. Furthermore, the local business environment does not enjoy the support of the government in the area of tax breaks, grants or any other kind of support.

Furthermore,  if an investor intends to start or set up a production firm, he will find that he or she needs to provide their building with their own water supply, and also that raw materials may be hard to find. Producers may prefer to send them abroad to foreign buyers.

There is also the problem of multiple taxations. Businesses have to pay taxes to Federal, State, and local governments, and other ridiculous levies such as those imposed for signage s.

Possible Solutions:

The Lawmakers must realize those small businesses are the future of the Nigerian economy and must start now to create business-friendly laws/policies, starting with the dismantling of the obnoxious multiple taxation system of things. Secondly, Tax breaks and incentives should be made by law, just as it is obtainable in developed countries. Made in Nigeria goods should be given preference stating from the Presidency down to the Local Governments.

  1. Poor Power Supply

The Electricity situation in Nigeria can be likened to a chronic illness that has refused to get cured. Successive governments have made several announcements about policies and intervention measures targeted at finding lasting solutions to the terrible situation in the Nigerian power sector. Businesses both big and small are affected by this situation and have to spend very high amounts of money running and maintaining power generators. Small businesses, in particular, are so badly affected that small business entrepreneurs have to spend money on fuel that could have been better used for other things, such as building and expanding their businesses.

As a result, the end product or service of the business becomes more expensive. Thank extra cost imposed on the buyer or customer could result in lower sales as the customer could decide not to patronize the small business, instead of looking for other alternatives that could be produced by bigger companies, or imported from abroad.


The onus lies with the Nigerian government to intervene in this terrible state of things. Power is vital to the industrialization of any country, and Nigeria is not an exception. Alternative power sources should also be made more affordable for small businesses to purchase. Power sources like solar panels should be made cheaper for individual business owners to buy. More investment in power such as solar farms that are available in developed countries can be implemented in Nigeria, then businesses and individuals can subscribe and pay monthly, just as they would do with the National Power Company.

  1. Poor Transport Network

Most businesses are located in urban areas where labour is available and where they should normally enjoy other advantages such as power supply and quick access to medical facilities if the need should arise.

But then the raw materials that they must use for the manufacture of their products cannot be sourced in the urban areas, and so they must travel to the hinterland in order to source these raw materials. But then the roads are mostly in a terrible state, and so what raw materials should take a day to arrive may take up to a week. The implication is that you have businesses that cannot meet up to the demand of their customers and so they lose business because the customers may take their demand to other manufacturers or simply buy imported versions of the goods.

Some manufacturers even after completing the production process have another headache which is to get the goods to their warehouses. The roads are just terrible.


The solution is that the Government must build good roads- period. Businesses, particularly small businesses are not saddled with the job of constructing roads. The government, therefore, must stand up to its responsibility and construct viable and lasting road networks. This is a capital intensive project and must be done even if the government must borrow from the capital market or from the private sector to achieve this goal.

  • 4 Poor Adoption of Technology

Perhaps still an effect of the lack of availability of funds, you find that in Nigeria, many businesses have stuck to the old ways of doing things, and have not adopted technology, some manufacturing businesses still mix and cut their raw materials by hand in 2019. This has caused the pace of production to remain slow and small.

Possible Solution:

Businesses should make an effort to learn more about modern ways of doing things. They may still need better access to funds from banks in order to fully implement the improvements that they have learnt about.

  • 5. Poor Access to Funds

Finance and funding is a very important aspect of starting or expanding a business.  Money is needed to build a lease suitable business premises, buy materials, equipment, pay staff and lots more. In Nigeria, the bankers have made a terrible mess of the lending process, many of them only lending to billionaire businessmen, based on personal recognition, while completely ignoring small businesses that actually need the money the most. Some banks impose impossible terms and conditions before giving out loans to small businessmen, resulting in many businesses closing down, or just managing to stay afloat.

Possible Solution:

The government should step in with incentives and punishments in order to encourage the banks to make funds available for small businesses to borrow and pay back with limited interest rates. This will greatly help the businesses expand, employ more workers and build brands that can compete in the international market.

That’s all on about the possible solution to problems of small scale businesses in Nigeria.


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