Small Business in Nigeria

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Table of Contents
Introduction------------------------------------------ 1
Constraint in small business :
1) Exchange rate-----------------------------------2
2) Access to loan -------------------------------2 - 3
3) Infrastructure --------------------------------3 - 4
4) Technology ----------------------------------4 - 5
5) Taxation -----------------------------------------6
6) Regulation --------------------------------------7
7) Policy---------------------------------------------8
Reference list-----------------------------------10 - 12

Nigeria is a country with 923,768 sq km ( 356,700 sq miles ) and the population at there is around 144.7 million. ( Sub Saharan Africa 2008 ). The capital city of Nigeria is Abuja. English is the official language at there. The GDP real growth is 5.2 percent in 2008 and the labour force is about 51.04 million people. (Starting your career in Nigeria Country Guide for International Students 2009 )The inflation rate is 11.5 percent in 2009.( Economy , n.d ) Sanni ( 2009, 15 ) has found that most of the business in Nigeria is small business which had cover 90 percent for the whole country. But only two-third of small business can survive around 2 year and it decrease to 44 percent at least four years.( Top 7 Reasons Why Most Business Fail in Nigeria 2009 ) So we can conclude that only 50 percent of business can survive in first years and after 5 year, there will be 95 percent business fail. The definition of small business is the business with more than 5 employees and less than 20 employees. ( Sanni 2009, 9 )There are also high business failure rate in Nigeria due to some of the problem. In this report will discuss about the constraint had been occur to establish a new business in Nigeria which include access to loan, technology problem, inadequate facilities, exchange rate, taxation and regulation. It including the reason why is it happen and how it affects the performance of small business.

Exchange rate
As discussed by Samson, and Daft (2000, 143), small business can be affect by the changing of exchange rate. For example, in 2006, 1 US dollar can exchange for 128 Nigerian nairas. ( Historic Exchange Rates 2006 ) In 2009, the US dollar had increase the value to 148 Nigerian naira’s, then the US goods will be more expensive because Nigeria people need to use more us currency to buy the goods with the same price. ( Historic Exchange Rates 2009 ) Indirectly, the US goods will be more difficult export to Nigeria and the profit will be cut down.

Access to loan

Sources : (Enhancing the Competitiveness of Small and Medium Enterprises in Africa: A Strategic Framework for Institutional Support, 2001 )

Majority of sub-Saharan country still faced the access of finance problems which has show in table 7. Participation of development banks seems to be performed poorly and low accessibility of loan from commercial bank. (Enhancing the Competitiveness of Small and Medium Enterprises in Africa: A Strategic Framework for Institutional Support . 2001, 26 ) There are not more than 50 percent of countries that have high availability to finance. For

example, in table 7, Nigeria had limited accessibility to short term loan and overdraft facilities as it have low availability and accessibility to get loans from bank. The high rate of failure in small business make the bank does not have any confidence to approve the loan for small business. Even though, the lending rate in Nigeria is in between 16.12 percent to 19.03 percent in year 2009.( Central Bank of Nigeria 2009 ) Some of the banks prefer to lend to big business and not reluctant to extend the credit for small business due to the high small business failure in Nigeria. ( Nigeria’s economy at the crossroads 1999 )


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