Small Business in Sub-Saharan Africa: Major Constraints in [Nigeria]

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Small Business in Sub-Saharan Africa:
Major Constraints in [Nigeria]


The Federal Republic of Nigeria has an area of 923,768.00 sq kilometres and completely within the tropical zone ( 2005). Nigeria has a population which is estimated over 154 million. It is a 12th largest petroleum product producer in the world. Due to the surge in international oil prices during 2007-08, Nigeria administrated an annual GDP of US$352.3 billion and has the largest GDP compare to all countries in West Africa. The GDP per capita is US $2,400 (Economy Watch n. d.).

In Nigeria, the petroleum industry is central to the country economic profile. They are overly dependent on the petroleum sector. Besides the petroleum sector, Nigeria economy is highly amorphous and lacks basic infrastructure.

Small businesses are important in sustained a country economic growth. However, there are still lots of constraints such as poor management, corruption, weak infrastructure, paucity of second generation, lack of capital and so on need to be tackled.

This report will deeply analyse the small business environment of Nigeria. Firstly, this report will state the measures of Nigeria’s government in promoting small business development. Secondly, the essay will look into the limitations that blocking the way of Nigeria small business growth. Finally, this report will state some recommendations about how to grow Nigeria small business.

1. The environment of small business in Nigeria

The need for small business growth in Nigeria is beyond question, small business play an important role in a country economic growth. They provide job opportunities, enhance regional economic balance through industrial dispersal and generally promote effective resource utilization considered critical to engineering economic development and growth. However, a lot of obstacles are testing the survival of small business in Nigeria.

1.1 Nigeria’s government measures and Funds

After year 1970s, Nigeria’s government has introduced measures which included monetary, fiscal and export incentive to pushing the growth of small business. Centre Bank of Nigeria demanded merchant and commercial bank distribute a part of their loanable funds to small businesses. Nigeria’s government and international financial institutions have create subsidized credit programmes and given loan guarantees such as Nigerian Bank for Commerce and Industry (NBCI), National Economic Reconstruction Fund (NERFUND), the Nigerian Industrial Development Bank (NIBD), and the World Bank SME I and SME II initiatives to provide either long term credit or specialized services to the small business entrepreneur (Abereijo and Fayomi 2005).

At the first six years of business operation, small business owner was given a tax holiday in term of fiscal incentives from Nigeria’s government. The Nigerian Export-Import Bank (NEXIM) has also provides export incentives for small businesses to motivate their export activity. For instance, Nigeria Export Promotion Council (NEPC) has managed export duty exemptions for small businesses (Okpara and Wynn 2007).

Local and state government have established small business assistance programs which including extension services and entrepreneurs training. Nigeria has the agreement with the International Monetary Fund (IMF) to support more economic growth in Nigeria by helping to finance infrastructure improvements (International Monetary Fund 2007).

In these incentive programs, small businesses are expected to grow thrive in Nigeria. Although several efforts have been made to develop small business sectors but failed. At the end those funds mostly allocated to other projects. Those funds are given according to nepotism or favouritism (Okpara and Wynn 2007). Therefore, the constraints of small business survive and growth in Nigeria will be mention further in this report.

1.2 Limitation of...
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