Top 10 Challenges of Starting a Business in Nigeria and How to Overcome Them
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Introduction
It is exciting to launch a business venture in Nigeria, but there are many opportunities for growth. As one of the largest and most dynamic markets in Africa, Nigeria offers great potential for entrepreneurs looking to capitalize on economic growth and a dynamic consumer base.
Although it’s a great opportunity for entrepreneurs in Nigeria, the reality is that starting or growing entrepreneurship here can be daunting. Don’t worry, you are not alone. What are the top 10 obstacles faced by entrepreneurs in Nigeria and how can you overcome them?
1. Access to Capital
Fund mobilization for start-ups and enhancing the business can always be a challenge given the high interest rates, rationed credits, and constricted loan covenants from financial institutions.
1.2 Some business people use their own funds or they borrow from friends and relatives which usually attract very high interest hence the business early capital base is stretched.
1.3. How to overcome
Avoid taking high-interest lending products you need to save or have family to borrow from.
Entrepreneurs seeks funding for their new business ventures, investors and venture capitals to invest on the opportunities of growth on new start up ventures.
And government grants and initiatives such as the Nigerian Youth Investment Fund (NYIF) Or any form of credit facility from Central Bank of Nigeria.
2.Inconsistent Government Policies
High political risks and the changing of government regulations, taxes, and policies can pose a threat to the stability of the business.
Due to the instability in policies, organizations may have a difficult time in making long term strategies and may end up in losses.
2.1. How to overcome this is by; Staying informed and engaged:
Track changes in laws by becoming a member of sites that highlight changes in laws within the country.
Business should join such organizations as the Lagos Chamber of Commerce and Industry (LCCI), to foster its policy impact.
2.2 Ensure the organization undertakes diversified operations mainly to distribute risk to the various areas of operation since they will be affected in varying degrees by policy changes.
It is recommended to advice and involve legal and financial experts that will ensure that the organization complies with all the set laws.
3. Inadequate Infrastructure
Some of the challenges may include; the provision of basic amenities such as; power blackouts, impassable roads, and lack of clean water may affect business operations.
These options may have additional costs that the business has to incur to come up with their own power, water and logistics.
3.1. How to overcome is to Maintain integrity and be proactive:
Make sure not to try to cut corners when dealing with government officials; demand candor and legal means.
Legal help is to be involved when it comes to the matters of moving through the bureaucracy successfully.
Strengthen ties with other business people with a view of seeking to compare experiences and ideas on how to deal with bureaucratic procedures.
3.2. Avoid contact with government offices and officials in person and where this is not possible to interact with them mostly through electronic means.
4. High Competition
The major reason that affect competition in Nigeria is that there are many companies competing in the same niche, with the increasing competition, more companies join the common niches such like retail, technology, and services.
4.1 It is always difficult for a new business to compete against so many other similar businesses in the market and this requires so much effort, resourcefulness, marketing and in most instances, capital investment.
4.2 How to overcome these is by Differentiating and focusing
To beat a competitor you should target areas where competition is weak, or where there is no competition at all.
Customer services, quality and innovation are other areas on which organizations should deploy efforts to differentiate their products or services.
Many people consider branding as building a solid commercial image by developing an exclusive proposition and advertising it effectively.
5. Limited Skilled Workforce
The difficulty of the human resource management problem arises from the fact that workers with the needed skills and experience could be rare because of education and training gaps.
There could be pressure to spend a lot of money in personnel training and development or else organizations may encounter some difficulties in achieving organizational objectives with regards to staff quality and performance.
5.1 How to overcome: Invest in people
If the competencies required are not present within the team offer training and development programs to strengthen it.
Look at the possibilities of the apprenticeship where you can develop and shape the young talents.
Form strong relations with educational institutions to be able to source for young fresh talents, and together, develop programs that respond to the needs of industry.
Implement the use of technologies and automation to curtail the reliance of manpower.
6. Security Concerns
Some of the problems like armed robbery, kidnapping and insecurity in general can guard businesses, specifically zones that are susceptible to them.
Some firms may have to invest in technologies, insurance, and other perquisites that can help them achieve security of the business undertakings and its employees.
How to overcome
6.1 Prioritize safety and preparedness:
Purchasing security products including CSDT, ensuring premises security, and security services.
Keep insurance to minimize loss due to theft or destruction of material.
Centralize a mitigation plan.
7 .Plan and comply strategically
Seek the help of tax advisors to explain what is expected from you as well as how to make the most of what you pay in taxes.
Exploit the available tax incentives and reliefs, especially those for the SMEs.
How to overcome
Ensure your record keeping and filing of returns is up to date so that you do not end up paying for penalties that you would have otherwise avoided.
Encourage changes in business associations that seeks to reduce and ease taxations on small businesses.
8. Cultural and Social Factors
The cultural dynamics and the consumer behavior may be challenging for the entrepreneurs to perceive and, thereby, to address.
In some cases the business may be forced to alter its products, its services or even the marketing mix to suit a particular culture which also takes time and a lot of information about the market.
All these are not insurmountable obstacles provided one can be well-prepared, familiar with the locality, and be able to adjust. There is potential for great success in Nigeria’s changing market for those who can competently solve these challenges.
8.1 How to overcome these is by Understanding and adapting:
Ensure you have carried out extensive research to learn the tastes, attitude, and trends of the market in that region.
Adapt the products you offer to the culture of the intended consumers.
Recruit employees from within the region to work for your organization to help in addressing issues related to culture.
Establish good relations with the people in the society through the consideration of CSR and partnership with the locals.
9. Foreign funds
For foreign businessmen to venture into the Nigerian economy, it is good news and a half bare knuckle fight. These peculiarities are important in order for a foreigner to not stumble on crucial moments when it comes to registration of a business, and to orient themselves with some specific legal obligations which can be encountered.
How to overcome
the Nigerian entrepreneurs may increase the probability of their success in overcoming the challenges that they may face on their way to creating a successful business in the country characterized by a complex and competitive environment.
10. Group equity
Base on crowdfunding in order to seek small amounts from many people at a go, you can join a group to carry out the projects because when you are many, you can share resources.
How to overcome
Use other individuals’ input from customers to enhance the company and shape new strategies to counter competition.
Conclusion
Starting a business in Nigeria may bear some challenges to the foreigner but the benefits can be enjoyed with the aid of proper planning, adherence to all the legal requirements and proper partnership. Imbedded in this process is the legal structure under CAMA and other laws Hiring local professional and establishing partnership channels will significantly boost chances of success in the dynamism of the Nigerian market
Call to Action
This subject reveals that doing business is not easy in Nigeria, but with this strategy, it is achievable to be successful.
At Qeeva Advisory Limited, We help organizations overcome these challenges with solutions that are unique to meet your organization’s needs.
Are you finally prepared to take on your business adversaries? Contact our team of professionals right now for a consultation and find out how we can assist your business to succeed in Nigeria. You can reach us at 08023200801,08075765799, info@qeeva.com or register on our website www. qeeva. To find out more about our services, please visit us.
With Qeeva Advisory Limited on your side, do not let a good business be held down transform your challenges to opportunities.
Get started
– Call-to-action to contact for a consultation
Tel: (+234) 802 320 0801, (+234) 807 576 5799)
E-Mail: info@qeeva.com
Office Address: 5, Ishola Bello Close, Off Iyalla Street, Alausa, Ikeja, Lagos, Nigeria.
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