Entrepreneurs should stay committed to the objectives for which the enterprises are set up by promoting good management and accountability. They should keep business transactions separate and ensure prudent allocation of resources to ensure financial stability
By Nwokolo Charles Ike.
There are many Small Enterprises established in Nigeria and many more are being set up ranging from Small to Medium and large scale Companies. The liberalization of the economy by the Federal, State Governments and the desires of many citizens to create employment, practice a trade or exploit innovative ideas are increasing the numbers of business enterprises in Nigeria. They bring about new products and services, and impacting standard of living and productivity, and reducing poverty.
Despite the noble roles they play in employment generations and contributions to economic development, Small and Medium Enterprises are struggling as a result of various challenges they face in the country, thus limiting their ability to scale and realize their full potentials. Such challenges are as highlighted below:
Structural Constraints
There are no clear cut infrastructure Master Plans for development. We have inadequate Infrastructural Facilities which are barriers to SMEs growth and development. Electricity generation and distribution are inadequate and unstable to galvanize business activities. The resort to other alternative sources of power such Solar, Generators with the high cost of Fuel, Diesel and huge cost of maintaining plant and equipment add to the cost of operations. The high cost of operations impact negatively on the prices of products and services, resulting in low demand for goods and profitability.
Road networks which are poorly maintained continue to be death traps and constant headache to motorists, and dare devil robbers and kidnappers often take advantage of the bad situations to rob or kidnap unsuspecting passengers on the roads.
Building new road networks and maintaining the existing ones to keep them in good condition will enhance ease of doing business.
Regulatory Environment/Government Policies
The frequent changes in Government policies constitutes big problem to the growth and development of enterprises. For example, the remover of Fuel subsidy in May 2024 in a fell swoop without adequate planning or in phases created hardship in the country as result of sudden increase in the price of fuel and cost of goods and services. The situation was compounded with the harmonization of foreign exchange market when Exchange to the Dollar rose to over $1/N1, 800.00.
SME entrepreneurs should be willing to employ professionals to provide management and financial guidance so that they can stay organized, focused on the objectives and goals of their businesses
For SMEs to thrive, there should be transparency and discipline in fiscal administration, low level of inflation, Exchange and Interest rates.
Stable macroeconomic environment will help proper planning and adequate planning and monitoring of economic environment will ensure better assessment of policy changes for informed business decisions.
Lack of Access to finance
This is a major problem to SMEs as they are constrained to source funds to meet their operational needs and invest in profitable investment projects. Access to finance in Commercial Banks and other Financial Institutions is limited because SMEs are considered high risk due to high Loan defaults. Where access is available they are subject to high interest Rate, thereby adding heavily to the overall cost of operation and limiting prospect for profitability.
Banks should be encouraged to lower interest rate to single digit to enable SMEs obtain the needed finance to scale their operations. SMEs also should embrace the efforts of Governments to boost Small Businesses through the activities of Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Small and Medium Enterprises Equity Investment Scheme (SMEEIS) for financial support.
Lack of Manpower Development
Most of these entrepreneurs lack the time, management and technical skills to properly manage their business successfully. Most times, they engage Staff who are not sufficiently trained to handle financial activities resulting in misuse of resources and business failure. Due to their small sizes, they are not willing to hire professionals to help them manage the business, provide information on business performance, financial position and cash flows.
No one knows it all. SME entrepreneurs should be willing to employ professionals to provide management and financial guidance so that they can stay organized, focused on the objectives and goals of their businesses.
Lack of Adequate Business Plan
As the saying goes, to fail to plan is to plan to fail. Planning is very important as a guide to business success. Business Plan helps to determine and evaluate demands for goods and services, revenue potentials and cost of operations. It serves as a working document, provides marketing and growth strategy, risk assessment and mitigation, profitability. Without it, one cannot manage and control business activities.
Poor or Absence of Governance
Entrepreneurs should stay committed to the objectives for which the enterprises are set up by promoting good management and accountability. They should keep business transactions separate and ensure prudent allocation of resources to ensure financial stability.
•Nwokolo Charles is a Consultant and he can be reached at cinwokolo@gmail.com, 08030599774.
