80% of Nigerian SMEs fail within five years of establishment, says report
By Onome Amuge
About 80 per cent of businesses under the Small and Medium Enterprises (SMEs) in Nigeria fail before their fifth anniversary due to harsh economic environments, lack of access to capital, and poor business practices, which have stunted growth and transition of micro-businesses, a new report on Nigerian SMEs has shown.
The report titled “Perception Study: Efficiency and Impact of Regulatory Activities of Standard Organisation of Nigeria on SMEs” was carried out by the Lagos Chamber of Commerce (LCCI), in collaboration with the Centre for International Private Enterprises (CIPE).
Following a survey carried out in four locations including Lagos, Aba in Abia State,Onitsha in Anambra State and Kano, the report finds that numerous variables currently influence Nigeria’s economic climate and as a result, is unfavourable and risky for foreign investments.
It also noted that there were obstacles in the Nigerian business environment that act as constraints to the scalability of businesses in the country, despite the economic expansion and the possibility for economic prospects.
Multiple taxations was identified as a major hindrance that has negatively impacted many businesses in the country.
Citing a statement by the Manufacturers Association of Nigeria (MAN), the report noted that the association has spoken out loudly that the Nigerian business environment is now under the oppressive weight of several taxes, which have the potential to bankrupt companies.
The report further pointed out that in a recent survey, MAN discovered that only 39 of the 119 taxes and levies that were authorised under the taxes and levies (Approved list of collection) Act 1998 were really being levied by various levels of government.
The report identified other challenges hindering the growth of SMEs to include cost of accessing adequate technology, lack of facilities for research and development, decline in demand for locally produced products and the increase in demand for imported goods.
Other significant challenges facing SMEs in Nigeria, according to the report, include low formal educational and technical competency of SME owners and staff as well as weak organisational framework, poor product/service marketing, low information technology utilisation, people management issues, insufficient accounting records, among others.