Problems facing small and Medium Enterprises in Nigeria and Solutions – It is of no doubt that small and Medium-scale businesses plays an important role in the economy, inspite of this, they still suffer neglect. In Nigeria, the problems facing small and medium-scale enterprises are numerous and these inhibit their optimal performance. Small and Medium-scale Enterprises (SMEs) create a bulk of the employment provided in our economy today. This is because of their large numbers and the fact that the country have low level of human resources and capital formation. They have also helped in the utilisation of indigenous technology and proper distribution of industries.
Every business owner starts with the mindset of making the most out of his or her business, but when such businesses are faced with challenges beyond their control, the business may eventually fold up if not properly managed. Here, you are going to know some of the challenges of small and Medium-scale Enterprises in Nigeria and the solutions to such challenges.
Problems Facing Small and Medium-scale Enterprises in Nigeria
1. Lack of Adequate Fund
Financial constraints is one of the biggest problem facing SMEs in Nigeria. The problem ranges from source of credit, how to obtain the credit and the financial decision to be taken regarding the various stages of production. The major source of finance for small business in Nigeria comes from personal savings, money borrowed from friends relations and other Private money lenders. In some cases, the required amount needed for such business to thrive is not obtained.
In some other instances, external sources such as financial institutions provides strict conditions which makes it difficult for small business enterprises to obtain loan from them.
2. Lack of Adequate Infrastructure
The growth of any business depends largely on the availability of the necessary infrastructure.These basic infrastructure includes; power supply, efficient transport and communication system, water supply and availability of the needed raw materials. It is highly disheartening to note that in Nigeria most of these basic needs of small business are provided by them.
The impact of these businesses providing their basic infrastructure is an increase in the cost of production and services. This inturn increases the cost of their goods and services. In another instance, the unavailability or irregular supply of these infrastructures decreases their level of production. The increase in the price of indigenous products makes their products less competitive compared to the imported substitutes.
3. Low Managerial Skills and Technology
Small scale businesses can be easily established, therefore, most of their managers and owners are not well educated to handle the Managerial and technological skills. They care less to undergo adequate training and do not adapt to changes in the techniques of production. In Nigeria, access to such trainings is not available and most times is not affordable by SMEs.
Due to financial constraints, they don’t adapt to innovations in terms of equipments. They don’t send their staff to trainings and development seminars and do not recruit highly qualified staff.
4. Wrong Marketing Strategy
Most of the owners of small business firms lack the knowledge of carving out the right market niche for their products. They don’t obtain adequate market information to know the purchasing habit of consumers within their locality. Their poor promotional marketing approach can also be observed in their packaging, advertisement and product design. This puts then in lower rank when compared to foreign goods.
5. High cost of imported raw materials
Small and Medium-scale Enterprises sometimes have the need for foreign raw materials for production. The continuous increase in duties and port charges in Nigeria and high cost of foreign exchange makes this a problem. This factor makes SMEs to run short of funds, produce low quality products and therefore suffers from lack of enough patronage.
6. Instability in Policy making and Decision in Nigeria
There is a great inconsistency in policy making and Decision in Nigeria. Improper regulation of the operational and production environment affects SMEs. Also the instability and increase in taxes, tariff and regulations of companies impacts negatively on SMEs.
7. Security Challenges and Political Instability
For any business to thrive, there must be peace and stability in it’s environment. An atmosphere that is over cast by wars and rumours of war will be unsuitable for industrial development. This will lead to the clustering of industries in the available peaceful environment which will lead to unhealthy competition among them. Their won’t be new investments in such tensed areas.
8. Lack of transmission of Knowledge
Some small scale entrepreneurs finds it difficult to share their knowledge with others. They have the mindset that they will later become their rivals. They find it difficult to form business corperatives. The side effects of this individualism is that it hinders development of their business because other people will equally have something to teach them.
9. Insufficient Market for Products
Most times, the products of small scale industries are faced with insufficient demand. This makes them to resort to credit sales without interest. At times, these credit sales are not recovered. Low demand for the products for the products of small and medium scale enterprises is also another limiting factor towards their. This can be as a result of improper market research, packaging and design. The end result is that the products of these firms often cannot compete favourably with foreign goods in terms of quality and design.
10. Improper Keeping of Records
Small and Medium-scale Enterprises sometimes do not keep adequate records for their business. This makes it difficult for them to determine their profits.
Solutions to the problems facing small and Medium-scale Enterprises in Nigeria
1. The issue of finance which is the major problem faced by SMEs can be solved by the government reducing the conditions of obtaining loans by SMEs. They should also favor both small scale businesses and Medium-scale Enterprises during SMEs loan scheme.
2. The government should aim at providing the basic infrastructures necessary for SMEs to thrive. Their should be steady power supply, availability of water, good roads and others.
3. There should be a comprehensive training for the management and operation of SMEs. Owners of such businesses should make themselves available for such trainings.
4. The owners of SMEs should properly study or have a broad knowledge of their marketing environment. This will enhance in their production techniques and presentation of their products.
5. Their should be good governance which will insure an acceptable tax rate, tariffs, duties and port charges of imported raw materials. The foreign exchange rate should also be of standard rate.
6. Their should be rule of law and security of life and properties so that businesses will thrive.
7. Small and Medium-scale Enterprises should learn to form cooperatives and partnerships so as to broaden their knowledge.
8. SMEs should have proper record to measure their profits and losses.
If Small and Medium-scale Enterprises performs optimally, the poverty level and unemployment rate in Nigeria will greatly reduce. Problems Facing Small and Medium-scale Enterprises and their solutions will be of great help in achieving a more industrial development in Nigeria.