For Africa’s biggest economy to ensure that the survival of its micro, small and medium enterprises increases and boost investment, experts in the country’s entrepreneurship ecosystem say the government must reform its transportation, power supply and foreign exchange.
Nigeria’s roads and rail system are insufficient to facilitate the movement of goods and services as the country is badly hit by huge infrastructural decay with a deficit estimated at well over $300 billion.
Energy remains a big infrastructural challenge in Nigeria, with its deficit-increasing operational cost for start-ups and reducing their survival rate, analysts say.
Businesses are made to pay higher electricity bills from the discos without regular power supply, and demand for diesel is rising higher with per litre price of the product now beyond N250.
Besides this, firms are taking out huge budgets to buy new generators, with SMEs the worst hit.
“The poor power supply in the country is so frustrating for businesses and it is killing a lot of start-ups,” Femi Egbesola, national president, Association of Small Business Owners (ASBON), said in a telephone response to questions.
“With stable power supply, start-ups survival rate will increase tremendously because power alone constitutes about 60 percent of their operational cost,” Egbesola said.
He noted that countries in the world where start-up survival rates are high are those with adequate power supply.
He called on the government to intervene to mitigate the plight of small businesses by providing adequate power supply.
Adeola Abdulrasdeed, founder of Cameraman.ng, in an interview with Start-Up Digest, stated how inadequate power supply has limited his automated photography business.
“Poor power supply remains the major challenge limiting my business. It continuously erodes my production cost as I run my generator daily to run my business,” Abdulrasdeed said.
Apart from poor power supply, transport infrastructure is also a major challenge for start-ups.
The road network is in a terrible state while the railway system is in a bad shape across the country, making it very difficult for start-ups to get their produce to the market.
During the rainy season, most of the roads become totally impassable and the cost of transportation surges.
“We need to stimulate the economy with massive investments in roads and rail transportation. It facilitates market access for start-ups,” said Bamidele Onibalusi, founder, Deloni Enterprise.
“With an effective rail system, I can easily access the northern market but due to the poor rail system, I only sell my goods in Lagos and its environs,” Onibalusi said.
Foreign exchange volatility has also played a major role in hampering the growth of start-ups and small businesses.
Nigeria is a highly import dependent country and this makes volatility in the exchange market impact heavily on the business environment.