Nigeria's growth potential is enormous. By 2030, Nigeria can make the shift from the world's 26th-largest economy today to a top-20 economy, as stated in a McKinsey report. With 160 million individuals in consuming-class households, Nigeria already boasts more consumers than the entire population of France and Germany combined. This is encouraging news for businesses, especially small and medium-sized enterprises (SMEs), which are commonly referred to as the backbone of any successful economy.
Despite all the entrepreneurial energy, however, Nigeria is yet to build businesses that can survive the test of time. The failure rate of startups and even large-scale businesses is high. Most promising firms—be they small businesses, family-owned businesses, or well-funded startups—tend to vanish within a few years.
Before the discovery of crude oil in 1956, Nigeria's economy relied heavily on trade and agriculture. Nigeria was a major exporter of cash crops such as :
• Rubber from Delta State (South-South)
• Groundnut, hides, and skin from the North
• Cocoa and coffee from the West
• Palm oil and kernels from the East
These businesses offered long-term employment and sustainable revenues. The transition to oil dependence, however, ushered in a gradual erosion of other sectors, resulting in the loss of economic diversification and the profitability of these businesses.
Nigeria had household business names in the 1980s and 1990s:
• Concord Group (Media & Aviation)
• Abiola Bookshops & Abiola Farms
• Chanchangi Airlines
These companies added so much value to the economy and I dare say could have become global companies but went into extinction at the death of their founders.
Now, we see the same trend repeating itself with once promising startups and well-funded companies folding up prematurely.
Why is this still occurring?
The Root Causes of Business Failure in Nigeria
Though the very high business failure rate is not specifically Nigerian business unique, the causes of failure remain the same. Some include:
1. Lack of Brand Identity and Positioning
The majority of Nigerian companies focus on short-term profits at the expense of long-term value creation. Although the Global Entrepreneurship Monitor says 41% of Nigerians in the working population are engaged in early-stage businesses and 81% consider entrepreneurship a good career choice, do they consider entrepreneurship a sustainable business model or merely a survival mechanism?
Winning brands fulfil a market need and solve issues, not solely for money. A majority of enterprises start without a mission, vision, or point of differentiation; thus they are easily substitutable.
2. Culture of Mediocrity
A majority of enterprises fail owing to the pursuit of short-term success instead of long-term supremacy. From low product quality to poor customer care, most brands don't invest in perpetual enhancement. With no innovation and emphasis on quality, they immediately get outdated.
3. Weak Brand Storytelling and Reputation Management
Successful companies tell great brand stories. engage their audience, gain trust, and stand out. Sadly, Nigerian companies do not realize the necessity to:
• Communicate their value effectively
• Evolve with changing consumer expectations
• Manage crises well
This undermines customer loyalty and exposes them to the dangers of shifts in the market and competition.
4. No Customer-Centric Strategies
In a very competitive economy, customer experience takes precedence. However, most companies are heavily focused on establishing transactional relationships and not on developing:
• Sound customer feedback mechanisms
• After-sales support
• Personalized interaction
Without the emphasis on customer retention, companies are unable to maintain repeat business and word of mouth that are key to long-term success.
5. Inability to Sustain Growth
Growing a business needs financial discipline, strategic thinkers, and appropriate business models. Most Nigerian businesses collapse because of:
• Insufficient policy and strategy for continuity
• Poor financial management and cash flow issues
• Over-reliance on founders without succession planning
• Inefficient internal systems and operational inefficiencies
Without good governance and investment in growth, most businesses collapse once they become larger.
6. Economic and Policy Instability
The Nigerian business environment is unpredictable. Some of the factors are:
• Frequent changes in government policy
• Incongruent regulation and taxation
• Poor infrastructure (power, road, internet accessibility)
• Foreign exchange volatility
…make it difficult for businesses to prosper. Most businesses cannot cope with such external difficulties and end up with high failure rates.
How Can Nigerian Businesses Achieve Longevity?
For businesses to live more than a few years and be able to compete globally, entrepreneurs need to pay attention to recurring causes of failure highlighted above and emphasize:
• Establish a solid brand identity with well-defined positioning and a long-term vision.
• Focus on excellence rather than short-term profits.
• Invest in storytelling and reputation management to sustain customer trust.
• Lead customer obsession to drive loyalty and growth.
• Embed financial discipline and sound business fundamentals to underpin growth.
• Adjust to Nigeria's policy context and diversify revenue streams to enhance resilience.
Nigeria possesses the talent, market size, and entrepreneurial drive to create world-class brands. Without planning, innovation, and resilience, however, most businesses will persist in struggling.
It is not difficult to commence a business; the challenge is to start one that will endure.
Are you running a business in Nigeria? What strategies have worked for you? Share your thoughts in the comments!
