5 Causes of Business Failure in Nigeria

Almost every day new businesses emerge and most fail as quickly. Statistics show that a good number of businesses do not go beyond their first three years and these numbers do not vary in the Nigerian context so to this end we will be examining five reasons that lead to the failure of Nigerian businesses.

1. Starting Big:

There is a common saying in the business world which is ‘dream big, start small’ but some entrepreneurs in a haste to reap benefits and see their names in flashy lights start extravagantly and this leads to burn out before the business even has a chance to grow. The goal of every entrepreneur and business owner that is starting out should be to reduce costs as much as possible but we see business owners in Nigeria overspending even before they have the money to spend. For example taking unnecessary loans. The lesson here is to start small with as little as you have and grow from there. Most world renowned organizations today started in a room or a tiny little office so the principle of dreaming big and starting small is tested and proven.

2. Business and Sentiments:

As Nigerians we are culturally sentimental and family oriented and that sometimes crosses over into business. We see cases of people placing family members in charge of new ventures or partnering with family and friends even when the party is unqualified and that individual ends up running the business into the ground. Every entrepreneur should understand that in business to make profit and if hiring a family member does that then do so while keeping the relationship official during office hours but if you are hiring someone because they share the same last name with no consideration as to qualifications then such a decision should be revised. A line should be drawn between one’s personal life and business.

3. Poor Customer Relationship Management:

Customer Relationship Management (CRM) is an emerging area in today’s business world and some Nigerian businesses and only just beginning to take this into consideration. If you treat your customers well they would return and most likely return with someone else. Businesses can longer afford to be rude or disregard their customers. They should be treated with utmost respect as this is one of the key ways to stay ahead in this competitive age. Proper CRM should be the hallmark of modern businesses but some Nigerian businesses are yet to grasps this.

4. Poor Management:

This is a common issue that leads to failure of businesses everywhere. For a business to thrive and flourish the proper management has to be in place. This includes the proper management of funds, people and every other material resource. Not every business owner would have the opportunity to take professional management courses but there are little everyday things that can be done to ensure waste is minimized and profit is maximised; such as keeping proper records of all resources that come in and leave the organization so as to measure cost and evaluate profits.

5. Same old, same old:

There are certain markets that are over saturated in Nigeria for example you can walk into a shop and see ten different types of bread or different brands of pure water, all looking the same but with different names. The only way to get ahead in business is to innovate, innovate and innovate some more. Sometimes people are so fascinated with the idea of starting a business that they do not evaluate the market before starting.

If a particular market is over saturated, innovate or move on. You can make bread but what makes your bread different from the one that the customers you are chasing after ate yesterday. It’s all about innovation. There is nothing new under the sun, yes! But the demand of innovation is that you do that old thing in a different, better, creative way. Most businesses that do things the same way as the competitor next to them more often than not just make ‘enough’ profit, barely break even or after a while shut down all together.

business failures nigeria

top Causes of Business Failures in Nigeria

The above are just a few of the problems that plague Nigerian businesses today but for every problem there is a solution and the understanding of a problem is a step in the right direction to overcoming it. It’s important for business owners to learn from the mistakes of others to avoid making them themselves.


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