5 Causes of Business Failure in Nigeria

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.

Knowing the reasons why businesses fail will give you a good edge to avoid the mistakes so that your own business can succeed.

Causes of Business Failure in Nigeria

In this article, we will carefully examine 5 causes of business failure in Nigeria.

5 Causes of Business Failure in Nigeria

Below are 5 causes why a business fails in Nigeria, and how to avoid them.

1. Starting Big

This is one of the causes of business failure in Nigeria. It is okay to dream big, but it is definitely ideal to start small and grow your business.

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 burnout before the business even has a chance to grow.

Usually, every business starting out is supposed to try as much as possible to reduce excessive spendings, so they can grow their business. However, this seems not to be the case for most entrepreneurs in Nigeria, as we see them taken unnecessary loans and spending extravagantly.

Don’t get me wrong, I am not saying taking loans to invest in your new business is wrong. I am only saying it should only be when it is entirely needful, and not because you want to prove a point to anybody.
Hence, to avoid this mistake, only spend when it is completely unavoidable and minimize your spending as much as possible. Rather invest more in your business, and watch it grow.

2. Business and Sentiments

This is one major reason that has led to the untimely death of many businesses in Nigeria. I understand and encourage familiar loyalty, but not to the detriment of your business.

In Nigeria, you see people becoming over-sentimental and ethnocentric even in their businesses. For instance, there is a vacancy that needs to be filled up; instead of employing a more qualified candidate to handle that position, you carry a family member or someone from your village that is not even qualified for the position.

What exactly are you hoping will happen to that business when you make such moves?

Business is business, and family is family. Be cordial and loyal to your family, but when it is time for business, keep relationships aside, and let everyone do their job meticulously.

If you sell products, then when your friend or family member comes to buy, ensure they pay for the products. There is this popular saying that goes this way: “business thrive when family and friends pay for the things they buy.”

You yourself are not left out on this. If you are selling a product that you need, never take it at will and say to yourself “after all, I am the owner of it.” No, never do that. If you need a product you sell, ensure you pay for it like you would want every other person to do.

3. Poor Customer Relationship Management

A lot of entrepreneurs do not know how to treat their customers well. Or put it aptly, many entrepreneurs have staffs that are not thought how to treat their customers well.

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.

Customers should be treated with the 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

Improper management is one of the causes of business failure in Nigeria. Starting a business is not enough. You need to learn how to properly manage your business.

Every business owner should learn the art of management. Learn how to effectively manage but the human and material resources in your organization.


Learn to keep proper records of your goods and sales made on a daily, weekly, and monthly basis. Keeping proper records of sales made is very important in every business.

Keeping proper records of all resources that come in and leave the organization will help you measure costs and evaluate profits.

5. Same old, same old

Another cause of business failure in Nigeria is lack of innovation. There are certain markets in Nigeria that are already oversaturated.

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 oversaturated, 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 for 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 altogether.

That’s all guys on 5 causes of business failure in Nigeria. I hope this article helps you learn why businesses fail in Nigeria; what to do and what not to do for you your own business not to fail but succeed.

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