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Nigeria is renowned for its vast population of Micro, Small, and Medium Enterprises (MSMEs) and a thriving entrepreneurial ecosystem, with approximately 1.16 new enterprises emerging per 1,000 people in 2022. However, despite this impressive statistic, many of these businesses struggle to scale beyond a certain point.

According to experts, only a small percentage of these enterprises manage to reach a national or international level, despite some achieving local success. So, what’s holding them back? In this article, we’ll explore the reasons behind this phenomenon and provide key strategies for achieving sustainable business expansion in Nigeria.

Access to Funding

Starting a business in Nigeria may not require significant capital, with many entrepreneurs relying on small loans or personal savings. However, scaling a business is a different story, requiring substantial funding that often surpasses the capabilities of small loans or personal savings.

“The high interest rates and collateral restrictions imposed by traditional banks can make it challenging to secure the necessary capital for growth,” says an industry expert. “Venture capital is an alternative, but it’s still relatively limited outside of the technology sector.

To overcome this hurdle, business owners can explore alternative funding sources, such as business incubators, angel investors, and grants. “It’s essential for businesses to demonstrate high growth potential and pitch their ideas aggressively to secure funding,” advises the expert.

Business Structures and Governance

Many small businesses in Nigeria operate informally, lacking official business plans, corporate structures, governance frameworks, and succession plans. This informal approach can lead to impulsive decision-making, making it difficult to convince investors and secure funding.

“Running a business informally can limit its ability to grow, as investors often look for strong proof of growth prospects, legal compliance, transparency, and organized financial records,” warns the expert.

To address this issue, businesses must prioritize formal registration and compliance with financial requirements. “Registering with the Corporate Affairs Commission (CAC) provides legal legitimacy and opens up financial and contractual opportunities,” advises the expert.

Highly Competitive and Saturated Market

Nigeria’s business landscape is highly competitive, particularly in the services, fashion, retail, and food sectors. Many entrepreneurs enter the market without a defined differentiation strategy, relying solely on demand to drive success.

“Without a unique selling point, businesses struggle to attract and retain customers, leading to price wars and unsustainable growth,” says the expert. “Scaling relies heavily on innovation, and businesses that create distinctive value propositions gain a competitive advantage.”

To stand out in a crowded market, businesses must invest in quality branding and marketing, leveraging data analytics to understand customer preferences and forecast market trends.

Business Education

Many Nigerian business owners lack sufficient knowledge of financial management, strategy formulation, and marketing. “Hard work and passion are essential, but they’re not enough to sustain and grow a business,” says the expert.

To overcome this challenge, entrepreneurs must participate in business accelerator programs, leadership training, and financial literacy courses. “Seeking guidance from industry leaders who have successfully scaled businesses can provide valuable insights and strategic recommendations,” advises the expert.

In conclusion, scaling a business in Nigeria is challenging, but not impossible. By addressing the issues of access to funding, business structures and governance, highly competitive and saturated markets, and business education, entrepreneurs can overcome the obstacles and achieve sustainable growth. As the expert notes, “The future belongs to those who are willing to innovate, adapt, and seek growth beyond local markets.

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