Ayanda and Laraba
Ayanda and Laraba (2011) described small businesses as one of the major factors that functionalize market economies. MSMEs are generally believed to be the most appropriate scale of business for developing economies like Nigeria as it is one of the major means families in Nigeria use to make ends meet.
Micro, small and medium enterprises are one of the major contributors to the improvement of the socio-economic aspect of any country especially developing countries like Nigeria. Nonetheless, running MSMEs in Nigeria is one of the most difficult and frustrating thing to do due to the harsh and sometimes unfavorable economic environment. It is due to this unfavorable condition that makes MSMEs crash within the first few years of incorporation or operation.
MSMEs have been major contributor to the overall GDP of Nigeria and all round economic growth, it also has contributed to the government’s objectives of creating employment, training prospective entrepreneurs and also generating income/ source of livelihood to most Nigerian families. However, the major challenges of these MSMEs is the lack or inadequacy of funds as other problems or challenges can be solved if there is enough funds available to them.
The challenges faced by MSMEs in Nigeria are numerous and these problems are either as a result of poor management by the owner of the business or failure of government to provide these small businesses favorable environments to compete.
According to Aiyedun (2004) government is expected to provide adequate enabling environment for the private sector to invest and operate in a free market system. Once policy decisions have been made by government, they should be implemented. No matter how well intentioned and well-articulated such policies on small business enterprises may be, they cannot be successfully implemented without effective administrative
Some of the problems faced by MSMEs may include;
In any business endeavor or undertaking, finance is a major factor and it will determine if the idea is going to be made physical or not. A business idea without funding is just “wishful thinking”. After getting capital to start the business, funds are still needed to ensure the running of the business until it can fully sustain itself which could be in a short or long time depending on the business type.
As summarized by Stevenson and Lundström (2001) gaining access to finance MSMEs is one of the oldest policy issues. When starting a business whether small, medium or large, it requires enough/adequate capital or finance to thrive and compete effectively. Getting adequate finance to start either a micro, medium or small business enterprise in Nigeria could be identified as one of the major, if not the biggest constraint facing them.
Most small businessmen or women must save before they can invest, or rely on their extended/ immediate family or friends to provide financial support. There are few commercial banks willing to provide credit facilities for small businesses but they often impose unattractive terms of repayment and interest rates.
The Lack of easy access to funding/credits facilities, which can be traced from the unwillingness of banks and other relevant financial institutions to extend credit to MSMEs, to poor business proposals and plans, lack of adequate collateral, high cost of administration and management of small loans as well as high interest rates.
The federal Government through some of its policies and agents have tried help address this issue. Some of the policies include various grants by Federal Government, low interest loan from Bank of Industry and Bank of Agriculture, Central Bank of Nigeria MSMEs Initiatives through the commercial and corporative banks.
Another problem of MSMEs in Nigeria is the poor legislature put in place by the government. First, the mere existence of some regulations is a burden to these small enterprises. Second, the cost that these MSMEs will use to comply with such regulations could be high at times and most of the small businesses neither possess the necessary technical know-how nor legal expertise.
HIGH COST OF DOING BUSINESS:
For a business to thrive and succeed, the factors that affects it must be favorable. But reverse is the case in Nigeria as most of the infrastructural factors that are supposed to help an MSME grow are not in place thereby reducing the chances of the business’s success.
One of the major challenges faced by micro, small and medium scale enterprise in Nigeria is the high cost of running their business operations. Some of these problems can be attributed to the poor state of infrastructure in the country. In Nigeria, poor infrastructure is a major factor in the country. We find out that most of our local investors have eloped the country due to the poor infrastructure in place. Example of these are physical infrastructures like roads, power supply, communication systems etc. All these infrastructures are major determinants in the success or failure of an MSMEs and since some of the businesses cannot produce these infrastructures for themselves, they are dependent on government to put them in place.
The poor state of infrastructure in the country has been a major obstacle to the growth of MSMEs. Only few entrepreneurs can survive without power. The irregular power supply has contributed very much to the high cost of doing businesses in the country due to business owners using funds that should be used to improve the business to provide electricity and other minor infrastructures for the business.
MSMEs also face other challenges which are not financial, they may include
• Poor managerial skill
• Inadequate man power
• Unfair competition arising from import tariffs, which at times favor imported finished products over locally produced goods
• Low demand for goods or service
• Lack of access to appropriate technology as well as absence of research and development to improve the business.
• Unfair trade practices that is, dumping and importation of substandard goods by fraudulent businessmen.