Authors: Adenike Adeyemi, Amaka Nwaokolo, Wilson Erumebor, Gospel Obele, Oyebola Agunloye, Godwin Henry
Affiliated organization: Fate Foundation Research
Type of publication: Report
Date of publication: November 10th, 2021
Entrepreneurs are the bedrock of the Nigerian economy. Data from the National Bureau of Statistics (NBS) show that Micro, Small and Medium Enterprises (MSMEs) account for 49.8% of Nigeria’s Gross Domestic Product (GDP) and constitute a significant share of the total number of businesses in Nigeria. In terms of labour force, they account for about 85% of total industrial employment and are spread across all the sectors of the economy. These businesses have been instrumental in providing creative solutions, innovative ideas and value creation in the sectors where they operate.
In addition to their high economic value, MSMEs have been drivers of social change in Nigeria. In the last few years, there have been witnessed several innovative solutions in key sectors such as education and healthcare. These solutions have leveraged technology to link consumers/clients to markets/ service providers, thereby breaking traditional barriers of infrastructure deficit, communication gaps and logistics bottlenecks.
Despite the important contribution of entrepreneurs, the business environment has not been fully supportive of their potential. Small business owners continue to grapple with numerous challenges which limit their productivity, expansion potential and employment capacity. Traditionally, limited access to capital, high interest rate, infrastructure deficit, inadequate power supply, policy and regulatory inconsistency top the list of challenges facing small businesses in Nigeria. More recently, insecurity has become a major barrier to the growth of small businesses in Nigeria. In addition, these businesses operate in a highly volatile, uncertain, complex, and ambiguous (VUCA) environment characterised by unpredictable policy changes.
Gender and Entrepreneurship
Contrary to the traditional perception of entrepreneurship, the gender gap among entrepreneurs has narrowed significantly in today’s entrepreneurial landscape. While men still dominate entrepreneurial activities, women are no longer sidelined. Our survey reveals that while most businesses are operated by men (57% of respondents), women make up as high as 43% of entrepreneurs in Nigeria. The relative gender gap in entrepreneurship, measured as the ratio of female to male entrepreneurs, is therefore placed at 0.75. This has far reaching implications for the economic benefits of inclusiveness in entrepreneurship. Among other benefits, increasing female participation in entrepreneurship will result in further improvement in job creation rates, in the level of innovation in the country, and in income levels.
In majority of the states considered in this survey, men are more likely to start a business than women; this is however not the case in few states such as Abia, Bauchi, Edo, Gombe, Kwara, Lagos and Oyo where there are more women entrepreneurs than men. The highest rate of female-led businesses was in Lagos, with 6% of total women-owned businesses in the country. This suggests that while there is a higher-than-expected participation rate of women in entrepreneurship, significant disparities still exist across states, with only few states having a high prevalence rates of female entrepreneurs.
Age and Entrepreneurship
Our results reveal that most entrepreneurs are youths; that is, between the age of 18-35. This age group accounts for 67% of entrepreneurs, reflecting the country’s skewed population structure towards this cohort. It however also reveals differences across old and young entrepreneurs. While young entrepreneurs are very energetic, with a high risk appetite, and are willing to leverage new technologies, older entrepreneurs usually have greater knowledge of the business landscape and wider networks. As such, it is expected that younger entrepreneurs would be more successful in launching early stage businesses.
Our results reveal that younger entrepreneurs are more likely to launch early-stage businesses (businesses within 1-5 years of existence) than older entrepreneurs. While older entrepreneurs have better experience of the markets and enjoy wider networks, they are constrained by several factors (which include the time and financial demands of catering for a family) which prevents them from focusing on growing their business or taking major risk (such as having to quit their regular jobs). Of the respondents that indicated they are working as fulltime entrepreneurs, 48% are youths compared to 28% who are 36 years and above.
Entrepreneurs and Years of Existence of Businesses
Most businesses run by entrepreneurs in Nigeria are less than 10 years old. 49% of businesses surveyed that are “young” are also led by young people.
Size of Business
Most entrepreneurs in Nigeria are micro scale operators, having between 0-9 employees. The interplay of several factors has constrained the operating environment of entrepreneurs, making it difficult for them to expand their businesses. Also, while micro, small and medium businesses are more likely to be owned by men, startups (that is, high growth young companies within 1- 5 years with an innovative/disruptive business model and/or effectively leveraging technology for scale) are more likely to be owned by women.
Business Incorporation type
Most small businesses are incorporated as a business name (75% of respondents) with the remaining 25% of respondents incorporated as either a private company limited by shares (19% of respondents), company limited by guarantees (3% of respondents) or public company limited by shares (3% of respondents). This result only corroborates previous findings that most entrepreneurs in Nigeria operate on a micro scale.
Entrepreneurs by Sector
Most of the entrepreneurs surveyed are engaged in the retail, fashion & FMCG (23% of respondents). Other leading activity sectors among entrepreneurs surveyed include agriculture, fishing & forestry, and hospitality and hotel.
Education, Training and Entrepreneurship
Most entrepreneurs (45% of respondents) have a Bachelor’s degree while 15% have a Higher National Diploma (HND). 16% have a secondary education. Majority of entrepreneurs surveyed have taken some form of training (87% of respondents) with business management as the most common form of training embarked upon by entrepreneurs (51% of respondents). Other forms of training among entrepreneurs include keeping financial records (14% of respondents), business expansion (8% of respondents) and managing talent (8% of respondents).
Indicators of entrepreneurship in Nigeria
Entrepreneurship is an integral aspect of an economy. In Nigeria, entrepreneurs are the drivers of innovation and continue to play key roles in the area of job creation in the economy. The global recognition of Nigerian start-ups, the significant growth of businesses in the technology space as well as the opportunities these businesses continue to create are clear evidences of the influence and potentials of entrepreneurs in Nigeria.
Most businesses run by entrepreneurs in Nigeria are less than 10 years old. 49% of businesses surveyed that are “young” are also led by young people
Following the growing importance of entrepreneurs in the economy, it is crucial for stakeholders to understand the dynamics of entrepreneurship, its different components and how each of these components can be measured to better understand the entrepreneurship space in Nigeria. This section examines the questions – What is the state of entrepreneurship in Nigeria? How are businesses thriving across different sub-areas? Which of these areas require improvement and what needs to be done?
The performance of female-led businesses
In the past one year, Nigeria witnessed several events which had major impact on the performance of businesses. From COVID-19 to the EndSARS protests, among other events, entrepreneurs in Nigeria have been through difficult times dealing with both internal and external hurdles. Amidst these challenges, COVID-19 remains paramount and many businesses are yet to fully recover from its impact. In this section, we explore how female-led businesses have fared since the height of the pandemic, the factors driving recovery, trends in employee and revenue growth as well as support structures available to businesses.
How women-led businesses in Nigeria have fared since COVID-19
19.5% of female entrepreneurs in Nigeria reported that the COVID-19 pandemic impacted their businesses positively (20.3% for male). For these businesses, majority noted that the positive impact was due to the nature of products/services they render and technology (66.7% and 63.5% of respondents respectively). This is particularly the case for firms in the agriculture, health, telecommunications and ICT sectors. These firms reported higher sales/revenue due to an increase in demand for their products/services.
When we delved deeper into the impact of technology on businesses, we find some interesting pattern. 70% of businesses that adopt technology say that their businesses have been on the path of recovery since the COVID-19 lockdown. For those that do not adopt technology, a lower share of 50% reported their businesses have been on the path of recovery. In terms of employment, there is also a striking difference between businesses that adopt technology and those that do not. 40% of businesses that adopt technology reported an increase in the number of employees since the lockdown, while only 19% of those that do not adopt technology increased the number of employees. Although we have not established a direct causal impact between technology and business growth/ recovery, the above analysis shows some interesting linkages that could further be explored in future studies.
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