Top 10 causes of small businesses failure in Nigeria

causes of small businesses failure

Are you afraid of starting your own business? Maybe this fear is due to the fact that a high percentage of small businesses failure in Nigeria. Experts in finance say about 80 percent of small businesses fail in their first five years of existence in Nigeria. In this post, we will be taking a look at the top 10 causes of small businesses failure in Nigeria.

Why do small businesses fail in Nigeria

As we mention in the introduction, we will be going over the top 10 causes of small businesses failure in Nigeria. Let’s get started with having the wrong reason for starting the business at the first place.

1. Starting for the wrong reason

The number cause of small businesses failure in Nigeria is because of the owners are starting for the wrong reason. Everybody wants to be his/her own boss without understanding what it takes.

Getting into business is not for everybody if we must be honest with ourselves.

Here are the common reasons they do mention for starting their own business or getting into business:

  • Being their own boss
  • Make quick money
  • Escape from working under a though boss.
why people give up

Here is what you need to know, start your own small business is not a small journey. It requires hard work, consistency may be more than the one required by your boss currently, so dedication is needed. Don’t think becoming your own boss means doing less work.

It is true that most people we see succeed with their businesses seem to be enjoying but it wasn’t like that for them at the beginning. It takes time. If you are expecting to make quick cash overnight, you may be disappointed.

2. Wrong product/service

The second cause of small businesses in Nigeria is picking the wrong product or service.

You need to understand that if you want to start a business, you are actually saying “I want to solve a problem”. I want to fill a gap. Failure to understand this is another reason why small businesses fail in Nigeria.

You need to study the market and see for yourself if people are looking for a product or service that is not in the market. Once you identify the product or service, you need to make sure you understand it and it is something you can go into.

Never go into a business you don’t understand.

Note: Talking about a market study before starting your business, you don’t have to think of a new product or service. If you observe that the demand for a particular product exceeds the supply, you can go into it as well.

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3. Wrong business location

If you have been reading our posts on How to start a particular business, you will notice we often talk about the choice of a good and strategic location.

keep in mind, people are the ones to buy your products or services. Ask yourself to know if people at your intended location are in need of them?

For example, if you intend to start a digital marketing business, your customers will obviously be business owners. That being said, you need to find out have many businesses you have in the location.

That is the third cause of small businesses failure in Nigeria. Now let’s move to the next one.

4. Lack of funding capital

Another reason that causes small businesses failure in Nigeria is the lack of capital. What does that mean?

Well, first of all, understand that it doesn’t mean they don’t have the capital that will be used to start the business. After all, they were prepared, they knew how much the rent is going to cost, their employees’ salary for the first few months, utility bills, etc …

However, the owners of small businesses in Nigeria are less in tune with how much revenue is generated by sales of products or services.

In another word, for a business to be sustained for a long time, it needs constant cash flow and how is the cash flow generated? Through sales. So, as a small business owner, if you don’t understand how much revenue is generated by sales, definitively you will be in trouble in a short period of time.

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5. Poor management

As you may know, most small businesses in Nigeria or Africa, in general, have one and only manager who is the owner. Of course for one person to oversee multiple aspects of his/her business, the task can be overwhelming.

So what ends up happening is that the owners start having less control in some aspect of the business. For example, he might be busy attending some of his employees’ issues or hiring new ones and end up neglecting to attend to his customers’ issues.

In the absence of a great management team, small businesses owners have greater potential to mismanage some aspects of their businesses.

Another common problem in poor management with Nigerian small business owners is the fact that they do involve their family members in their business at the early stage. Although they can be good but be watchful and be observant. So there we go, that is the fifth reason why businesses fail in Nigeria.

6. Inability to adapt With Trend and Changing Technology

This is another big issue faced by small businesses in Nigeria. Most small businesses find it difficult to adapt to what is trending in their sector.

Things constantly change in this world, so learn to adapt. For example, we are used to advertising on radio, newspaper, Tv, etc … Today, it is more of a social media marketing. Are you following the trend?

talking of marketing, let’s consider another common issue faced by small businesses that are related to promoting their business.

7. Lack of marketing

How can your business survive without being promoted? To help you understand this section, let us illustrate with an example. Imagine you have a business, 10 people love your products or services. How many people out there do you think are likely to like your services too?

Obviously so many are out there, so how do you reach out to them? By promoting your business. By so doing, your business will grow and you will constantly have cash flow that will sustain the business.

8. Competition

Like it or not, we are living in a competitive world, so get ready, prepare ahead of time. There is no point in being afraid of competition. It most comes if it is not already there.

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Here are some of the things you can do to face the competition.

  • Creativity
  • Adaptation to the new trend
  • Innovation

That is the eighth cause of small businesses failure in Nigeria.

9. Bad debt

Some businesses failed because of debt, meaning selling their product at credit in the name of “if we don’t sell at credit, nobody is going to patronize us“. Well, it is all about how to qualify your clients. Remember not all customers are your real clients.

Some are there to ruin your business. You need constant cash flow to keep your business alive otherwise, you will be out of business.

Takeaway: Sell your products and services to people that are ready to buy.

10. Internal Fraudulent Activities

This issue is somehow related to bad management. Because of the lack of control over some aspects of your business, some bad employees may take advantage of that.

They may seal some significant amount of money from you which might put you out of the market or in a bad debt hard to come out.

How to fix the problem

make money online

If a doctor is able to diagnose a client of what is wrong with him or her, it is easier for him to prescribe drugs that will treat the illness. The same goes with small businesses. We have identified the top 10 causes of small businesses in Nigeria.

Now that we know the causes, it is left for us to flip the coin. If your business is not in the right place, you better get another place before it gets too late.

If there is any poor management going on right now in your business, please fix it. Are you the type that like involving your family members in your business?


To wrap up this topic, remember, start a business is not get rich quick scheme. It requires effort, consistency, and dedication. So start for a good reason and avoid the above-listed mistakes. We wish you happy hustling. If you wish to start any business, check the following business ideas that we have written about or check youtube for others that we are yet to talk about.

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About the Author: Aime

My name is Aime. I am an online entrepreneur, a professional web designer/developer, digital marketer. I love anything tech and business. If I am to choose one, I will go for tech because it is in the blood.

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