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Sunday, March 28, 2021

ENTREPRENEURIAL DEVELOPMENT: KEY TO NIGERIA’S ECONOMIC GROWTH AND DEVELOPMENT

Written by: UKEJE, Chukwudike Chukwunenye
This essay is one of the winning essays at the 2020 Bible society of Nigeria - NYSC annual essay competition. While I was writing my essay last year, I read a previous winning entry on your website. Having participated and won, I deemed it worthwhile to send in my winning entry for publication (on rexchimex.com) for others to benefit as well.  -  Ukeje.CC.
Delta State Polytechnic, Ozoro
Email of Corresponding Author: ukejechukwudike5@gmail.com
Phone: +2348163662098


ABSTRACT
Over the years, policymakers and researchers have tried to explore the relationship between entrepreneurial development and economic growth. A lot of studies have shown a positive relationship between entrepreneurial development and economic development vis-à-vis poverty alleviation, employment generation, and wealth creation. With the recent coronavirus pandemic popularly known as COVID-19, many countries are shifting focus to policies that encourage entrepreneurship development as a strategy to ameliorate the economic impact of the COVID-19 pandemic. In Nigeria, several policies and programs aimed towards entrepreneurial development have been implemented in time past, however, most of these programs and policies failed to achieve their major formulation goals. Drawing from empirical and theoretical literatures, and with the use of biblical references, this paper tries to examine the state of entrepreneurial development in Nigeria. The paper contends that more efforts need to be geared towards entrepreneurial development in the country. It identified some of the major factors that constrain entrepreneurial development in Nigeria, as well as highlighting creative solutions and smart financing proposals through which entrepreneurial development can be achieved, as this will help ensure sustainable economic growth and development in Nigeria within the post-COVID future. 
Keywords: Entrepreneurial development, Economic growth, Economic development, COVID-19, Nigeria.

1.      INTRODUCTION

All over the world, the concept of entrepreneurship is seen as a veritable tool that can be leveraged on to facilitate economic growth and development across economies. In recent times, entrepreneurship as a field of study and as a human endeavour has attracted a lot of interest from researchers and policymakers across the globe. Entrepreneurship development, having a direct linkage to economic development, is considered an effective means to facilitate rapid economic growth in both developed and developing economies (Schumpeter, 1934; Harper, 1991).

 

Owing to increasing interest among researchers in the field of entrepreneurship, a lot of definition and concept has evolved over the years in defining the term “entrepreneurship”. While Schumpeter (1934) sees entrepreneurship from the point of value creation and considers an entrepreneur as a risk-taking innovator who facilitates economic development through the process of creative destruction that renders old ideas obsolete while replacing them with new ones, Hamza (2013) considers entrepreneurship as an act or process of starting a business haven identified business opportunities, organization of resources, and management

 

Presently, there is a dire need for entrepreneurship development in Nigeria more than ever before. This is necessitated by the huge unemployment rate in the country and its concomitant effect on the people and economy of the nation.  According to the United Nations World Population Prospect (2019), Nigeria’s population was estimated at over 200 million. Prior to the outbreak of the Coronavirus pandemic, the National Bureau of Statistics (NBS) 2019 report placed the unemployment rate in Nigeria at 23.1 percent.  With the unprecedented impact of the COVID-19 pandemic on the Nigerian economy, which affected most businesses and triggered a lot of workers layoffs in many sectors, there is no single doubt that the unemployment rate in the country has further increased.

 

As duly noted in the bible in the book of Ecclesiastes 10:18, which says “by much slothfulness the building decayeth; and through idleness of the hands the house droppeth through”. In relation to this verse, the unemployment rate in Nigeria, if left unabated, will gradually degenerate to adverse socio-economic havoc. Since entrepreneurship development can initiate economic growth while adequately combating unemployment and its adverse effects, it becomes critically important to examine some of the governmental efforts geared towards entrepreneurship development in Nigeria so as to identify loopholes militating against entrepreneurial development, and subsequently highlight solutions and financing strategies for achieving effective entrepreneurial development in the country.


2.      ENTREPRENEURIAL DEVELOPMENT IN NIGERIA: PAST AND PRESENT

Over the years, Nigeria has experienced a serious unemployment crisis. The unemployment crisis in the country has resulted in high prevalence rate of crimes which includes but not limited to insurgences, militancy, arm robbery, drug abuse, and mass murder. The Nigerian government is not oblivion to the negative offshoots of unemployment in the country. Thus, to abate unemployment, the government, over the years, has put in place policies and programs aimed at entrepreneurship development in order to create employment opportunities and economic growth while alleviating poverty. Some of the major entrepreneurship development programs initiated by the government from past to present are examined below:

i. Small and Medium Industry Equity Investment Scheme (SMIEIS): 

Established in December 1999, by the bankers' committee to enhance the promotion of small and medium enterprise; the Small and Medium Equity Investment Scheme (SMIEIS) mandates all commercial bank in Nigeria to set aside 10% of their profit after tax for investment in small and medium enterprises (Central bank of Nigeria, 2003). However, as duly noted by Idam (2014), the SMIEIS failed to achieve its major formulation goals owing to lack of national spread in utilization, as Lagos state took about 42% of the monetary amount set aside for the scheme while a majority of other states of the federation had little or nil investment.

ii. Small and Medium Enterprise Development Agency of Nigeria (SMEDAN): 

Established in 2003 by the small and medium enterprises development agency act of 2003. SMEDAN was established to stimulate, monitor, and coordinate the development of small and medium enterprises in Nigeria by articulating and formulating policies and programs to facilitate the development of small and medium scale industries. Nonetheless, Idam (2014) argues that SMEDAN has not impacted the entrepreneurship landscape in Nigeria significantly owing to low awareness. 

iii. NYSC Skill Acquisition and Entrepreneurship Development (NYSC-SEAD): 

The Nigerian Youth Service Corp Skill Acquisition and Entrepreneurship Development (NYSC-SEAD) program was established in 2012 to coordinate efforts towards empowering corps members in the country to become budding entrepreneurs after their service year. The program was introduced to train youth corps members in various entrepreneurship and vocational skills in response to the growing unemployment concern in the country. Although there have been some success stories from the NYSC-SEAD program, however, one of the major setbacks to the program is the fact that only a few estimable corps members take serious interests in the program (Ogbaga, 2018).

iv. Youth Enterprise with Innovation in Nigeria (YouWIN): 

YouWIN was one of the initiatives of the past government aimed at encouraging entrepreneurial development in the country. The program entails an innovative business plan competition aimed at job creation by encouraging and supporting young entrepreneurs to come up with and execute innovative business ideas. The YouWIN entrepreneurship development program circumspectly identified grassroots entrepreneurs, but the program eventually became a victim of inconsistent government policies as it was discontinued after the inauguration of the present government.

v. TraderMoni: TraderMoni is one of the present entrepreneurship development efforts made by the current government to facilitate easy credit access to entrepreneurs. The program which is part of the Government Enterprise and Empowerment Program (GEEP) scheme, was created specifically to provide interest-free loans to petty traders and artisans across the country. TraderMoni, no doubt, has aided in driving economic benefit for small scale traders across the country, nevertheless, the sustainability of the program is in doubt as it may soon become obsolete with the election of a new government.


3.      CONSTRAINTS TO ENTREPRENEURIAL DEVELOPMENT IN NIGERIA

From the entrepreneurial development programs examined above, it is lucid that the Nigerian government through the years have made some efforts towards promoting entrepreneurship development through the initiation of these various programs. However, most of these programs as elaborated had inherent loopholes which consequently hampered their potentials in solving the targeted problems. Furthermore, these entrepreneurial development programs and policies do not necessarily tackle all the fundamental problems and challenges hindering entrepreneurship development in the country, hence, it becomes imperative at this juncture to identify some of the major factors militating against entrepreneurial development in Nigeria.

3.1.     Lack of Financial Capital

Lack of financial capital to start up a business idea or to expand an already existing business is one of the fundamental constraints to entrepreneurship development in Nigeria. Anyadika et al. (2012) identified undercapitalization as one of the major challenges faced by entrepreneurs in Nigeria. Most young people in Nigeria with viable business ideas find it difficult to secure loans because of collateral involvement and the bureaucratic process involved in securing loans from commercial banks in Nigeria. Even when they are able to secure the loans, paying back the loaned amount becomes a problem owing to the ‘throat-cutting’ interest rates charged by commercial banks in the country.   

3.2.     Poor Managerial Skill

The holy Bible succinctly noted in the book of Hosea 4: 6 that “my people perish due to lack of knowledge…” In the same vein, most entrepreneurial ventures in Nigeria today fail because of inadequate knowledge on how to run a business on the side of the entrepreneur. Poor managerial, leadership, organizing, planning, and execution skills are some of the major hindrances to most business growth in Nigeria, which consequently result in poor economic outcomes for such businesses.

3.3.     Hostile Business Environment

Hostile business environments is another factor that deters people from pursuing entrepreneurial ventures in certain location across the country. An unfriendly business environment hinders both entrepreneurial and economic development. For example, since the Boko-Haram insurgence in north-eastern Nigeria, a lot of entrepreneurs have lost their businesses and source of livelihood, while investors barely consider investing in businesses within the region. More so, the high cost of doing business in Nigeria occasioned by multiple taxations, high incorporation cost, business permit cost, legal and professional fees, all add up to create a heavy financial burden on small scale businesses, which more often than not, hamper the survival of such emerging small businesses.

3.4.     Bribery and Corruption

The high rate of corruption in Nigeria poses a serious threat to small and medium scale industry development. Most of the public funds allocated to facilitate the development of small and medium scale entrepreneurial ventures in the country end up being diverted to private pockets (Ojo and Oluwatayo, 2015). Transparency International 2019 Corruption Perception Index (CPI) placed Nigeria 140th out of 180 surveyed countries. This shows that corruption is getting worst in Nigeria. Consequently, this increase in corruption affects businesses in the country from all ramifications. Since there is a greater tendency of public servants collecting bribes while involving nepotism and favoritism in the discharge of their duties, it becomes increasingly difficult for businesses to scale through without rubbing some palms with money. Just like the word of God rightly said in the book of Proverbs 29:4 “A just king gives stability to his nation, but one who demands bribes destroys it”, in the same way, bribery and corruption destroys efforts geared towards entrepreneurial development in Nigeria.

3.5.     Poor Infrastructural development

The Nigerian business environment is highly characterized by poor infrastructural development. The infrastructural deficit in terms of epileptic power supply, bad roads, poor internet infrastructure, among others all contribute to hamper entrepreneurial pursuit in the country. For example, many vehicle owners who would have loved to sign up as partnering drivers with emerging ride-hailing platforms such as Uber and Taxify were not able to do so due to the deplorable state of roads across the country.  Furthermore, the epileptic power supply in Nigeria, further increase the cost of doing business in the country. Ojo and Oluwatatayo (2015) pointed out that private entities in Nigeria spend an estimated $8 billion importing generators annually. The poor state of infrastructure in Nigeria makes the cost of running a business too high and unaffordable, especially for small business startups  

3.6.     Inconsistent Governmental Policies 

Lack of continuity in governmental policies especially with changes in government does not tell well on entrepreneurship development in the country. Inconsistent governmental policy is the reason why entrepreneurial development programs such as YouWIN was discontinued. In the bible, the Israelites were able to get to the promised land as a result of continuity; as Moses had to hand over the baton to Joshua to continue from where he stopped. In a similar instance, the gospel of the Lord Jesus Christ was spread from the old-time generation to the present time owing to continuity. Old-time Apostles such as Peter and Paul were able to carry on the gospel to subsequent generation without deviation. However, the lack of continuation by subsequent governments is the ban of most entrepreneurship development programs established in Nigeria.  


4.      BRIDGING THE GAP – SOLUTIONS TO ENTREPRENEURIAL DEVELOPMENT 

As we have seen, from the evaluation above, we were able to identify some of the major challenges facing entrepreneurial development in Nigeria. As the economic landscape across the world continues to evolve owing to the impact of the coronavirus outbreak, the Nigerian government needs to build frameworks that will adequately encourage entrepreneurial development as a strategy to mitigate the impact of the COVID-19 outbreak on the Nigerian economy. Effective entrepreneurial development policies will no doubt lead to sustainable national growth since entrepreneurial development is a key driver of sustainable and inclusive economic growth and development. Some of the means through which entrepreneurial development can be enhanced in the country are discussed hereinafter.

4.1.     Enhanced University Education

One of the major causes of poor entrepreneurial outcomes in Nigeria is the poor quality of education obtained in most universities in the country. Samuel and Bassey (2012) identified this to be the primary cause of the dearth of skill among university graduates. Many courses in our universities are overly theoretical-based and do not impact deployable skills that can enable graduates to startup entrepreneurship ventures on their own after graduation. As the entrepreneurship landscape continues to change, stakeholders in the universities across the country must put hands on deck to ensure that university graduates are equipped with the necessary skills that will enable them to become self-reliant while creating employment opportunities. As Proverb 24: 4 succinctly puts it, “… by knowledge shall the chambers be filled with all precious and pleasant riches”.  Thus, universities in the country will need to revisit their curriculum to ensure that they are inculcating knowledge with deployable skills that are in tandem with the jobs of the 21st century.

4.2.     Investment in Human Capital Development

Another strategy by which entrepreneurship development can be improved in Nigeria is through investment in human capital development. An all-rounded investment in human capital through capacity building in education and training will certainly help young people around the country to develop the necessary skills needed to manage their businesses. Last year, Nigerian ranked 152 out of 157 countries in the World Bank Group Human Capital Index (HCI). The HCI which measures the human capital a child born today can expect to attain by the age of 18, given the risk of poor health and education in a country where he or she lives (World Development Report, 2019), shows that a lot still needs to be done to build human capital in Nigeria. Just like the holy bible admonished us in the book of Proverbs 22:6 to “train up a child in the way he should go: and when he is old, he will not depart from it”, similarly, the Nigerian government needs to invest heavily in earlier childhood education and health, as this will help young people develop necessary skills that will enable them to build and manage entrepreneurial ventures in the future effectively.

4.3.     Protection of Intellectual Property Rights

 One of the most effective ways to enhance entrepreneurship development while supporting entrepreneurs is through adequate protection of intellectual property. Intellectual property rights protection promotes creativity and innovation, which consequently generates jobs while improving economic growth. Nigeria needs to provide legal and institutional instruments that will ensure the efficient enforcement of intellectual property rights protection in the country. Through impeding product counterfeiting and piracy, efficient intellectual property rights protection will certainly encourage people in Nigeria to venture into entrepreneurship since they are assured that strong legal instruments exist to protect their patents and designs.

4.4.     Support and Investment for Technology Hub Centers

It is imperative to note that technology is gradually changing the entrepreneurship eco-system across the globe. Amidst the COVID-19 pandemic, most businesses that leveraged on technology were able to survive as a result of working remotely via technology-enabled platforms. As the future unfolds, entrepreneurs in Nigeria and around the world must be technology smart to flow with the current trend of things. The emergence of technology hub centers where people can learn vital technology skills is going to help prepare entrepreneurs in Nigeria for technology-related businesses in the future. However, for this to be effective, the government will need to build more technology hub centers as well as provide support for existing ones.

4.5.     Improving the Ease of Doing Business

 As noted earlier, hostile and unfriendly business environments contribute to impeding entrepreneurial development in Nigeria. Thus, the Nigerian government has a significant role to play in simplifying the ease of doing business in the country. One of the major roles is to make proper and clear-cut policies that are targeted towards boosting entrepreneurial development. For instance, implementing a tax waive policy for new businesses in their first few years of existence will enable business startups to overcome certain financial challenges.  Commendably, the ease of doing business in Nigeria is getting better as the country moved up 15 places to rank 131out of 190 countries in the latest World Bank Doing Business Index (2020).  However, more work needs to be done to reach the federal government’s Economic Recovery and Growth Plan (ERGP 2017 – 2020) target of getting Nigeria ranked among the top 70 in the World Bank Doing Business Index by 2023.

 

5.      FINANCING ENTREPRENEURSHIP DEVELOPMENT IN NIGERIA

Financing entrepreneurship development in order to trigger economic growth and development is obviously not an easy task. Upgrading our institutions of learning to international standards, investment in technology hub centers, and adequate investment in human capital development clearly requires a lot of funding. With the COVID-19 pandemic that grounded economic activities while crashing the price of crude oil which accounts for more than 80% of Nigeria’s foreign revenue, it becomes more difficult for the government to generate resources to drive entrepreneurship development in the country. Nonetheless, the advent of digital businesses and emerging startup firms provides an opportunity for the government to generate an alternative source of revenue to finance entrepreneurship development.  

5.1.     Taxing digital businesses

 As a result of technology advances, many businesses today are able to operate on digital platforms without a physical space. This development is increasingly making traditional taxation policies that rely on Permanent Establishments (PE) to assign tax jurisdiction obsolete (Morinobu, 2018). The COVID-19 outbreak has further exposed some of the weaknesses of permanent establishment. The future reality is that a lot of businesses are soon going to go digital.  Hence, to raise finance for development, it is needful for the government to lay down strategies for taxing digital businesses. A successful attempt at taxing platform-based businesses will no doubt provide the needed revenue for financing entrepreneurship development programs in Nigeria.

5.2.      Emerging Firms  and Private Equities

Another means through which the government can indirectly finance entrepreneurial development is by providing an enabling environment for private equities. As the business landscape continues to evolve, new firms are beginning to emerge from different sectors by leveraging on the opportunities provided by technology. Without a doubt, these emerging startup firms will help drive economic growth and development through employment creation.  However, it is important to recognize that emerging startups are able to succeed because of an element of funding in the startup ecosystem. This funding, most of the time, is provided by private equities and venture capitals. In 2019 alone, Nigerian ventures secured about $663.24 million in private equity and venture capital investments (Olawabunmi, 2020). Therefore, a public-private partnership between the government and private equities will set the path right for driving entrepreneurial development through sustained investment in emerging startup firms.

6.      CONCLUSION

Entrepreneurial development is no doubt a key driver of economic growth and development. The challenges to the economic growth of Nigeria today - unemployment and unequal distribution of wealth - could be overcome by strongly investing in entrepreneurial development agendas. Efficient entrepreneurial development policies have the capability to propel infrastructural development; reduce unemployment and poverty; as well as improving the living standard of Nigerians.  As the post-COVID future unfolds, it becomes critically important for the Nigerian government to focus on entrepreneurial development as a strategy to ameliorate the economic impact of COVID-19.  The World Economic Forum (WEF) duly noted that “rapidly growing entrepreneurial enterprises are seen as important sources of innovation, productivity growth, and employment, as small and medium scale enterprises account for 97% of all jobs in emerging economies." Refocusing our gaze on entrepreneurial development could be our chance to rewrite our story from the world’s poverty capital to an economically prosperous nation. The word of God in the book of Deuteronomy 28:12 has promised to bless the work of our hands, it now depends on us to put all hands on deck towards entrepreneurial development to make these promises come to pass. 

REFERENCES

Anyadike, N., Emeh I.E.J., and O.F. Ukah (2012). Entrepreneurship Development and Employment Generation in Nigeria: Problems and Prospects. Universal Journal of Education and General Studies, 14(1):1-15.

Central Bank of Nigeria (2003). The small and medium industries equity investment scheme. Central Bank of Nigeria Brief Serial No. 2002-3/09, 65-69, CBN, Abuja, Nigeria.

Harper, M. (1991). The role of enterprise in poor countries. Entrepreneurship, Theory and Practice, 15(4), 7-11.

Hamza, A.A (2013): Entrepreneurship Development; a publication of the National Open University of Nigeria, Pp. 16-33.

Holy Bible, King James version

Idam, L.W (2014). Entrepreneurship development in Nigeria: A Review. IOSR Journal of business and management. Vol 16, Issue 1.

Morinobu, S. (July 18, 2018). Strategies for Taxing the Digital EconomyResearchThe Tokyo Foundation for Policy Research. Retrieved September 20, 2019, from The Tokyo Foundation for Policy Research website: https://www.tkfd.or.jp/en/research/detail.php?id=24

National Bureau of Statistics (2019). Unemployment/Underemployment Report Q2 2019. Retrieved June 25, 2020, from www.nigerianstat.gov.ng

Ogbaga, S.T (2018). "Empowered Youth - Drivers of Nigeria's Socio-economic Growth and Development". Unpublished essay

Ojo, A & Oluwatayo, I.(2015). Entrepreneurship as Drivers of Growth, Wealth Creation, and Sustainable Development in Nigeria. The Scientific Journal for Theory and Practice of Socio-economic Development . 4(8): 325-332

Oluwabunmi, B. (January 4, 2020). With $663.2m, Nigeria again tops startup investments in Africa. Retrieved 26 June 2020 from https://www.businessday.ng/entrepreneur/article/with-633-2m-nigeria-again-tops-startup-invetsmnt-in-africa/amp/

Samuel, A., & Bassey, I. (2012). Graduate Turnout and Graduate Employment in Nigeria. International Journal of Humanities and Social Science, 2(14), 9.

Schumpeter, J. A. (1934). The theory of economic development. Cambridge, MA: Harvard University Press

Transparency International (2019). Corruption Perception Index 2019.

United Nations (2020). World Population Prospect: The 2019 Revision. Retrieved June 25, 2020, from www.worldometers.info/world-population/nigeria-population

World Bank (2019). The Changing Nature of Work: World Development Report 2019. Retrieved from http://documents.worldbank.org/curated/en/816281518818814423/pdf/2019-WDR-Report.pdf

World Bank (2019). Ease of Doing Business Index. Retrieved June 26, 2020, from https://home.kpmg/ng/en/home/insights/2019/10/nigeria-rank-131-in-world-bank-s-2020-doing-bussiness-report.html

  ENDNOTES

[i] World Economic Forum (2020). Executive Summary. Retrieved June 27, 2020, from https://reports.weforum.org/new-models-for-entrepreneurship/executive-summary/




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