Why Business Fail In Nigeria

Why Business Fail In Nigeria – Business Failure

One of the most common occurrences in business today is the failure that happens, and the fact remains that all over the world businesses are failing on a regular basis. Business failure is not restricted to just any location, even in the United States of America, we have seen world renowned firms like WORLDCOM, EMRON, PARMALAT etc failed, their location didn’t exempt them from failing as a business, this is not to say that it is an excuse to fail, but that failure can occur as a result of a lot of factors.

In Nigeria, we have so many big and small businesses run by young as well as old entrepreneurs fail every other time. According to statistics, 80% businesses both the small, medium and large that are registered at the Nigerian Corporate Affairs Commission fail and die in their first five years. Failure encompasses both Public Sector agencies such as Nigerian Airways, Nigerian Railways, Nitel etc, in the private sector we had Concord Newspaper, Concord Airlines, Kabo Airlines Orinet Airlines etc, in the financial industry, most especially the banking industry, this is arm of the economy has its own business graveyard where tomb stones of dead banks are and new ones are still been buried.

Every business sector of the economy has had its share of ups and down, however, it is worthy to note that despite what seems to be mass failure amongst the businesses around, there are also businesses that have been surviving and are doing very well. The question now should be why are these other businesses failing? Particularly, why do business fail in Nigeria? What are the reasons? It is very much confusing because the factors behind the successes of a business are the very same actors that account for the failure of business. In essence if these factors are present, the business succeed, but if they are absent the business fail.

Reasons Why Business Fail In Nigeria

There are many known and established causes of business failure and success. In the banking sector for example the CAMEL test has been applied to banks for centuries, this acronym means;

C – Cash Flows

A – Adequacy of fund

M – Management structure, this is the suitability and appropriateness.

E – Efficiency and Effectiveness

L – Liquidity

At any point in the life of a bank where customers cannot withdraw their deposits, that banks shall be declared as distressed, bankrupt or failed. Indeed, such test apply to all known businesses, the world over, as when a company can no longer supply its goods and services to its own customers on demand, then there must be death cat on the line somewhere.

Specifically, what are these causes or factors or variables of business failure? They are many and we will discuss as much as we can here;

  • Personal problems of Chief Executive and Board members
  • Lack of Education, Training and development of Human resource pool
  • Lack of Appreciation of managerial ground norms and principles
  • Prematurity, Frustration and Lack of Experience
  • Lack of transparency and financial understanding
  • Lack of planning, crucial, strategic and operational
  • Lack of managerial succession; Failure to obey the law legacy.
  • Poor credit Management
  • Shrinking Market Shares and declining sales.
  • Lack of business expansion
  • Fraud and Corruption
  • Declining Profit turnover
  • Business and Economic Depression
  • High Debt Ratio
  • Poor Leadership and Management Practices and Philosophies
  • Poor Location industry
  • Lack of competitiveness of company in the industry
  • Receivable Difficulties
  • Absentee and Neglecting Management
  • Excessive Fixed Assets and Low Liquidity Base

Beyond the above litany, following years of longitudinal researches, Bennis Etal (2000) has summarized the factors of Why Business Fail In Nigeria and success as follows;

  1. Bold Vision – Where there exists a bold vision, Purpose, direction, mission, objectives, goals and targets, Shall succeed. But where these factors lack the business will fail.
  2. Systematic Approach to doing Things – A company that adopts the SMART approach to doing things will succeed, but where smartness does not exist, failure knocks at the door. Smart means and stands for “Systematic”, “Measureable”, “Achievable”, “Realization”, and the “Time Bound”. Goal are set for organisations must have SMART credential/
  3. Clear Intent And mandate, Based On Swot Analysis – Successful organisations constantly embark on SWOT analysis of its operations. SWOT means “Strength”, “Weakness”, “Opportunity”, and “Threat”. Successful business focus on their strength and opportunities while attacking their weakness and threats. Those that yield to their threats and weakness must surely fail, as they cannot exploit their strength and opportunities.
  4. Specific Methodology – Successful organisations adopt clear and specific, methods for their operations and all concerned will usually know about these methods and follow them for success.
  5. Effective And Visible Leadership (MBWA): Management BY Wondering About – MBWA is a new leadership philosophy that means “management By Wandering About”. An effective leader must be clearly visible throughout the company, either physically or through his visions, philosophy and principles, as well as set standards and achievements. Similarly an effective and visible leader must exhibit the following characteristics;

– Creativity and Innovativeness

– Visionary influence

– Solid knowledge of business

– Creditability Track Record And Successful Experiences

– Exceptional people (Human Resource) Skills – the knack for selecting the right people, A – Z knowledge of human behaviour, motivation and dynamics, Motivation and Coaching Abilities.

Ability to foster Positive mental Attitude (PMA) in other people (See People like Richard brandson, Steve jobs, Bill Gates; Mike Adenuga etc;

  • Impeccable Character
  • Excellent Judgement, decision ability and spirit
  • Total Quality Management (TQM).
  • Total Quality Management (TQM) is a tool for successful entrepreneurship, and business reengineering. It involves several characteristics some of which are the following;
  • Continuous innovation
  • Listening to customers learning to learn
  • Generating new ideas constantly
  • Designing new products and services based on new paradigms and metaphors
  • Anticipating and eclipsing competition
  • Contributing to improved quality of Work Life of employees (QWL) and the social community the support of responsible scheme.
  • -Constructive change and constant challenge of established doctrines.

Business failure can also result from the absence of the above variables or form a strong organised labour (Trade Union); lack of commitment on the part of workers or management, lack of worker involvement in terms of quality and quantity of productivity output as well as very low transactions that can lead to poor organisational efficiency or effectiveness.


Leave a Reply

Click Here To Call Us Now