The number of small businesses in Nigeria, both in the formal and informal sectors, continues to grow as they play a vital role in driving the economy and are the backbone of major developed economies worldwide. Small businesses encompass a wide range of enterprises, from street vendors and repairers to law firms and consulting companies.
These small businesses, often overlooked, contribute significantly to the non-oil sector, employment generation, and sustainable entrepreneurship if properly supported. Notable examples include Computer Village in Ikeja, Aba Ariaria Market in Abia State, Kano Kurmi Market in Kano State, and Onitsha Market in Anambra State. However, the government’s involvement in these economic clusters is limited.
According to the Nigeria Bureau of Statistics (NBS), microenterprises constitute a high percentage (99.8%) of the total number of small and medium-sized enterprises (SMEs) in Nigeria, amounting to 41.4 million enterprises. The dominance of small businesses in Nigeria can be attributed to several advantages of self-employment.
Independence is a key driver for entrepreneurs, allowing them to be their own bosses and self-reliant. Small business owners enjoy full financial gain without dilution from external investors, giving them a sense of prestige and control. Moreover, small businesses are easy to set up with minimal regulatory requirements and can operate with a small initial capital outlay.
Small businesses that provide direct services, such as hairdressers, fashion designers, and kiosk operators, enjoy quick patronage and easy payments. These businesses also excel in coordination and communication due to their simple structure, allowing them to provide personalized attention to customers’ specific requirements.
Small businesses exhibit agility and flexibility, enabling operators to quickly adapt to new opportunities. They can easily change their business models to align with market demands, fostering innovation and creativity. Additionally, the focus of small businesses tends to be narrow, allowing them to identify and leverage competitive advantages more effectively than larger enterprises.
A well-functioning small business sector has the potential to significantly contribute to economic growth, livelihood sustainability, poverty reduction, job creation, and income redistribution. To harness the full potential of small businesses, the Nigerian government should play a more active role in supporting their growth, development, and sustainability. Policies should prioritize job creation, economic diversification, innovation, poverty reduction, wealth creation, and income redistribution, recognizing the crucial role of small businesses in achieving these goals.
By nurturing and empowering small businesses, Nigeria can transform its economy and address the high unemployment rate, particularly among graduates. Small businesses offer a practical solution to reducing unemployment and fostering inclusive economic development.