Entrepreneurship Development in Nigeria: Prospects and Challenges

Amaka G Metu
Faculty of Social Sciences, Department of Economics, Nnamdi Azikiwe University, Awka Anambra Nigeria; and is the corresponding author. E-mail: ag.metu@unizik.edu.ng

Ebele S Nwokoye
Faculty of Social Sciences, Department of Economics, Nnamdi Azikiwe University, Awka Anambra Nigeria. E-mail: es.nwokoye@unizik.edu.ng

This paper underscores the importance of policy formulation in entrepreneurship development in Nigeria as well as the importance of entrepreneurship in reducing the ever-growing rate of unemployment in Nigeria. The methodology adopted for this paper is the Narrative-Textual Case Study (NTCS); it is a social science research method that relies on information and data from several sources for problem identification and problem solving. The paper opines that entrepreneurship is lacking in Nigeria due to certain challenges such as epileptic power supply, lack of genuine support for those intending to start up a business, lack of strong will power to take risks; all these and more inhibit entrepreneurship development and create unemployment. The paper concludes that government policy on entrepreneurship should be more robust and that the government should create a conducive business environment to enhance entrepreneurship development and reduction in youth unemployment.

Introduction
Nigeria, a former British colony, is a triplistic economy and is the 12th largest crude oil producer in the world, the 9th most populous country of the world and the second largest economy in Africa with earnings of an estimated $2.2 mn a day in oil revenue (World Fact Book, 2009 cited in Nwokoye et al., 2013). Nigeria is a mono-product economy heavily dependent on crude oil for more than 90% of its foreign exchange earnings. It is endowed with large agricultural potential as more than 70% of its land is arable.

In spite of these attributes, Nigeria is still classified as one of the poorest countries of the world. Its industrial sector, which is expected to create substantial job opportunities and reduce unemployment, is fast deteriorating due to low productive capacity (Chibundu, 2006). Poverty and unemployment continue to grow rapidly in Nigeria as a result of increase in population and dwindling production both for domestic and international markets.

National Bureau of Statistics (2010) reported that about 70% (105 million) Nigerians live below poverty line against 54% which was reported in 2008. Its harmonized Nigerian Living Standard Survey 2010 further reported that 90% of Nigerians live on less than $2 a day and puts the current poverty rate at 79% out of which 30.3% are extremely poor. The United Nations Habitat puts the poverty rate at 76% for 2010 against 46% which it reported in 1996, despite the continuous increase in its population growth rate.

Table 1 shows that the level of none poor people in Nigeria has been decreasing while extremely poor continues to increase over the years in Nigeria. For instance, the level of none poor decreased from above 72% in 1980 to about 31% in 2010; while the level of extremely poor increased to about 38.7% within the same period. This situation is quite disturbing despite the numerous poverty reductions programs established by different governments.

Table 2 shows that the rate of unemployment has continued to increase over the years. As at 2000, the rate of unemployment was 13% but by 2011, it has increased to as high as 24%. This increasing rate of unemployment calls for a more proactive measures towards supporting entrepreneurship development in Nigeria.

Even though Nigeria has evolved and used different policies and policy mixes in the past, it is still far away from achieving the economic progress needed to influence or better the wellbeing of an average Nigeria citizen, despite being blessed with numerous human and material resources.

The dynamics of the global economy has changed in the last few decades with South East Asia and Latin America becoming dominant in the world market as it concerns exporting of manufactured goods. This is because these countries encourage entrepreneurship policies of tax holidays, soft credit facilities, etc. Domestic entrepreneurship contributes to the economic and social development through creation of employment opportunities.

Entrepreneurship in Nigeria needs attention from different sectors to help in every angle of its operation as it is one of the contributors to economic and social development. Entrepreneurs are important because they have important effect on world economy (Wickham, 2004). In both developed and developing countries, entrepreneurs play a important role in modifying rural and urban areas, generating income and contributing to employment generation (Hallberg, 2000; and William, 2001). One of the most difficult problems threatening the development of any nation in achieving economic development is youth unemployment: a nation which fails to adequately and advantageously engage its increasing population has little plans for economic progress. This calls for the need to redirect the nation's development strategy by looking inward to create new businesses and develop the abundant and untapped youthful talents.

The main objective of this paper is to examine the critical factors affecting the growth and survival of new ventures in Nigeria and also challenge existing businesses that feel satisfied in their comfort zone. This study would create a platform for them to improve their innovative ideas for the achievement of economic growth and development.

Literature Review
Entrepreneurship is derived from the French word entreprendre, which means to undertake. Hence, entrepreneurship is the process of undertaking activities concerned with identifying and exploiting business opportunities while assuming its attendant risks. Entrepreneurship involves taking chances because new businesses do not emerge by accident (Engelhoff, 2005).

Schumpeter (1959) considered the entrepreneur as an innovator. According to him, entrepreneurship is the carrying out of new factor inputs combination which can be referred to simply as an enterprise; the individual whose function it is to carry them out, can be referred to simply as entrepreneurs. Say (1964, cited in Nwokoye et al., 2013) used the term entrepreneur to describe someone who creates and then, perhaps, operates a new business venture whether or not there is anything innovative in those acts. Baumol (1993) views the Schumpeter type as an innovative entrepreneur and the Say type as the business-organizing entrepreneur. Therefore, an entrepreneur is one who undertakes to organize, manage and assume the risk of a business.

Entrepreneurship as a human activity plays a significant role in economic development. It points to the spirit of enterprise. For instance, such a spirit can transform man from a nomad to a cattle rearer, to an agriculturist, a trader, an industrialist and finally into becoming a multinational conglomerate. Transform man from a nomad to a cattle rearer, to a settled agriculturist, to a trader, to an industrialist and finally to a multinational conglomerate. Okonkwo (1996) and Okonjo-Iweala (2005, cited in Ekwurum and Ekpunobi, 2008), opined that strong entrepreneurial bases are essential drivers of economic growth and prosperity in a modern economy; it empowers the populace and provides greater possibilities for the use of available local raw materials and this goes a long way in encouraging vertical and horizontal linkages.

Chibundu (2006, cited in Nwokoye et al., 2013), opined that it is encouraging to note that research findings and empirical evidences show that significant poverty reduction is possible and have occurred in many countries where entrepreneurship is encouraged. To him, domestic entrepreneurs stimulate private consumption, ownership and entrepreneurial abilities, generate employment, help diversify economic activities and make significant contribution to exports and domestic trade while utilizing local raw materials.

Jhingan (2003) observed that a low entrepreneurial ability is a strong factor responsible for the low rate of capital formation in Least Developed Countries (LDCs). He recognized that though LDCs are characterized by small size of the market, deficiency in capital, lack of private property and contract, entrepreneurship is the focal point in the process of economic development. He, therefore, attributed the spirit of nationalism to that of entrepreneurship.

In Nigeria, domestic entrepreneurship is often discussed within the context of micro, small and medium scale enterprises (Ewurum and Ekpunobi, 2008; and Uwatt, 2010 cited in Nwokoye et al., 2013).

A nation's economic growth depends on successful domestic entrepreneurship combined with the forces of established corporation. Schumpeter, in 1934, in the Theory of Economic Development, argued that the entrepreneur is the prime cause for economic development. He explained how large firms out do the smaller firms in innovation and appropriation processes through strong feedback loop from innovation to increased research and development activities.

Shepherd and Douglas (1997) observed that the essence of entrepreneurship is the ability to see and chart a course for a new business venture despite the uncertainty and ambiguity which the business venture faces. This results in innovative and creative strategies as well as courageous leadership.

Elsewhere, entrepreneurship has led to employment generation, economic growth and sustainable development (Anyadike et al., 2012) and that the Nigerian youth have some sterling qualities such as resourcefulness, initiative, drive, ambition, energy, courage, boldness, etc. which are all valuable traits for entrepreneurship development.

Bennell (2000) maintained that youth livelihood could be improved by tapping into the dynamism of young people and building on their strong spirit of resourcefulness through entrepreneurship development. For instance, in Ghana, findings on small-scale enterprises revealed that young people owned almost 40% of these enterprises (Osei et al., 1993). In any entrepreneurship development, a new firm is set up. Often times millionaires and billionaires are made, and if well managed, these domestic enterprises can turn into giant corporations of tomorrow (Nwokoye, et al., 2013). When the Nigerian youth are mentored and provided with enabling environment as well as the needed resources, they will be gainfully engaged, thereby shunning illegal activities such as hostage-taking, kidnapping and vandalism.

The theoretical foundation of this work is based on Schumpeter's Refugee Effect. This theory explains that the ability to make good judgment about the future makes an entrepreneur out of an individual. The process of unemployment fast-tracking entrepreneur activity is known as the Refugee Effect. Oxenfeldt (1943), (cited in Anyadike et al., 2012), pointed out that individuals confronted with unemployment and low prospects for wage employment often turn to self-employment as a viable alternative. The simple theory of income choice lends credence to Refugee Effect by suggesting that increased unemployment will lead to an increase in start-up business activity on the grounds that the opportunity cost of not starting a firm has decreased (Evans and Leighton, 1990; and Blanchflower and Meyer, 1994).

The importance of entrepreneurship to economic development has long been recognized by economists. The creation of small businesses and the growing the existing ones are considered to be the fastest way to achieve economic growth (Salako, 2004, cited in Nwokoye et al., 2013). Conventionally knowledge about how business ideas emerge in a society has assumed that the process starts and ends with the individual character traits (Kelby, 1988 cited in Murtala, 2005). Though the entrepreneurship instinct is inborn, many still argue that entrepreneurship can be stimulated through policy intervention (Clelland and Winter, 1969). This is why entrepreneurship is increasingly promoted in the developing countries of the world (Jhingan, 2003).

Sue and Dan (2000) argued that entrepreneurship can be influenced by genetic power, family background and economic environment. Since economic environment could develop or suppress entrepreneurship, it would not be wrong for the government to develop macroeconomic policies that could support and provide resources for those that would want to improve and expand their business. Supporting entrepreneurship becomes a critical policy issue especially since those new businesses that do survive tend to expand employment and economic growth of any economy.

Institutional Frameworks for Entrepreneurship Development in Nigeria
The Federal Government of Nigeria, since the 1960s, has put in place different kinds of institutional framework to reduce youth unemployment in the country. These, among others, include establishment of Industrial Development Centers (IDCs), the small-scale industries credit scheme, credit guidelines to financial institution, working for yourself/entrepreneur development program (WFY/EDP) and National economic reconstruction. Having known the significant role of entrepreneurship in fetching economic and social development (which is supposed to be the concern of the various governments globally), the Nigerian government, in its effort to encourage entrepreneurial initiatives, has developed many programs through funding from its Central Bank. These efforts have led to an increase in the number of private domestic firms. However, a majority of these business ventures are very small scale when measured in terms of capital, employment and revenue (Attahir and Minet, 2000).

Problems of Entrepreneurship Development in Nigeria
Successive governments in Nigeria have emphasized the need for the development of enterprises in order to reduce the rate of unemployment and poverty level. The need for encouraging increased productivity and self-employment has been accompanied by the formulation of Small Scale Enterprise Promotion policy. More often than not, government pronouncements are not backed by effective implementation. Provision of basic infrastructural facilities such as good roads, electricity and access to information and communication network will help in the development of the society and also facilitate economic productivity. In Nigeria, these basic needs are lacking, creating frustration among a lot of young people with bright ideas and a corresponding spirit to effect a change in some areas of their life. For instance, power supply which is the bedrock of production has proven to be the greatest challenge to any aspiring entrepreneur in Nigeria. Most times, businesses have to be run using generators. The cost of running a business with a generator reduces the profit which an entrepreneur may earn. During scarcity of gas or petrol, businesses are grounded. This factor adds immensely to total overhead costs leading to high cost of product/services. This is a discouragement to entrepreneurial development.

Another worrisome problem is the issue of transportation. Air transport is very expensive that is beyond the reach of young entrepreneur; the rail road is a thing of the past, while the road which is the most affordable means of transport is neither conducive. The roads are dilapidated, leading to unwarranted road accidents and unnecessary delays. Communication system comes with enormous service cost charged by the various telecom companies, and this has a trickledown effect on the Internet service. Security network, which has been made worse by the incapability of the security personnel, is another big challenge. Entrepreneurs who are serious about doing business need to arrange private security personnel in order to secure their facilities. This arrangement does not come cheap; it reduces or erodes the profit margin of the entrepreneur whose primary objective is profit maximization.

Education and knowledge plays a strong role in the formation of entrepreneurial spirit. The intending and existing entrepreneur needs to be conversant and in tune with the events around him/her. Unfortunately, the role of education in preparing young people as 'change agents' has been ignored. The quality of education continues to decline due to industrial actions and mass emigration of qualified teachers. The policy makers end up sending their wards abroad, thereby circumventing the will to address the urgent needs required by the SME sector. The result is half-baked workforce who lack confidence and the desire to look inward on how to bring out the best in them and stop depending on government which is not available.

These days, the youth are high dreamers, therefore, the entrepreneurial ideas require huge capital to take off or sustain them. The financial institutions that are supposed to act as financial advisers do not have the will power to give out loan without collaterals. Even when they do, the interest rate is so high and the procedures for assessment of such credit are often rigorous. The government has been hampering entrepreneurship development through different programs sponsored by the Central Bank of Nigeria. When these funds are finally made available, such funds are either mismanaged or misallocated, thereby creating the impression that the youth and the younger generation are lazy and lack both managerial abilities and ideas. With this state of affairs, the intending entrepreneur falls back on families and relatives for loans to start up or worst terminate an already existing project.

Agbeze (2012) examined the obstacles to entrepreneurship development and asserted that the challenges facing aspiring entrepreneur includes non-accessibility to local and international markets, absence of a viable credit policy that addresses the specific needs of the enterprise, difficulty in procuring business approval, multiple taxation, high inflation and other macroeconomic distortions. All these put together have made entrepreneurial activities cost-intensive, unprofitable and uninteresting, thereby dissuading the youth from assuming entrepreneurial leadership positions (Anyadike et al., 2012).

Conclusion
There are a number of entrepreneurship development programs established in Nigeria offering direct support to the citizens in areas of employment creation. However, the absence of a harmonized and well-focused national development program, which is available to every region, renders most of these initiatives ineffective. It is obvious that entrepreneurship is the magic wand that can change the story of unemployment in Nigeria. The Nigerian government has not yet fully explored this avenue despite the increasing rate of unemployment in the country. The few entrepreneurs who have taken their destiny in their hands and have taken the initiative to start off a project/ventures are faced with serious problems such as lack of capital and inadequate access to loan schemes needed for expansion, lack of security to lives and property, lack of managerial prowess and absence of the zeal to take risk, etc.

With these aforementioned problems and conditions, paradigm shifts in policies that are critical to effective entrepreneurship development have become very imperative. To overcome these problems, the following recommendations are proffered:

• There should be proper auditing of all policy programs aimed at stimulating entrepreneurial activity in order to make sure it gets to those who are really in need of the program.
• The recent introduction of entrepreneurship as a course of study is encouraging, but it should include practical entrepreneurship education and training. There should also be career centers to provide counseling to growing entrepreneurs. This will enhance their knowledge.
• Entrepreneurs are also encouraged to make efforts on their own to acquaint with benefits of education and training being offered.
• There should be a well-structured and organized entrepreneurial forum to coordinate and represent the interests of entrepreneurs at all levels when issues of policy formulation and reformation are made.
  
• Certain policies and structures aimed towards making loans and financing available to entrepreneurs are already in place, that is, commercial banks are required to set apart 10% of their profits to serve as capital for entrepreneurs. But most times, it is difficult for entrepreneurs who do not have personal affiliations within these bodies to access the capital. It is therefore necessary to set up internal monitoring and control unit to ensure compliance.

In conclusion, in order to encourage domestic entrepreneurship, the Nigerian government can frame policies for the creation of a competitive environment where businesses thrive and support business ideas among the youth through provision of finances and connections to already thriving business networks. The Nigerian government can also take advantage of the richly endowed physical and natural resources through its policies and create job opportunities to its teeming youth through entrepreneurship development programs.

Other incentives include provision of basic amenities and conducive business environment especially consistent supply of electricity, security to lives and property, functional judicial system, strict adherence to taxes and levies, political as well as macroeconomic stability which are all geared towards peaceful coexistence aimed at encouraging business expansion and networking. The government in developed countries are encouraged to help entrepreneurs by providing frameworks for policies, plans and programs which help in turning around the old practices involved in setting up and operating business ventures.

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Being a paper presented at the International Conference on Entrepreneurship: Strategy for Socio-Economic Advancement in Emerging Economies, organized by the Department of Business Administration, Faculty of Social and Management Sciences, Bowen University Iwo, Nigeria, May 28-30, 2014.