Deciphering socio-economic challenges to a sustainable business environment in Nigeria

I had my first practical exposure to the challenges of a sustainable business climate in Nigeria in 2014. I had just graduated and was enlisted into the mandatory one-year national youth service. That year, 520,000 unemployed graduates applied for just 4,000 vacancies advertised by the Nigeria Immigration Service, a ratio of one vacancy to about 130 unemployed graduates. Many died during the stampede that occurred at various recruitment centres (Aririahu). For the first time, I saw a future awaiting me in the Nigerian labour market.

Every year, Nigerian universities release about 600,000 graduates. The challenge however is not the absence of human capital but businesses, both large scale and SMEs to employ them. While unemployment constitutes a major problem in the country, the question is why there are insufficient business entities to employ these graduates (Onyekwere 4 – 7). The term business in itself connotes a cycle of production and distribution of goods and services to ensure profit for the producers on one end, and ameliorate the consumer’s need at the other end (Babalola and Tiamiyu 2). All these must occur within a defined geographical contiguity, socio-cultural, and political economy generally termed as the “environment” that influences the actors involved, and vice versa (Ogunro 133). These suggest that the absence of an enabling environment for business will result in unemployment.

A conducive business environment is therefore one that reduce cost of production for the manufacturer, and facilitates the delivery and consumption of such products to and by the final consumer. Nwaeke opined that a business environment can have “political, physical, economic, social and technological” manifestations (2). This is why Anekwe and others observed that an enabling business environment must have quality road network and efficient transportation system, power supply, security, and sound economic policies among others (72 – 80). A business environment can therefore be classified as internal or external; internal if the political actors, generally state actors and government officials, have control over these aforementioned variables. On the contrary, a business environment is external when it is outside their sphere of influence such as within the power of another state or the international community (Onakoya 13 – 20).

  • Challenges

Nigeria possesses abundance of resources, both human and capital, which gives her a competitive advantage over many African nations and beyond. These natural resources have been the pull factors for investors. As such, pundits anticipate that salient infrastructures are provided to enable business and all other economic activities thrive accordingly. However, Nigeria’s business environment is besieged by uncertainty, policy instability and lack of necessary infrastructure such as good road networks, electricity, water supply, among others (Igwe et al 182 – 200). The objective of this work is not to reiterate these lapses, literature abounds on that already. The goal is to state causal factors of these gaps which bedevil the Nigerian business environment.  

This study attempts a redefinition of the classifications of business environments: An internal environment is defined as one in which an entrepreneur or group of entrepreneurs can influence to create an enabling environment, while an external environment constitute that which is within the power of the state, multinational organization or any international body. The author attributes the absence of an enabling business environment to the social construct of most Nigerian entrepreneurs. While indecisive policies by the Nigerian government is emphasized, indigenous entrepreneurs have also shown laxity and irresponsibility in areas where they had resources to influence outcomes but failed to take actions. The result has been a continuous cycle of poor development which has undermined both the manufacturing and service sectors. Some encumbrances to a sustainable business environment are highlighted below:

  • Internal Environmental Factors
  • Apathy to Physical Infrastructural Development: The major driver of any economy is the power sector. Nigeria has the potential to generate 12,522 MW from existing infrastructures, power plants, and a natural endowment of hydro, oil and gas, and solar resources. However, the national grid has a low capacity of about 4,000 MW, which is insufficient for a country of over 200 million people (Punch Newspaper). QuartzAfrica stated that Nigeria will need 180,000 MW of electricity if it is to enjoy stable power supply. A World Bank report also noted that Nigeria has the highest number of people without access to electricity (85 million people), or 42 percent of the country’s population.

A report shows Nigerian businesses spend about $14 billion (N5 trillion) on generating their own electricity (Nairametrics), and this was about 38 percent of manufacturer’s production cost in 2019 (Vanguard). Also, a loss of over $26 billion is attributed to lack of electricity per annum. And yet manufacturers have only invested only N293 billion in the sector since the privatization in 2013. If Nigerian entrepreneurs invest just 50 percent of what they spend in generating their own electricity over a 10-year period between 2012 and 2022, about $70 billion would have been invested in the power sector, culminating in substantial infrastructural development in Nigerian business environment. The same goes for other infrastructures such as road networks (Adekoya, Yusuf, The Guardian).

Moreover, private firms hardly publish data but leave it to the National Bureau of Statistics. Data derived from electronic sellers can help the government determine how many megawatts of electricity is needed in a particular area, while data derived from automobile dealers such as type of vehicle purchased and buyer’s address can help the government make better policies on what roads to construct, among others. However, this may be difficult as many entrepreneurs, in order to avoid paying taxes, may refuse to disclose such information (, Ottoabasi).

  • External Environmental Factors
  • Rent System and Politics of Patronage: A 970-passenger train was attacked on the 28th of March, 2022 by terrorists at Katari, a village in Kaduna state (The Guardian). One of the victims was Chinelo Megafu, a 28-year-old medical doctor. In a press conference the following day, Nigeria’s Minister of Transportation, Rotimi Amaechi reportedly stated that the ministry requested the purchase of N3 billion high-capacity rail track cameras and sensors to eliminate all blind spots on the train corridors across the country to forestall such incidents. The government however refused (ChannelsTV, Daily Post). While we criticize the rationale behind the government’s refusal to take pre-emptive such measures, it is also appalling that the government refused to take into cognizance another notable fact that between two economic centres of Abuja and Kaduna lies an undeveloped people battling poverty and without any capital project to facilitate development. The people in villages such as Katari are therefore prone to terrorist recruitment and attacks.

Some answers can be found in Collier (41-9). In a resource-rich and multi-ethnic state like Nigeria, ethnic loyalty thrives, undermining press freedom. Patronage politics is the norm and politicians are concerned with winning the next elections than investing in capital projects, except perhaps white elephant projects. Second, democracy transcends merely conducting and winning elections. Beyond determining how power is won, it also emphasizes how power is used with concerns on checks and balances on government abuse of power. But the latter can be influenced by resource rents. The more dependent a country is on resource rent; the more likely electoral outcomes can be influenced. A normal circumstance would have seen public services and infrastructures necessary for a conducive business environment delivered, but the reverse has been the case of patronage politics and bribery of voters. The secret ballot system has also not helped matters.

Nigeria’s revenue from oil has also weakened political restraints by radically reducing the needs of citizens and businesses to tax (Mark and Nwaiwu 1 – 10). Since over 80 percent of her revenue comes from rent from petroleum, tax laws are often relaxed. In effect, citizens do not scrutinize how taxes and oil revenues are being utilized. This undermines accountability, erodes checks and balances, and promotes autocratic leaders. Thus, economic policies and basic infrastructures necessary for a thriving business environment are absent.

  • Recommendation and Conclusion

There is an ongoing paradigm shift in the global business system. Remote work and digital currencies are becoming the norm. With virtual reality and the metaverse emerging as the future of business environments, Nigerian entrepreneurs cannot afford to leave the provision of basic infrastructures to the public sector alone. Capital investments must be made to generate a thriving environment for their businesses (Abolaji 27 – 35). In return, a social contract must be agreed upon with the government via signatory to and implementation of economic policies that will further engender a sustainable business environment. Finally, entrepreneurs must supply government with relevant data crucial to the distribution of resources and provision of basic infrastructures.


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Oduola Oluwaseun Joshua is a Nigerian with areas of interest in political economy, diplomacy and development economics. A graduate of Landmark University - Nigeria, he earned a BSc (Hons) in International Relations (2014). Between 2016 – 2019, he headed the Social Science department of a reputable secondary school in Lagos where he taught Economics and Government. He has since contributed to journal publications and dissertations of postgraduate candidates in reputable institutions such as Coventry University (UK), College de Paris (France), and John Hopkins University (USA). He also drafted the communique and conference proceedings of Nigeria’s Federal Ministry of Agriculture and Rural Development (FMARD) workshop on “Quantitative and Qualitative Techniques for Effective Monitoring & Evaluation in Project Implementation” held in Abuja in April, 2021.

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