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SPECIAL REPORT: How funding, poor infrastructure stifle growth of Nigerian start-ups


Over the years, Small and Medium Enterprises, SMEs, have become sources of employment for Nigeria’s teeming population of unemployed youth. While successive governments have been unable to tackle the problem of unemployment, many Nigerian graduates who choose to embrace entrepreneurship for survival still face numerous institutional challenges in their struggle to create wealth and opportunities, writes PREMIUM TIMES’ Oladeinde Olawoyin.

Mr. Wale Bakare ("Oga Wash") and his staff on duty
Mr. Wale Bakare (“Oga Wash”) and his staff on duty

When Wale Bakare graduated from the University of Ilorin in 2014, he was determined to set up a business and create job opportunities for himself and others. Rather than seek paid employment, the 28-year-old graduate of Zoology co-founded “Oga Wash”, an innovative mobile car washing service outfit in Ilorin, the capital of Kwara State.

More than six months after the company was started, employing 4 people, Mr. Bakare laments his inability to get loans for expansion.

“One of the challenges I am facing is the issue of adequate start-up capital,” he told PREMIUM TIMES in an interview.

“You will agree with me that it is very difficult to secure loans from commercial and government banks as a start-up in Nigeria, because some of these banks see lending start-up money as a giant risk,” Mr. Bakare added.

The loan required by Mr. Bakare for his business would enable him to rent a space for his operations and employ more hands, thereby creating jobs and opportunities. He would also be able to purchase equipment like Pressure washer, Vapor steamer, Paint Correction, Buffers, Polishers, as well as Cleaning and deodorizing equipment.

“One of the machines, Vapor Steamer, cost N550,000 and a fairly used truck cost N900,000,” he told our correspondent.

Like Mr. Bakare, thousands of Nigerian youth running small businesses have found it difficult to expand and innovate due to the various bureaucracies attached with accessing funds from financial institutions. Some of them spoke to PREMIUM TIMES about their challenges.


According to the National Bureau of Statistics, NBS, as at the third quarter of 2016, Nigeria’s unemployment rate rose to 13.9 from 13.3 per cent in the second quarter of the same year.

The NBS disclosed that there had been eight consecutive increases in the unemployment rate since the fourth quarter of 2014.

It is partly to reduce the unemployment rate that the federal government has repeatedly encouraged fresh graduates to be self-employed, to set up their own small businesses.

Speaking at the 2nd Convocation ceremony of the Kaduna State University in December 2015, a few months after his inauguration, President Muhammadu Buhari pledged that his administration would give the fullest possible support to all efforts to create more jobs through the reorientation of Nigerian youth towards an entrepreneurial mindset.

“This administration will ensure that youths in the country are gainfully employed and youth restiveness curtailed,” the president had said.

“One of the focal points of this administration is job creation. Job creation will help in the achievement of other objectives of the government such as poverty reduction. Insecurity cannot be divorced from unemployment and poverty because an idle mind, they say, is the devil’s workshop.

“With declining internally generated revenue and over dependence on equally declining oil revenues, there is need to seek other ways of diversifying the economy so as to boost revenue.

“One of the ways we can achieve this is through the reorientation of our youths towards an entrepreneurial mindset. We must therefore promote and enhance the teaching and learning of entrepreneurial skills in all schools and tertiary institutions, thereby exposing our youth to the basics and rudiments of starting and sustaining their own businesses.”

In addition, Mr. Buhari said that to encourage and assist Nigerian youth to move from being job seekers to job creators, his administration would sustain and improve programmes by the Central Bank of Nigeria, the Small and Medium Enterprises Development Agency of Nigeria, the Bank of Industry, the Bank of Agriculture and other Federal agencies to grant them start-up loans at concessionary rates.

But according to start-up owners who spoke with PREMIUM TIMES, apart from words of encouragement, the government has not done much to resolve the numerous structural impediments militating against the growth of start-ups in Nigeria.

“The challenge I am currently facing is lack of capital and poor institutional framework,” Olasupo Abideen, a start-up business owner, said.

Mr. Abideen, who studied Industrial Chemistry and runs a gas depot at Malete in Kwara State, noted that it is difficult for start-up owners to access loans for expansion of their businesses and other developmental concerns.

Similarly, for Iyanuoluwa Bolarinwa, who runs a start-up which focuses on the new model of real estate in Lagos, funding has been a major challenge in his drive towards sustainability.

“Our operations actually are very limited because our funds have since been exhausted by running costs and payments of staff,” he told PREMIUM TIMES in an interview.

On the other hand, for Charles Onuoha, a tech entrepreneur based in Ikeja, Lagos, electricity has been the bane of his expansion and growth efforts.

“I power my generator myself every day. Imagine if there had been good power supply, the money I pump into fuel would be used for software acquisition and other manpower development that my job requires,” said Mr. Onuoha, a 24-year-old graduate of the Institute of Management and Technology, Enugu.


Apart from capital and the strict conditions attached to access to loans, PREMIUM TIMES findings showed that poor infrastructural facilities also militate against the growth of SMEs.

Some of the start-up owners lamented the absence of adequate infrastructure that could propel their ideas and initiative and reduce cost of running their businesses.

“Let government just fix electricity and watch the potentials of the Nigerian tech entrepreneur blossom,” Mr. Onuoha told PREMIUM TIMES.

He explained further that poor infrastructure, especially electricity, is the bane of technological development in Nigeria, especially among its “army of super-talented young tech entrepreneurs.”

Speaking with PREMIUM TIMES, Adeniyi Phillip, an agricultural entrepreneur, noted that most SMEs owners, especially in the agricultural sector, provide their own facilities.

This, he said, impedes profitability as it shoots up the running and operational cost.

“For anyone going into farming, it is almost impossible to start-up with little capital, where you don’t have access to water or energy (electricity),” he said.

“This is because, some of the critical challenges of food production include the cost of energy (power), storage and irrigation on the farm.

“Both plants and animals require regular supply of water/irrigation to survive, especially, in the dry season. But, hardly will you find a village with government water or electricity.”

He added that, “Since farming is done in the rural areas where access to water and electricity is very limited, start-ups in the primary production of plants and animals, must consider sinking over N200,000 borehole depending on the area, to serve its water needs.

“With a borehole, you need a generating set. Today, the cost of a 2.2 KVA generator with a capacity to carry a 1-horse power borehole has increased by over 200 per cent.

Mr. Phillip explained further that the cost of maintenance has also increased, because “everyone continues to blame the hike in the prices of goods and services on dollars.”

This, he said, was not surprising as Nigeria remains an import dependent nation.

“These associated costs have prevented many from starting farming. It has also forced a lot of people out of agribusiness,” he added.

For Mr. Bakare, the University of Ilorin graduate, one of the major facility-related problems he faces running his mobile car wash start-up is poor drainage system in Ilorin. He noted that due to limited funds, he cannot afford to locate his business in an environment where there is good drainage system.

“Sometimes our customers’ neighbours complain that we litter their environment with water runoff. This particular issue is a serious challenge that is making our mobile car wash lose many of our customers,” he said.

“The only solution that can allow us to clean vehicles and at the same time does not need much water is the Auto Detailing process which is very expensive to afford for a start-up like ours.


According to some of the start-up owners, the conditions put in place as prerequisite for access to loans are ‘unrealistic’ and ‘strict’, thus making it difficult to meet.

On his part, Mr. Abideen, the gas depot owner, noted that the processes and documentation are stressful and overly discouraging.

“Access to loan for start-up like this should be less stressful (once you are) with CAC registration and physical address of your start-up,” said Mr. Abideen.

“The issue of collateral and guarantor is a clandestine approach by the government to deny some youth from poor background access to loans,”he told PREMIUM TIMES.

For Mr. Bakare, some of the financial institutions discourage entrepreneurs with some of their unrealistic demands such as huge collateral and unrealistic interest rates which, he said, is aimed at discouraging start-ups.

“From experience, I have approached the Kwara state government, some commercial banks and also Bank of Industry (BOI) for loan to expand my start up and get involved in auto detailing mobile car wash and I discovered that these financial institutions tend to frustrate aspiring entrepreneurs with some of their ridiculous requirements in a bid to discourage young start-ups from getting loans from financial institutions,”said Mr. Bakare.

“And I believe with this kind of practice by banks and government, a lot of brilliant start-up ideas would have been killed due to financial constraints,” he added.

Bank of Industry, BOI, reacts

According to Mr. Bakare, he was selected in the Youth Entrepreneurship Support, YES, programme, an initiative of the Bank of Industry, BOI, in 2016. But his dream of nurturing his start-up into a huge business enterprise would soon be killed by the conditions stipulated by the bank before he could be given access to loan facilities.

“It was in 2016 and having been selected in the YES programme, I was asked to provide two guarantors with N5 million each in (their) accounts,” he said, adding that he was also asked to submit his University and NYSC certificates.

“Of course, I couldn’t meet the conditions; BOI terms and conditions are too tough for start-ups to cope with,” he lamented.

When contacted by PREMIUM TIMES, the Bank of Industry, BOI, however, said it has a system that ensures all prospective customers meet basic credit criteria in order to encourage best practices in Nigeria’s business environment.

“Because many of the assisted projects are also import substitution and export-based, BOI’s esteemed customers have contributed significantly to efforts at attaining national self-reliance through backward integration and economic diversification, all of which positively impact the contribution of the manufacturing sector to Nigeria’s Gross National Product,” the bank said.

When confronted with PREMIUM TIMES findings, the bank said the affected entrepreneurs might have come with project proposals that may not key into its broad objective as an organization.

“We emphasise prudent project selection and management…Support quality projects with high developmental impact such as job creation and poverty alleviation to enhance the socio-economic standard of Nigerians,” it noted.

It, however, disclosed that those affected may need to visit the banks’ state offices for complaints.

The bank, incorporated in 1959 as ICON Limited, was reconstructed into the Nigerian Industrial Development Bank (NIDB) in 1964.


Speaking with PREMIUM TIMES, the start-up owners explained that the way out is for government to ensure that the activities of institutions put in charge of providing facilities for entrepreneurs are closely monitored,

Others also suggested that the government should provide infrastructure that would ease business activities and facilitate productivity.

“Another challenge, aside bad road network, is multiple taxes and licences on the road and the market place. Government officials and market leaders are all out to exploit people. Their presence everywhere, is responsible for the increment in the prices of goods and services,” lamented Mr. Phillip, the agriculturist.

“Government must begin to increase access to production inputs and concentrate development in the rural areas. Such development should include, provision of electricity, irrigation, good roads, storage facilities among others,” he added.

Mr. Bakare, on his part, said, “My advice for both state and federal government is to provide enabling environment for start-ups for economic development. Government should also make policies that will favour start-ups, recognise, and genuinely support the essence of entrepreneurship to nation building.”

“Fix electricity and half of Nigeria’s developmental problems will be solved,” said Mr. Onuoha, the tech entrepreneur.

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