Problems of Nigerian Business Enterprises

The majority of the problems facing the business enterprises in Nigeria irrespective of their nature, scope and the sector to which they belong have been highlighted as their disadvantages. However, for the reason of specificity, we shall attempt in this section to make some additions.

Having thoroughly undertaken a perusal of the nature and classification of the various forms of business enterprises, attention in this section shall be directed to the state of the art of some business enterprises in Nigeria. After this, the various problems and their implication will be fully considered once again.

For convenience, business enterprises in Nigeria may be classified as Industrial (or economic enterprises), social services enterprises and infrastructural projects. A lot of industrial site have been abandoned, some having reached the peak of their life cycle or “died” prematurely as a result of competition. Sudden changes in government policies or even inability to source raw materials locally.

A number of business enterprise, especially development projects, have failed because of the general down turn in the economy between the last half of the 20th century and early 21th century. Typical examples of such industrial enterprises is the Top Larger Beer which reigned between 1962 and 1982 which was A product of West African Breweries Limited, This is followed by the ban on Larger Beer which is also no more in the market. Others are the farm settlement at Odeda, Obasanjo Tarm at Ayetoro and the ljebu North Local government poultry farm in Ijebu lgbo. Yet, there are construction industries, petroleum (e.g Refineries), petrol-Chemicals) Iron and steel(e.g. Ajaokuta Steel Rolling Mills), etc.

Examples of business enterprises in the social services that are facing serious problems abound in the transport, educational and medical sectors. For illustration, a number of enterprises run as social projects have failed in Nigeria most especially in the recent past. These include abandoned secondary schools established under the Unity Party of Nigeria (UPN) of the second Republic .In the UPN controlled states of the then Western Nigeria. to be specific the Adígbe High School in Obafemi Owode Local Government; now being used as a community primary school and Bishop Akinyele High School, Oke-Ado, Ibadan established under the Bola Ige’s regime whose site is now over grown with weeds. Again, there are the Muslim Teachers Training College, MTTC, Oru-ljebu; now converted to the Oru Refuge Camp and the St. Leo’s Teach Training College, Abeokuta; now housing the Navy Command School.

In the health sector, there is the painful cases of Ogun State drugs project of Gateway Pharmaceutical, Ijebu-Ode and Dideolu Specialist Hospital in Ikenne-Remo which have failed owing to wrong locations and expensive medical bills that were unaffordable to the communities in which they were sited. There are also enterprises that are being run as infrastructural projects and which have failed in one way or another. For instance, the Lagos-Abeokuta dual carriage way; initiated during. the Muritala -Obasanjo regime of the 1970’s which has Since stopped at Sango. Others are the various transport corporations like the Lagos State Transport Corporation, LSTC, and Gateway Transit of Ogun State government.

Even those companies and corporations in both the public and Private sectors of the economy which appear performing are just pretending to be successful. The fact still remains that most business enterprises in the country are yet to perform to expectation.

Meanwhile many factors have been identified as bottlenecks to the successes and survival of Nigerian business enterprises among which are:

1. Inadequate or non-financial design from conceptions;

2. Inappropriate business objectives;

3. Shortage or non-availability of raw materials;

4. Inappropriate economic policies of the government;

5. Financial constraints;

6. Administrative cum Managerial Incompetence;

7. Political problems;

8. Technological cum infrastructural problems;

9. Wrong choice of business performance appraisal criteria;

10. Poor Accountability and control mechanisms;

11. Wrong Timing;

Many business enterprises have failed apparently because they were not well designed, planned or conceived. This might even arise out of misplacement of priority by the government authorities especially in the case of the public enterprises. Enterprises that cannot identify their principal objectives are bound to fail.

In Nigeria, as in most African countries, materials failures usually arise due to inferior materials, shortage of materials as well as importation problems. Many business enterprises are based on foreign or imported raw materials. Where this is the case, the business is most likely to face the problem of changes in international policies.

Next, many businesses in Nigeria have failed as a result of stringent or unfavourable fiscal and monetary policies adopted by successive government. Wrong choice of monetary and fiscal policies might manifests in the form of method of project financing. Most Nigerian business enterprises are wrongly financed.

For instance, financing long-term projects with short-term loans has proved to be unhealthy to most investment projects. This is a wrong investment strategy for business finance. Long-term business must be financed with long-term loans, stock capital, equity or development bounds. Financing Long-term business investment with short-term loans entails the maturity of the loan stocks at the time when the project is still uncompleted thereby creating double problem of seeking avenue of repaying the loan and at the same time raising more fund’s to carry on the project

Financial constraints involve insufficient funding and inconsistencies in terms of loan agreement. Shortage of fund is one of the most pronounced causes of failure of business enterprises in Nigeria. Knowing fully well the relevance of finance in business execution or transaction, no business the world over will be a success if faced with financial anemia. Ipso-facto (i.e for this reason), finance is an indispensable ingredient if a business is to be successful.

Personal traits and objective execution have immense influence on the success or failure of any business venture. For instance, if a particular business is executed by well-meaning, patriotic, self-less and diligent citizens, there is every tendency that the business will be successful. Conversely, if self-centered, dubious, a various and unpatriotic citizens execute a business, the chance of the business being successful is very slim (if it exist at all).

For illustration, a study in the United State by Dum and Bradastreet (1973) came to the conclusion that 93% of the causes of project failures stemmed from managerial inexperience and incompetence; the remainder being attributable to other factors.

Lying behind these causes are failure to plan and failure to control the consequences of the plans, environmental factors may be significant but only to the extent that they are beyond the abilities of competent managers or administrators to predict and control. Argenti (976) identifies five characteristics of bad management, These are one-man-rule (not by any standard necessarily a one-man business), a non-participating board of directors and unbalanced team of managers (in the functional and personality), a week finance function and a company in which the chairman and chief executive are the same person.

Another indicator of bad management is the determination of certain financial ratios. Albeit, managers often engage in creative accounting with a view to enshrouding these lapses. However, irrespective of the creativity of managers in presenting accounting information, the intrinsic impact of bad management is felt sooner or later. From the aforementioned bad management characteristics, there is the flow of certain sequences which are summarised by Agenti as “if the management of a company is poor, then two things will be neglected; the system of accountancy information will be deficient and the company will not respond to changes. Some companies, even well managed ones, may be damaged because powerful constraints prevent the managers from making the response they wish to make.

Political grounds make it possible for projects of business enterprises to be sited where they would not have been and apparently where such projects would not thrive well. The concomitant effect of this wrong choice of project site is pumping much money into a project that would have required less amount had the location been economical and rational, and in most cases, the ultimate result will be outright failure of such wrongly sited projects.

Still, the availability of the basic infrastructural facilities and the level of technology determine the effectiveness and efficiency at which development projects are carried out in Nigeria and most of the third world countries. Such basic infrastructural facilities include electricity, pipe-born water, good roads, good communication network, etc. Most projects cannot thrive well where these facilities are lacking.

Unfortunately in Nigeria, being a developing country, such facilities are centralised in few privileged towns and cities. Because of these, business enterprises that would have been more viable if sited in any of the towns where these facilities are lacking are constrained to be sited where they are available, albeit, has economical sites; resulting in marginal returns from such enterprises and their gradual, but inevitable failure.

On the wrong choice of investment appraisal criteria, it should be noted that the criteria used to evaluate a particular business performance are the major determinants of whether such business investment would be viewed worthwhile or not. Consequently, painstaking effort is sought to be exerted in selecting investment evaluation criteria Wrong choice of investment evaluation criteria will apparently lead to the demise of the business enterprise as this would lead to recommending an investment that ought not have been undertaken.

Long term investments are more concerned with long-term viability and profitability. Consequently criteria that will reflect the potential viability and profitability of such projects in the long-run are ideal. On the other hand, short-term investments are often most concerned with their potential profit generating capacities in the short-run. Therefore, the ideal criteria for evaluating such investments will be those that tend to reflect their inherent short-term profitability. Some of the criteria that may be used in evaluating the viability of investments based on quantitative reasoning are cost-benefit ratios, CBR pay-back period. PBP accounting rate of returns ARR and discounted cash flow techniques such as Net Present Value, NPV, Internal Rate of Returns, IRR, and Profitability Index PI, etc.

In Nigeria, most investment projects had failed probably because little or no attention was paid to the choice of investment decisions criteria. Investment appraisal techniques are at times incorporated in feasibility studies. Unfortunately, feasibility studies are often not adhered to, in executing the project of most Nigeria business enterprises especially in the public sector due to one political reason or the other; the resultant effect being failure of the various investments.

Accountability and control are indispensable ingredients for the success of any business enterprise. The concept of accountability entails keeping accurate records of all transactions pertaining to the business in question with a view to providing basis for stewardship reporting as and when needed. The concept of control on the other hand, entails ensuring that the objectives for which this business is meant are actualised, by making sure that actual results tally with anticipated benefits.

In Nigeria, as is the case in most developing countries of Africa, Asia, etc, most people entrusted with the management and control of public and private business enterprises do not even know what the concepts of accountability and control are all about. Where they do, they deliberately ignore the two vital ingredients to the detriment of the investments under their auspices.

From this analysis, it would be clear that the problems of the Nigerian business enterprise depend on the nature of the enterprise and also the sector to which the enterprise belong. Again, the distribution or structure of the component problems will necessarily depend on these two criteria.

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