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Rising Economic Pressures Force Many Nigerians to Abandon Entrepreneurial Pursuits and Rejoin Job Market

An increasing number of Nigerians are abandoning their entrepreneurial pursuits and returning to the job market. According to the 2023 social statistics report by the National Bureau of Statistics (NBS), the number of individuals operating as small-scale industrialists across various economic sectors stood at 170,098 in 2022. This represents a 45% decline from the 246,200 recorded in 2020 and a decrease from 213,402 in 2021. The new data also indicates that 76,102 Nigerians decided to end their entrepreneurial pursuits within two years.

 

A sectoral analysis of this decline reveals significant drops across various industries:

 

Education Sector:

– 2020: 56,321

– 2021: 49,749

– 2022: 39,876

 

Real Estate Sector:

– 2020: 19,956

– 2021: 12,720

– 2022: 8,313

 

Agriculture Sector:

– 2020: 39,109

– 2021: 36,431

– 2022: 36,348

 

Information and Communication Technology (ICT) Sector:

– 2020: 33,842

– 2021: 28,816

– 2022: 23,101

 

Manufacturing Sector:

– 2020: 27,723

– 2021: 20,736

– 2022: 17,450

 

Mining Sector:

– 2020: 24,852

– 2021: 22,721

– 2022: 22,522

 

Wholesale and Retail Trade Sector:

– 2020: 44,397

– 2021: 42,229

– 2022: 22,488

Although the NBS report did not clearly state the reasons behind the closures of many small and medium-sized enterprises (SMEs), it is not difficult to understand the underlying causes. Economic challenges have significantly affected Nigerians’ purchasing power, creating a tough environment for SMEs to thrive.

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Several factors contribute to the declining number of SMEs. The Central Bank of Nigeria’s (CBN) tightening monetary policies have played a significant role. The rising inflation, a depreciating naira, and increasing production costs have further exacerbated the situation, making it increasingly difficult for SMEs to sustain their operations.

 

Muda Yusuf, the CEO of the Centre for the Promotion of Private Enterprise (CPPE), recently voiced his concerns regarding the CBN’s interest rate policies. He stated, “My prayer was for the MPC to pause the rate hikes for a number of reasons. First, previous rate hikes have been quite aggressive, hurting output and real sector investments. Most economic operators with credit exposures to the banks have not recovered from previous hikes. Interest rates were already around the 30% threshold.”

 

Yusuf’s concerns highlight the struggles faced by businesses dealing with high-interest rates, which significantly increase the cost of borrowing and reduce the potential for investment and growth. As a result, many SMEs find themselves unable to cope with the financial strain, leading to a higher rate of business closures.

 

The impact of these economic challenges is evident in the declining numbers across various sectors. The education sector, for example, saw a reduction of over 16,000 small-scale operators between 2020 and 2022. Similarly, the real estate sector experienced a drop of more than 11,000 operators in the same period. The ICT sector, which has been a crucial driver of innovation and growth, also saw a decrease of over 10,000 operators.

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The agriculture sector, although less affected compared to others, still saw a reduction of nearly 3,000 operators from 2020 to 2022. This decline is particularly concerning given the sector’s importance in ensuring food security and providing employment in rural areas.

 

The manufacturing sector, which is vital for industrial growth and employment, experienced a decline of over 10,000 operators. The mining sector saw a smaller but still significant reduction of around 2,000 operators.

 

The wholesale and retail trade sector, which is crucial for the distribution of goods and services, experienced one of the most substantial declines, with over 21,000 operators leaving the market between 2020 and 2022.

 

The combination of these factors paints a grim picture for the future of entrepreneurship in Nigeria. The economic environment, marked by high inflation, a depreciating currency, and stringent monetary policies, has created substantial barriers for SMEs. To reverse this trend, there is a need for policy interventions that can stabilize the economy, reduce borrowing costs, and support the growth and sustainability of small businesses.

What do you think?

Written by Realinfoteam

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