4 Reasons Why Startups Fail in Nigeria


Startups in Nigeria have to fight against so many harsh economic factors that one would be right to conclude that the business climate in Nigeria is actively vying for their failure; some of these factors where highlighted in the 2014 World Bank Enterprise survey, which surveyed over 2000 small Nigerian business and outlined the biggest obstacles to doing business in Nigeria.


Source: World Bank Enterprise Survey, 2014


But in spite of these external factors stacked up against business success, Nigerian entrepreneurs still need to find ways to keep their startups afloat. The harsh reality is that a lot of startups fail and as you can see, Nigeria isn’t trying that hard to help correct this trend; but there is as much to learn from business failure as there is to learn from success.  So in this article, I will be focusing on internal factors that are within our control and highlighting 4 common ‘internal’ reasons why startups fail in Nigeria:


(1) Lack of market need

If there’s no demand or need for the product or service you’re providing, then your startup won’t be around for very long. In fact, about 42% of startups fail due to lack of market demand. The economic conditions in Nigeria understandably force people to start businesses with the focus of making money but this mindset doesn’t always bode well for business success. It is absolutely essential that your business is centered on satisfying a particular need that people have, in order to ensure that what you’re providing has an existent market.

If you have already started a business and realize that your product/service has no market demand, then you’ll need to pivot a little. Nigeria currently presents quite a few problems for its citizens, take a step back and ask yourself: “Which of these problems can I solve with the resources within my reach?”. Answering this question is the starting point to turning your business around and basing it on a need that people have.


(2) Mismanagement of money

Due the ‘access to finance’ problem we have in Nigeria, raising sufficient capital to start and run a business is often a challenge for a lot of entrepreneurs, so proper management of business funds has never been more important.

Mismanagement of money in Nigerian businesses typically takes the form of mixing personal and business funds or giving too much credit to customers based on sentiment. This then results in the business being owed a lot of money, and the more debt a business has, the higher the risk of it folding up.

It is imperative that proper money management systems, such as credit limits for customers and a clear segregation between the business and personal accounts, are put in place to help positive cashflow in your business. It is also advisable to have a concrete plan to identify where your startup’s main cash needs lie and when the cash needs arise. This will enable you focus on eliminating unnecessary expenses and help you deliver your product or service in a manner that adds value but doesn’t tie up resources.


(3) Lack of focus

Lack of focus is often a real challenge for startup entrepreneurs because startups usually include constant changes in priorities in a bid to find the right business model. However, once you’ve nailed down a particular business model that works, it is important to stick to it and build on it. Delving into too many new areas or adding new features too soon will likely confuse your customers and blur what exactly you’re trying to provide.

Of course, once you have a bigger brand and more resources, you can pay to expand your book selling business to ‘the everything store’ like Amazon did. But at the early stages, it’s important to limit your scope to the key functions that really matter to a majority of customers, to ensure that what your business stands for is abundantly clear and to avoid spreading your resources too thin.


(4) Poor customer service

Poor customer service is a major problem in Nigeria and it is, by far, the easiest way to lose customers. I can’t count the amount of times I’ve sworn off patronizing a particular business just because their customer service was awful. Your staff members are usually the direct link between your business and your customers, their professionalism and customer service etiquette must not be compromised for anything if you want to keep your customers happy.

Moreover, the best form of advertisement for your business is through satisfied customers. Treat your customers well and they will not only be willing to come back but also be more likely to refer your business to others.


Well that’s it for now, these are just a few problems I’ve identified that lead to startup failure and I hope you can learn from them. For every problem, there is a solution and understanding a problem is the first step to overcoming it or avoiding it. It’s very important for startup entrepreneurs to take initiative and learn from as many business problems, mistakes and failures as possible in order to increase their chances of success.

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