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SMEs: Warning Signs of Business Failure in COVID-19 Era

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Signs of Business Failure

By Timi Olubiyi, Ph.D.

The high failure rate of start-ups and SMEs in Nigeria, give a bleak picture of the sector’s potential to contribute significantly to job creation, economic growth and poverty reduction.

The big question is why do businesses fail so easily? This could be adjudged to the fact that most of the SMEs especially the micro-businesses are unstructured and operate informally in the country.

Nonetheless, when these businesses are in the failing path, the entrepreneur or SME operator is unaware of it happening, until it is often too late.

The survival of SMEs is even a bigger worry this time because of novel coronavirus (COVID-19) related negative impact, harsh business environment, insecurity among others.

With the pandemic, virtually every aspect of our lives is affected, with a significant adverse impact on trade, investment, business sustainability, and employment generation.

The primary objective of this article is to present the causes and predictors of the failure of these SMEs in the country.

In the context of this article, the term failure means any form of closure, either through bankruptcy, liquidation, prevention of further losses, abandon and re-starting another business, and/or due to personal choice (such as early retirement).

Small businesses in the context of this article is defined based on the number of employees in a business entity. Therefore, small and medium enterprises (SME) is a business employing 1 to 200 persons.

However, micro business is defined as entities employing 1 to 9 persons and small businesses employ 10 to 49 persons. In a similar vein, medium enterprises are businesses employing 50 to 199 persons. All businesses that employ from 200 persons and above are termed as big or large enterprises.

It is imperative to state that business failure is the last stage of an organization’s life cycle. The failure of SMEs or any business organization is an event which can produce substantial losses to creditors, stakeholders, and/or stockholder.

While there is multitude of conditions and reasons that can result into business failure, the key predictor of SMEs’ failure and death of businesses is the business environment.

Nigeria, like most African countries, lack basic infrastructure and action plan for businesses to thrive conveniently and the environment is a harsh one for businesses especially start-ups.

Even though small and medium-sized enterprises (SMEs) have been proven to be a catalyst for economic development in countries all around the world, this is not entirely the situation in Africa, including Nigeria.

Sadly, the prevalence of business failure usually impacts negatively on national development and growth of any nation.

The prevalent business failure in Nigeria could be one of the major setbacks to economic growth and high unemployment rate in the country.

Records reveal that SMEs are the largest employers of labor globally and if this vital sector suffers failure predominant, then the level of unemployment in the country might not abate.

From observation around, especially in Lagos State, the economic nerve center, and SME hub of the country, only a fraction of new businesses survives for the first five years and only one-third of new businesses can survive for 10 years.

According to Bloomberg, 8 out of 10 entrepreneurs who start businesses fail within the first 18 months, which is a whopping 80 percent business failure rate.

In addition, it is estimated that the failure rate of SMEs in Nigeria is as many as 80 percent within the five years of operation, according to findings of Stanbic IBTC.

Experts also corroborate these assertions, saying about 80 percent of Small and Medium Enterprises (SMEs) in Nigeria fail within the first five years of their existence due to lack of experience and other wrong business practices.

The anticipated catalyst to this high rate of business failure in Nigeria is the COVID-19 pandemic with the current realities.

We are likely to witness an extremely high post-pandemic business shut down, job loss, and a persistent decrease in outputs and revenue expectations of SMEs in Nigeria.

However, government can do more by rolling out measures to support this SMEs especially through the COVID-19 disruptions.

With government intervention, high number of business failures can be forestalled because the pandemic is already impacting negatively on distribution and supply chain of businesses.

Nonetheless, even though the environment is a critical factor in the ease of doing business, a harsh and difficult one exists in this country with or without COVID-19.

Government action plan and focus is imperative to develop this sector which is widely accepted as economic growth driver.

Recently, a survey conducted on small business in Lagos State indicated that the failure predictors is in two broad categories, namely internal or managerially controllable causes and external or non-controllable causes.

The internal factors the participants of the survey cited are (1) Financial resources like funding inadequacy, lack of profit, poor accounting practice, cash flow inadequacies, lack of viable investment opportunities, and low or no source of income. (2) Physical resources like the company location, abysmal culture, old equipment, and technology issues. (3) Human resources like managerial inadequacy, poor staffing, poor morale and customer dissatisfaction.

Other factors depend on business leaders’ decisions.

Example of this includes no management structure, no differentiation of ownership and management, no succession plan, unprofitable business model, lack of uniqueness, poor knowledge of the operating sector and its value chain, value dysfunctional, even rapid growth and over-expansion was cited, and not in touch with customer needs, etc.

These factors can easily be forecasted with some level of reliability, and therefore, a company has a good chance of reducing this form of business risk.

The company leadership usually have control over internal factors, what is required is just adequate managerial skills and continuous education to set things right.

However, findings indicated that this important feature is usually missing in the SME operators and business leaders.

The external or non-controllable causes of small business failure as perceived by a sample of small business owners and managers surveyed are as follows: government policies, natural factors infrastructure failures and deficits, stiff competition, rising costs of doing business, social, legal and political changes, even common macroeconomic factors such as business cycles, recessions, insecurity, government debt, inflation, high taxation, exchange rates, high-interest rates, excessive regulations, and/or a lack of interest from the public in the business’s offerings are just a few.

The power (electricity) situation in Nigeria has been a great cause for concern for businesses, investors, and citizens at large and is equally significant in the overall performance of the economy.

These infrastructure gaps and weak macroeconomic factors can be blamed on the depressed economy and prevalent business failure in Nigeria.

Because a depressing economy will impact negatively on firm’s sales, which in turn negatively affect firm’s business continuity.

It is imperative to state that these macroeconomic factors and external causes cannot be controlled or forecasted by entrepreneurs and SME operators.

Consequently, it poses a big risk to businesses unless government intervene decisively and give the needed policy responses. This is the big prayer of all SMEs and entrepreneurs in the country.

The warning signs of failure of SMEs are either one or the multiplicity of internal and external factors mentioned above.

SMEs can also fail if the business lack a contingency plan to react and mitigate any of the challenges in the event of any crisis.

The best way to manage and mitigate business failure due to these factors is to maintain an adequate level of capital.

A company with adequate financial resources can more effectively weather some level of business risk. Even at that, it is important to state that the prevalence of business failure is a vital indicator of the state of economy in any country.

Conclusively, despite the high rate of business failure much is still desired, if 80 percent of new businesses fail, according to Bloomberg, then 20 percent of new businesses can succeed and this percentage can also scale up. But how? Whether you desire to start a new business or you are already running a business, you must understand that success depends on careful strategic planning and sound fiscal management.

SME operators need to critically identify the actual business growth drivers and leverage strongly on them for sustainable business study.

With the COVID-19 pandemic forcing most SME operators to work remotely or even stay at home, this new normal could affect service quality and also cause severe business disruption.

Therefore, entrepreneurs need to understand the current competitive marketspace, customers’ needs and their current buying habits.

For SME operators to stem the tide of the current realities, effective communication with employees and customers is necessary to thrive, this can be achieved with effective use of technology and mobile telephony.

Furthermore, strategy to mitigate the predictors of business failure along with adequate business process review needs to be in place to cope with the operational stress generated by COVID-19.

Additionally, it is key to leverage on technological innovation and adopt a workable risk management strategy. When this strategy is in place, companies can anticipate the risks and respond appropriately to guarantee business sustainability. Good luck!

How may you obtain advice or further information on the article? 

Dr. Timi Olubiyi holds a Ph.D. in Entrepreneurship and Small Business Management. He is a prolific investment coach, Chartered Member of the Chartered Institute for Securities & Investment (CISI) and a financial literacy specialist. He can be reached on the twitter handle @drtimiolubiyi and via email: [email protected],for any questions, reactions, and comments.

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Dangote at 69: The Man Building Africa’s Industrial Backbone

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Dangote Steel Business

By Abiodun Alade

As Aliko Dangote turns 69, his story demands to be read not as a biography of wealth, but as a case study in Africa’s unfinished industrial argument.

For decades, the continent has lived with a structural contradiction. It exports raw materials and imports finished goods. It produces crude oil but imports refined fuel. It grows cotton but imports textiles. It produces cocoa but imports chocolate. It harvests timber yet imports something as basic as toothpicks. This imbalance has not merely defined Africa’s trade patterns; it has shaped its vulnerability.

Dangote’s career can be viewed as a sustained attempt to break that cycle.

What began as a trading enterprise has evolved into one of the most ambitious industrial platforms ever built on African soil. Cement, fertiliser, petrochemicals and now oil refining are not random ventures. They are deliberate interventions in sectors where Africa has historically ceded value to others.

This is what many entrepreneurs overlook. Not the opportunity to trade, but treading the harder, riskier path of building production capacity where none exists.

Recent analyses, including those from global business commentators, have framed Dangote’s model as a “billion-dollar path” hidden in plain sight: solving structural inefficiencies at scale rather than chasing fragmented market gains. It is a strategy that requires patience, capital and an unusual tolerance for long gestation periods.

Nowhere is this more evident than in the $20 billion Dangote Petroleum Refinery in Nigeria, a project that signals a shift not just for one country, but for an entire continent. With Africa importing the majority of its refined petroleum products, the refinery represents an attempt to anchor energy security within the continent.

Its timing is not incidental.

The global energy market has become increasingly volatile, particularly during geopolitical disruptions such as the recent crises in the Middle East. For African economies, which rely heavily on imported refined fuel, such shocks translate immediately into inflation, currency pressure, fiscal strain and higher poverty.

In those moments, domestic capacity ceases to be a matter of convenience and becomes one of sovereignty.

Dangote Petroleum refinery has already begun to play that role. By supplying refined products at scale, it reduces Africa’s exposure to external supply shocks and dampens the transmission of global price volatility into local economies. It is, in effect, a buffer against instability in a world where supply chains are no longer predictable. The refinery is not infrastructure. It is insurance against global instability.

But the ambition does not end there.

Dangote has articulated a vision to grow his business empire to $100 billion in value by 2030. This is not simply a statement of scale. It is a signal of intent to build globally competitive African industrial capacity.

When realised, such a platform would place an African conglomerate in a category historically dominated by firms from China, the United States and India—economies that have long leveraged industrial champions to drive national development.

The implications for Africa are significant.

Industrial scale matters. It lowers costs, improves competitiveness and attracts ecosystems of suppliers, logistics networks and skilled labour. Dangote’s cement operations across more than ten African countries have already demonstrated this multiplier effect, reducing import dependence while stabilising prices in local markets.

The same logic now extends to fertiliser, where Africa’s largest urea complex is helping to address agricultural productivity, and to refining, where fuel supply stability underpins virtually every sector of the economy.

Yet perhaps the most interesting shift in Dangote’s trajectory is philosophical.

In recent years, Dangote’s interventions have moved beyond industry into social infrastructure. A N1 trillion education commitment aimed at supporting over a million Nigerian students suggests an understanding that industrialisation without human capital is incomplete.

Factories can produce goods. Only education produces capability.

This dual focus—on both production and people—mirrors the development pathways of countries that successfully transitioned from low-income to industrial economies. In South Korea, for instance, industrial expansion was matched by aggressive investment in education and skills. The result was not just growth, but transformation.

Africa’s challenge has been the absence of such an alignment.

Dangote’s model, while privately driven, gestures toward that possibility: an ecosystem where energy, manufacturing and human capital evolve together.

Still, there are limits to what just one industrialist can achieve.

No matter how large, private capital cannot substitute for coherent policy, regulatory clarity and institutional strength. Industrialisation at scale requires coordination between state and market, not tension between them. This remains Africa’s unresolved question.

Beyond scale and industry, Aliko Dangote’s journey is anchored in faith—a belief that success is not merely achieved, but granted by God, and that wealth is a trust, not an end. His philanthropy reflects that conviction: that prosperity must serve a higher purpose. History suggests that, by divine providence, such figures appear sparingly—once in a generation—reminding societies that impact, at its highest level, is both economic and spiritual.

Dangote’s career offers both inspiration and caution. It shows that African industrialisation is possible, that scale can be achieved and that global competitiveness is within reach. But it also highlights how much of that progress still depends on singular vision rather than systemic design.

At 69, Dangote stands at a pivotal moment, not just personally, but historically.

He has built assets that did not previously exist. He has challenged economic assumptions that persisted for decades. And he has demonstrated that Africa can do more than export potential; it can manufacture reality. But the deeper test lies ahead.

Whether Africa transforms these isolated successes into a broader industrial awakening will determine whether Dangote’s legacy is remembered as exceptional—or foundational.

In a fragmented global economy, where supply chains are shifting and nations are turning inward, Africa has a unique opportunity to redefine its place.

Africa must now make a deliberate choice. For too long, its development path has been shaped by external prescriptions that prioritise consumption over production, imports over industry and short-term stability over long-term capacity. International institutions often speak the language of efficiency, yet the outcome has too frequently been a continent positioned as a market rather than a manufacturer—a destination for surplus goods rather than a source of value creation. This model has delivered dependency, not resilience. Industrialisation is not optional; it is the foundation of economic sovereignty. Africa cannot outsource its future. It must build it—by refining what it produces, manufacturing what it consumes and resisting the quiet drift towards becoming a permanent dumping ground in the global economy.

At 69, Aliko Dangote stands not at the end of a journey, but on the cusp of a larger question.  His factories, refineries and investments are more than monuments of capital; they are proof that Africa can build, can produce and can compete. But no single individual can carry a continent across the threshold of industrialisation. The deeper test lies beyond him.

Whether Africa chooses to scale this vision or retreat into the familiar comfort of imports will define the decades ahead. Dangote has shown what is possible when ambition meets execution. The question now is whether others—governments, institutions, and investors—will match that courage with corresponding action.

History is rarely shaped by what is imagined. It is shaped by what is built.

Abiodun, a communications specialist, writes from Lagos

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Why Creativity is the New Infrastructure for Challenging the Social Order

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Professor Myriam Sidíbe

By Professor Myriam Sidíbe

Awards season this year was a celebration of Black creativity and cinema. Sinners directed by Ryan Coogler, garnered a historic 16 nominations, ultimately winning four Oscars. This is a film critics said would never land, which narrates an episode of Black history that had previously been diminished and, at some points, erased.

Watching the celebration of this film, following a legacy of storytelling dominated by the global north and leading to protests like #OscarsSoWhite, I felt a shift. A movement, growing louder each day and nowhere more evident than on the African continent. Here, an energetic youth—representing one-quarter of the world’s population—are using creativity to renegotiate their relationship with the rest of the world and challenge the social norms affecting their communities.

The Academy Awards held last month saw African cinema represented in the International Feature Film category by entries including South Africa’s The Heart Is a Muscle, Morocco’s Calle Málaga, Egypt’s Happy Birthday, Senegal’s Demba, and Tunisia’s The Voice of Hind Rajab.

Despite its subject matter, Wanuri Kahiu’s Rafiki, broke the silence and secrecy around LGBTQ love stories. In Kenya, where same sex relationships are illegal and loudly abhorred, Rafiki played to sold-out cinemas in the country’s capital, Nairobi, showing an appetite for home-grown creative content that challenges the status quo.

This was well exemplified at this year’s World Economic Forum in Davos when alcoholic beverages firm, AB InBev convened a group of creative changemakers and unlikely allies from the private sector to explore new ways to collaborate and apply creativity to issues of social justice and the environment.

In South Africa, AB inBev promotes moderation and addresses alcohol-related gender-based violence by partnering with filmmakers to create content depicting positive behaviours around alcohol. This strategy is revolutionising the way brands create social value and serve society.

For brands, the African creative economy represents a significant opportunity. By 2030, 10 per cent of global creative goods are predicted to come from Africa. By 2050, one in four people globally will be African, and one in three of the world’s youth will be from the continent.

Valued at over USD4 trillion globally (with significant growth in Africa), these industries—spanning music, film, fashion, and digital arts—offer vital opportunities for youth, surpassing traditional sectors in youth engagement.

Already, cultural and creative industries employ more 19–29-year-olds than any other sector globally. This collection of allies in Davos understood that “business as usual” is not enough to succeed in Africa; it must be on terms set by young African creatives with societal and economic benefits.

The key question for brands is: how do we work together to harness and support this potential? The answer is simple. Brands need courage to invest in possibilities where others see risk; wisdom to partner with those others overlook; and finally, tenacity – to match an African youth that is not waiting but forging its own path.

As the energy of the creative sector continues to gain momentum, I am left wondering: which brands will be smart enough to get involved in our movement, and who has what it takes to thrive in this new world?

Professor Sidíbe, who lives in Nairobi, is the Chief Mission Officer of Brands on a Mission and Author of Brands on a Mission: How to Achieve Social Impact and Business Growth Through Purpose.

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Why President Tinubu Must End Retirement Age Disparity Between Medical and Veterinary Doctors Now

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Tinubu Türkiye

By James Ezema

To argue that Nigeria cannot afford policy inconsistencies that weaken its already fragile public health architecture is not an exaggeration. The current disparity in retirement age between medical doctors and veterinary professionals is one such inconsistency—one that demands urgent correction, not bureaucratic delay.

The Federal Government’s decision to approve a 65-year retirement age for selected health professionals was, in principle, commendable. It acknowledged the need to retain scarce expertise within a critical sector. However, by excluding veterinary doctors and veterinary para-professionals—whether explicitly or by omission—the policy has created a dangerous gap that undermines both equity and national health security.

This is not merely a professional grievance; it is a structural flaw with far-reaching consequences.

At the heart of the issue lies a contradiction the government cannot ignore. For decades, Nigeria has maintained a parity framework that places medical and veterinary doctors on equivalent footing in terms of salary structures and conditions of service. The Consolidated Medical Salary Structure (CONMESS) framework recognizes both professions as integral components of the broader health ecosystem. Yet, when it comes to retirement policy, that parity has been abruptly set aside.

This inconsistency is indefensible.

Veterinary professionals are not peripheral actors in the health sector—they are central to it. In an era defined by zoonotic threats, where the majority of emerging infectious diseases originate from animals, excluding veterinarians from extended service retention is not only unfair but strategically reckless.

Nigeria has formally embraced the One Health approach, which integrates human, animal, and environmental health systems. But policy must align with principle. It is contradictory to adopt One Health in theory while sidelining a core component of that framework in practice.

Veterinarians are at the frontline of disease surveillance, outbreak prevention, and biosecurity. They play critical roles in managing threats such as anthrax, rabies, avian influenza, Lassa fever, and other zoonotic diseases that pose direct risks to human populations. Their contribution to safeguarding the nation’s livestock—estimated in the hundreds of millions—is equally vital to food security and economic stability.

Yet, at a time when their relevance has never been greater, policy is forcing them out prematurely.

The workforce realities make this situation even more alarming. Nigeria is already grappling with a severe shortage of veterinary professionals. In some states, only a handful of veterinarians are available, while several local government areas have no veterinary presence at all. Compelling experienced professionals to retire at 60, while their medical counterparts remain in service until 65, will only deepen this crisis.

This is not a theoretical concern—it is an imminent risk.

The case for inclusion has already been made, clearly and responsibly, by the Nigerian Veterinary Medical Association and the Federal Ministry of Livestock Development. Their position is grounded in logic, policy precedent, and national interest. They are not seeking special treatment; they are demanding consistency.

The current circular, which limits the 65-year retirement age to clinical professionals in Federal Tertiary Hospitals and excludes those in mainstream civil service structures, is both administratively narrow and strategically flawed. It fails to account for the unique institutional placement of veterinary professionals, who operate largely outside hospital settings but are no less critical to national health outcomes.

Policy must reflect function, not merely location.

This is where decisive leadership becomes imperative. The responsibility now rests squarely with Bola Ahmed Tinubu to address this imbalance and restore coherence to Nigeria’s health and civil service policies.

A clear directive from the President to the Office of the Head of the Civil Service of the Federation can correct this anomaly. Such a directive should ensure that veterinary doctors and veterinary para-professionals are fully integrated into the 65-year retirement framework, in line with existing parity policies and the realities of modern public health.

Anything less would signal a troubling disregard for a sector that plays a quiet but indispensable role in national stability.

This is not just about fairness—it is about foresight. Public health security is interconnected, and weakening one component inevitably weakens the entire system.

Nigeria stands at a critical juncture, confronted by complex health, food security, and economic challenges. Retaining experienced veterinary professionals is not optional; it is essential.

The disparity must end—and it must end now.

Comrade James Ezema is a journalist, political strategist, and public affairs analyst. He is the National President of the Association of Bloggers and Journalists Against Fake News (ABJFN), National Vice-President (Investigation) of the Nigerian Guild of Investigative Journalists (NGIJ), and President/National Coordinator of the Not Too Young To Perform (NTYTP), a national leadership development advocacy group. He can be reached via email: [email protected] or WhatsApp: +234 8035823617.

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