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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: dr***********@***il.com,for any questions, reactions, and comments.

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How Christians Can Stay Connected to Their Faith During This Lenten Period

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Lenten Period

It’s that time of year again, when Christians come together in fasting and prayer. Whether observing the traditional Lent or entering a focused period of reflection, it’s a chance to connect more deeply with God, and for many, this season even sets the tone for the year ahead.

Of course, staying focused isn’t always easy. Life has a way of throwing distractions your way, a nosy neighbour, a bus driver who refuses to give you your change, or that colleague testing your patience. Keeping your peace takes intention, and turning off the noise and staying on course requires an act of devotion.

Fasting is meant to create a quiet space in your life, but if that space isn’t filled with something meaningful, old habits can creep back in. Sustaining that focus requires reinforcement beyond physical gatherings, and one way to do so is to tune in to faith-based programming to remain spiritually aligned throughout the period and beyond.

On GOtv, Christian channels such as Dove TV channel 113, Faith TV and Trace Gospel provide sermons, worship experiences and teachings that echo what is being practised in churches across the country.

From intentional conversations on Faith TV on GOtv channel 110 to true worship on Trace Gospel on channel 47, these channels provide nurturing content rooted in biblical teaching, worship, and life application. Viewers are met with inspiring sermons, reflections on scripture, and worship sessions that help form a rhythm of devotion. During fasting periods, this kind of consistent spiritual input becomes a source of encouragement, helping believers stay anchored in prayer and mindful of God’s presence throughout their daily routines.

To catch all these channels and more, simply subscribe, upgrade, or reconnect by downloading the MyGOtv App or dialling *288#. You can also stream anytime with the GOtv Stream App.

Plus, with the We Got You offer, available until 28th February 2026, subscribers automatically upgrade to the next package at no extra cost, giving you access to more channels this season.

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Turning Stolen Hardware into a Data Dead-End

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Apu Pavithran Turning Stolen Hardware

By Apu Pavithran

In Johannesburg, the “city of gold,” the most valuable resource being mined isn’t underground; it’s in the pockets of your employees.

With an average of 189 cellphones reported stolen daily in South Africa, Gauteng province has become the hub of a growing enterprise risk landscape.

For IT leaders across the continent, a “lost phone” is rarely a matter of a misplaced device. It is frequently the result of a coordinated “snatch and grab,” where the hardware is incidental, and corporate data is the true objective.

Industry reports show that 68% of company-owned device breaches stem from lost or stolen hardware. In this context, treating mobile security as a “nice-to-have” insurance policy is no longer an option. It must function as an operational control designed for inevitability.

In the City of Gold, Data Is the Real Prize

When a fintech agent’s device vanishes, the $300 handset cost is a rounding error. The real exposure lies in what that device represents: authorised access to enterprise systems, financial tools, customer data, and internal networks.

Attackers typically pursue one of two outcomes: a quick wipe for resale on the secondary market or, far more dangerously, a deep dive into corporate apps to extract liquid assets or sellable data.

Clearly, many organisations operate under the dangerous assumption that default manufacturer security is sufficient. In reality, a PIN or fingerprint is a flimsy barrier if a device is misconfigured or snatched while unlocked. Once an attacker gets in, they aren’t just holding a phone; they are holding the keys to copy data, reset passwords, or even access admin tools.

The risk intensifies when identity-verification systems are tied directly to the compromised device. Multi-Factor Authentication (MFA), widely regarded as a gold standard, can become a vulnerability if the authentication factor and the primary access point reside on the same compromised device. In such cases, the attacker may not just have a phone; they now have a valid digital identity.

The exposure does not end at authentication. It expands with the structure of the modern workforce.

65% of African SMEs and startups now operate distributed teams. The Bring Your Own Device (BYOD) culture has left many IT departments blind to the health of their fleet, as personal devices may be outdated or jailbroken without any easy way to know.

Device theft is not new in Africa. High-profile incidents, including stolen government hardware, reinforce a simple truth: physical loss is inevitable. The real measure of resilience is whether that loss has any residual value. You may not stop the theft. But you can eliminate the reward.

Theft Is Inevitable, Exposure is Not

If theft cannot always be prevented, systems must be designed so that stolen devices yield nothing of consequence. This shift requires structured, automated controls designed to contain risk the moment loss occurs.

Develop an Incident Response Plan (IRP)
The moment a device is reported missing, predefined actions should trigger automatically: access revocation, session termination, credential reset and remote lock or wipe.

However, such technical playbooks are only as fast as the people who trigger them. Employees must be trained as the first line of defence —not just in the use of strong PINs and biometrics, but in the critical culture of immediate reporting. In high-risk environments, containment windows are measured in minutes, not hours.

Audit and Monitor the Fleet Regularly

Control begins with visibility. Without a continuous, comprehensive audit, IT teams are left responding to incidents after damage has occurred.

Opting for tools like Endpoint Detection and Response (EDR) allows IT teams to spot subtle, suspicious activities or unusual access attempts that signal a compromised device.

Review Device Security Policies
Security controls must be enforced at the management layer, not left to user discretion. Encryption, patch updates and screen-lock policies should be mandatory across corporate devices.

In BYOD environments, ownership-aware policies are essential. Corporate data must remain governed by enterprise controls regardless of device ownership.

Decouple Identity from the Device
Legacy SMS-based authentication models introduce avoidable risk when the authentication channel resides on the compromised handset. Stronger identity models, including hardware tokens, reduce this dependency.

At the same time, native anti-theft features introduced by Apple and Google, such as behavioural theft detection and enforced security delays, add valuable defensive layers. These controls should be embedded into enterprise baselines rather than treated as optional enhancements.

When Stolen Hardware Becomes Worthless

With POPIA penalties now reaching up to R10 million or a decade of imprisonment for serious data loss offences, the Information Regulator has made one thing clear: liability is strict, and the financial fallout is absolute. Yet, a PwC survey reveals a staggering gap: only 28% of South African organisations are prioritising proactive security over reactive firefighting.

At the same time, the continent is battling a massive cybersecurity skills shortage. Enterprises simply do not have the boots on the ground to manually patch every vulnerability or chase every “lost” terminal. In this climate, the only viable path is to automate the defence of your data.

Modern mobile device management (MDM) platforms provide this automation layer.

In field operations, “where” is the first indicator of “what.” If a tablet assigned to a Cape Town district suddenly pings on a highway heading out of the city, you don’t need a notification an hour later—you need an immediate response. An effective MDM system offers geofencing capabilities, automatically triggering a remote lock when devices breach predefined zones.

On Supervised iOS and Android Enterprise devices, enforced Factory Reset Protection (FRP) ensures that even after a forced wipe, the device cannot be reactivated without organisational credentials, eliminating resale value.

For BYOD environments, we cannot ignore the fear that corporate oversight equates to a digital invasion of personal lives. However, containerization through managed Work Profiles creates a secure boundary between corporate and personal data. This enables selective wipe capabilities, removing enterprise assets without intruding on personal privacy.

When integrated with identity providers, device posture and user identity can be evaluated together through multi-condition compliance rules. Access can then be granted, restricted, or revoked based on real-time risk signals.

Platforms built around unified endpoint management and identity integration enable this model of control. At Hexnode, this convergence of device governance and identity enforcement forms the foundation of a proactive security mandate. It transforms mobile fleets from distributed risk points into centrally controlled assets.

In high-risk environments, security cannot be passive. The goal is not recovery. It is irrelevant, ensuring that once a device leaves authorised hands, it holds no data, no identity leverage, and no operational value.

Apu Pavithran is the CEO and founder of Hexnode

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Daniel Koussou Highlights Self-Awareness as Key to Business Success

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Ambassador Daniel Kossouno

By Adedapo Adesanya

At a time when young entrepreneurs are reshaping global industries—including the traditionally capital-intensive oil and gas sector—Ambassador Daniel Koussou has emerged as a compelling example of how resilience, strategic foresight, and disciplined execution can transform modest beginnings into a thriving business conglomerate.

Koussou, who is the chairman of the Nigeria Chapter of the International Human Rights Observatory-Africa (IHRO-Africa), currently heads the Committee on Economic Diplomacy, Trade and Investment for the forum’s Nigeria chapter. He is one of the young entrepreneurs instilling a culture of nation-building and leadership dynamics that are key to the nation’s transformation in the new millennium.

The entrepreneurial landscape in Nigeria is rapidly evolving, with leaders like Koussou paving the way for innovation and growth, and changing the face of the global business climate. Being enthusiastic about entrepreneurship, Koussou notes that “the best thing that can happen to any entrepreneur is to start chasing their dreams as early as possible. One of the first things I realised in life is self-awareness. If you want to connect the dots, you must start early and know your purpose.”

Successful business people are passionate about their business and stubbornly driven to succeed. Koussou stresses the importance of persistence and resilience. He says he realised early that he had a ‘calling’ and pursued it with all his strength, “working long weekends and into the night, giving up all but necessary expenditures, and pressing on through severe setbacks.”

However, he clarifies that what accounted for an early success is not just tenacity but also the ability to adapt, to recognise and respond to rapidly changing markets and unexpected events.

Ambassador Koussou is the CEO of Dau-O GIK Oil and Gas Limited, an indigenous oil and natural gas company with a global outlook, delivering solutions that power industries, strengthen communities, and fuel progress. The firm’s operations span exploration, production, refining, and distribution.

Recognising the value of strategic alliances, Koussou partners with business like-minds, a move that significantly bolsters Dau-O GIK’s credibility and capacity in the oil industry. This partnership exemplifies the importance of building strong networks and collaborations.

The astute businessman, who was recently nominated by the African Union’s Agenda 2063 as AU Special Envoy on Oil and Gas (Continental), admonishes young entrepreneurs to be disciplined and firm in their decision-making, a quality he attributed to his success as a player in the oil and gas sector. By embracing opportunities, building strong partnerships, and maintaining a commitment to excellence, Koussou has not only achieved personal success but has also set a benchmark for future generations of African entrepreneurs.

His journey serves as a powerful reminder that with determination and vision, success is within reach.

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