New Business Creation in Nigeria Falls to 3-year Low — Report
Businesses in Nigeria are no longer throwing caution to the wind, as the creation of new enterprises has reached its lowest levels in three years, driven by a weaker expansion plan, a new report shows.
According to a State of Entrepreneurship report published by the FATE Institute, the research and policy arm of FATE Foundation, the business birth rate in Africa’s top crude producer declined to 24 per cent in 2024, even as 87 per cent of the surveyed respondents were optimistic about opportunities.
“In 2024, the business birth rate in Nigeria fell to 24%, from 30% in 2023 and 32% in 2022. This slowdown in business creation was largely due to Nigeria’s harsh economic conditions,” the report revealed.
According to the report, which surveyed more than 10,000 businesses across the 36 states, the entrepreneurial index of the country also saw a downward trend, reaching 0.46. This score is lower when compared with 0.52 in 2023 and 0.58 in 2022, indicating a deterioration in the state of entrepreneurship in the country
“The decline in the entrepreneurial index reflects the following: lower business birth rates when compared to 2023; fewer businesses experienced growth and created jobs; low levels of skills adoption among entrepreneurs; and the persistence of challenges such as exchange rate depreciation, high inflation, insecurity and poor power supply.”
Nigerian businesses are experiencing a tough economic situation that’s continued to weigh on growth, expansion and overall profitability.
A devaluation of the naira and immediate scrapping of petrol subsidies without speedy targeted cushioning saw inflation spiral to an almost three-decade high, and the currency lost more than 70 per cent of its value.
Even though the economy is stabilising with headline inflation moderating for the fourth consecutive month in July and a potential downward trend, and the naira is now more predictable today than at any time in the last few years, businesses are still cautiously optimistic, as 68 per cent expressed plans to expand.
“This is a significant drop from 78% in 2023. This indicates that many entrepreneurs are cautiously optimistic about the future given the numerous challenges in the business environment,” the report stated.
SOURCE: Business Day