Entrepreneurial Opportunities in Nigeria Retail Sector

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1. Introduction

Entrepreneurial ecosystem infers a specific economic and social environment that supports the

entrepreneurs to connect with people and institutions. An effective entrepreneurial ecosystem

is extremely crucial in a country in fostering entrepreneurial business growth and overall

growth of the country as well (Mago, 2023). The purpose of the current study is to explore the

possibilities of setting up a small business in the retail sector in Nigeria. In this context, the

present study is going to evaluate the entrepreneurial ecosystem of Nigeria through

incorporating factors of the Isenberg Model. Moreover, the study is going to identify the areas

of development in entrepreneurial business in Nigeria to overcome the barriers of

entrepreneurial growth in the country, exploring the possibilities and gauging the chances of

success.

ENTREPRENEURIAL OPPORTUNITIES IN NIGERIA

2. Part a: Analysis of the entrepreneurial ecosystem in Nigeria in the Retail

sector

2.1 Analysis of the entrepreneurial ecosystem through utilising Isenberg Model

Isenberg Model is a specific business framework that offers an effective entrepreneurial

ecosystem for businesses (Isenberg, 2011). The model delineates six key elements for

generating an innovative entrepreneurial ecosystem, namely, policy, finance, culture, support,

human capital and markets (Isenberg, 2011). In order to evaluate the entrepreneurial ecosystem

of Nigeria for setting up small businesses in the retail sector of the country, policy, finance,

culture, market, human capital, support factors of the framework are going to be discussed in

the current study.

Figure 1: Isenberg Model

(Source: Isenberg, 2011)

2.1.1 Entrepreneurial ecosystem in Nigeria in terms of policy and legislation

Nigeria has several policies and legislation that support entrepreneurship business growth in

the country in the retail sector. Over the last decades, Nigeria has undergone a conceptual

reorientation of policies and legislation followed by dramatic changes in business mechanisms

in promoting entrepreneurship in all sectors (Tende, 2014). Based on the Global

Entrepreneurship Monitor (GEM) report, it has been observed that Nigeria has one of the

greatest entrepreneurial intentions globally (GEM, 2013). The entrepreneurial development in

Nigeria has been executed through a bunch of policies to enhance skills, knowledge and

attitudes of the entrepreneurs in the country. The government of Nigeria has adopted friendly

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trade policies for supporting the entrepreneurs of the country in building amicable relations

with other nations which helps in strengthening competitive advantage of the start-ups in

trading (Akinyemi and Adejumo, 2018). The relaxed trade restrictions and free trade zones

help the retail sector of the country in generating cost saving business operations resulting in a

positive impact on the bottom line of the entrepreneurship retail businesses.

The Federal Government of the country has adopted the policy of establishment of Agencies

and Institutions which offer support and services to entrepreneurs. The Government-driven

Entrepreneurship Development Program (EDP) in Nigeria has targeted to promote self-

employment in the country (Ulabor, 2020). The EDP program supports entrepreneurs in setting

small businesses in the retail sector. The entrepreneurs under the National Directorate of

Employment of the country are offered with EDP training and entrepreneurial tool support

ranging from marketing, financing, suppliers and production (Tende, 2014). It has been

observed that the Nigerian Government has focused on offering educational programs for the

entrepreneurs which is helpful in developing skills and knowledge for the entrepreneurs in the

market. The Young Entrepreneurship Training Programs offer vocational and technical skills

and mentoring entrepreneurs (Kulmie et al., 2023) [Refer to Appendix 1]. Additionally, the

Business Innovation Accelerator provides standard entrepreneurship training and

empowerment to the entrepreneurs across the 6 geopolitical zones of the country. As per the

evaluation of Boldureanu et al. (2020), offering effective training to the entrepreneurs is

extremely impactful on developing business skills of individuals in thriving in the modern

dynamic business environment. The offered training supports the retail entrepreneurs in the

country significantly, addressing the worrisome phenomenon of youth unemployment in

Nigeria through developing capacity of the youths and funding their business ideas as well.

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Figure 2: Entrepreneurship Development Program (EDP)

(Source: Ulabor, 2020)

It has been observed that Nigeria possesses around 600,000 entrepreneur retailers which

contributed 97% national retail transactions in the country (Oxford Business Group, 2022).

Moreover, it has been observed that for effective implementation of government policies for

promoting entrepreneurship in the retail sector, the Nigerian Government has adopted certain

agencies such as Industrial Development Centre, National Economics Reconstruction and

Nigeria Export Promotion Council (Tende, 2014). In addition to that, as Nigeria has established

its position as a hub for entrepreneurship in the modern business world, the government of the

country has undertaken significant legislation in fostering a conducive environment for setting

up small business or startups in the country. In this regard, one of the key legislations is the

Nigerian Start-up Act of 2022 (Adelodun and Daibu, 2023). This legislation is a joint venture

of the Nigerian tech startup ecosystem and the Presidency in harnessing the potential digital

economy in entrepreneurship (Adelodun and Daibu, 2023). The Act is aimed at offering clear

and planned laws and regulations in the entrepreneurial ecosystem in the country. The

legislation helps in creating a favourable environment for entrepreneurship in the retail sector

in Nigeria through offering a regulatory framework for startup development. Thus, it can be

stated that the policy and legislation in Nigeria are on an appropriate track in offering the right

ecosystem for the entrepreneurs in the country in the retail sector through offering suitable

policies and legislation to start the business without any political or governmental barriers.

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2.1.2 Entrepreneurial ecosystem of Nigeria in terms of Finance

The Nigerian Government has designed and adopted multiple monetary and fiscal policies and

incentives for strengthening the entrepreneurs in the country. It has been observed that the

Federal Government of Nigeria adopted the strategy of training and motivating entrepreneurs

through offering funds and incentives (Tende, 2014). The National Directorate of employment

helps in approving loans to the entrepreneurs from selected commercial banks in promoting

their businesses in the dynamic marketplace (Karanasios, 2023). Though, it has been observed

that Nigeria possesses multiple taxes for businesses including high tax burdens for startups

which is difficult to overcome for the entrepreneurs. However, the Central Bank of Nigeria

offers single digit interest rates in loans for entrepreneurs (Nwajiaku, Esan and Ananwude,

2020). In this context, it can be stated that the initiative of single digit interest rates supports

the retail entrepreneurs in Nigeria in escalating their business operations without financial

barriers in the business marketplace.

Figure 3: The Tony Elumelu Foundation

(Source: Ogar, 2023)

The Federal Government of Nigeria has announced to grant $6,444 each to AI-focused

entrepreneurship businesses and researchers for developing their businesses (Nwajiaku, Esan

and Ananwude, 2020). Hence, the retail AI-driven startups can promote their businesses

through the government offered grants and survive successfully in the dynamic business

marketplace. Additionally, the Nigerian Government has announced offering PCGS Grant

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which provides 50,000 naira to around 1 million entrepreneurship businesses in 774 local

government areas of the country (Bank of Industry, 2024). Therefore, it can be stated that the

small retail business can easily hire diligent employees, promote business operations and grow

in the market of Nigeria. Apart from that, other grants, such as “Diamond Bank VET Program”,

“Shell LiveWIRE” and “FGN Alat Skillnovation” also support the Nigerian entrepreneurs in

the retail sector in promoting and growing their businesses in the Nigerian business markets

(FGN, 2024). Though it has been observed that the financial institutions of Nigeria often need

high interests and collateral rates for operating businesses which become difficult for small

businesses. It has been observed that the Bank of Industry, the largest and oldest institution of

Nigeria provides long-term funding facilities to the entrepreneurs for their economic growth.

Additionally, the Tony Elumelu Entrepreneurship Program (TEEP) offers 12-week training

programs for entrepreneurs (TEEF, 2024). Thus, it can be inferred that Nigeria has a suitable

financial framework and environment which is extremely supportive for setting up a retail

entrepreneurship business in the country through offering effective financial support.

2.1.3 Entrepreneurial ecosystem in Nigeria in terms of business markets

The Nigerian business market offers opportunities for commencing small businesses through

providing low-cost options. Nigeria is a growing economy and it has a supportive small

businesses entrepreneurship environment which is helpful in commencing small retail

businesses in the country. Centred on the GEM report, 90% of Nigerian adults believe that they

are effective in emerging as entrepreneurs in Nigeria business marketplace (GEM, 2013). It is

found that Nigeria possesses a large consumer-based market and has a vibrant entrepreneurship

ecosystem which is also extremely beneficial for starting businesses in the retail sector of the

country (GEM, 2013). Though, it has been observed that the Nigerian business market has

challenges such as high cost of doing business, poor judicial due process and insecurity. Nigeria

has an impactful network of roads and bridges which handles 90% of its freight (PwC, 2020).

However, the International Trade Administration (2021), reported that the industry network or

the transportation system of the business market of Nigeria confronts certain challenges such

as poor infrastructure, rising costs and limited access to services. As per the analysis of Afrin

and Yodo (2020), the poor infrastructure leads to road congestion causing higher travel costs

and reduction of productivity. It has been observed that Nigeria has possessed technological

advancement in 4G, 5G and internet penetration and cloud computing which led to digital

transformation in business operations. As per the evaluation of Krishnan et al. (2024),

technological advancement is highly crucial in improving customer experience, increasing

sales and inventory management in the rail sector. Apart from that, the large population and

ENTREPRENEURIAL OPPORTUNITIES IN NIGERIA

untapped natural resources of the Nigerian market offer several opportunities for the start-ups

to commerce in Nigeria and promote growth. Thus, it can be stated that though the business

market of Nigeria has certain constraints, it is an effective platform to commence retail startups

in the market.

2.1.4 Entrepreneurial ecosystem in Nigeria in terms of culture

As per the views of Chukwuma-Nwuba (2018), Hofstede argued Nigeria as a collectivist

country and people mostly value long-term and close commitment to family and relatives. This

kind of culture denotes ability to adjust and caring about relationship goals also. However, it

refers to a solid foundation towards responsibility, individual accountability along with hard

work. These features are quite suitable for entrepreneurship as it depicts habits about personal

drive as well as self-regulation.

The entrepreneurship ecosystem in Nigeria also values the innovation and skills of the

workforce available in the country. According to OC&C (2018), the innovative approach in

the entrepreneurship ecosystem in Nigeria is powered by the availability of cheap internet

which allows the businesses in Nigeria to efficiently use global cloud services. Therefore, it

can be said that the Entrepreneurial ecosystem in Nigeria is favourable.

2.1.5 Entrepreneurial ecosystem in Nigeria in terms of support

The entrepreneurs in Nigeria get adequate support from the government in terms of their

businesses. According to MSME Africa (2023), the Nigerian government is responsible for

initiating different programs that support women entrepreneurs such as enterprise and

empowerment programs, the n-power program and others. Apart from that, Okojie (2023),

different non-government organisations such as the Tony Elumelu Foundation (TEF) That

empowered more than 200,000 entrepreneurs in 54 countries in Africa.

Apart from that, private sector organisations such as National Association of small and medium

enterprises (NASME) in Nigeria contribute significantly to the growth of the entrepreneurial

ecosystem in the country (Kolawole, 2016). Therefore, it can be understood that the

entrepreneurial ecosystem in Nigeria gets support from both the government, non Government

and private organisations.

2.1.6 Entrepreneurial ecosystem in Nigeria in terms of human capital

Nigeria is a country that has not shown positive performance in terms of the development of

human resources. According to Ikyanyon, Johnson and Dawson (2020), ethnic conflicts,

tribalism, lack of skills and lack of health are the main issues in the human capital in Nigeria.

The aspect of corruption also impacts the widespread corruption in Nigeria. As per Fagbemi et

al. (2022), the development of the human capital in Nigeria is negatively affected by corruption

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and nepotism. Therefore, it can be understood that in terms of human capital, the

entrepreneurial ecosystem in Nigeria is not favourable.

2.2 Impact of effective entrepreneurial ecosystem of Nigeria for economic output and

regional development

The entrepreneurial ecosystem of Nigeria impacts significantly on economic growth and

regional development of Nigeria. The vibrant entrepreneurial ecosystem of Nigeria attracts

foreign investment resulting in economic development of Nigeria. It has been observed that the

Foreign Direct Investment in Nigeria accounted for $5.3 billion in 2022 which was $4.8 billion

in 2021(Amata, 2023) [Refer to figure 4]. Effective entrepreneurship ecosystem enhances the

resilience of businesses in the country and reduces unemployment in the country. It has been

observed that the entrepreneurship ecosystem impacted the country in reducing dependency on

imported services and goods resulting in the developing economy condition of the country.

Centred on the National Bureau of Statistics, small businesses or entrepreneurship in Nigeria

make up more than 90% of Nigerian businesses and also employ 70% of the workforces in the

country (Gumel, 2018). The impactful initiatives of the government in Nigeria encourage the

underprivileged Nigerian to pitch their innovative business ideas resulting in promoting

regional growth and economic output of the country. Entrepreneurship is supported in reducing

poverty in local areas and enhances Cross National Product and Per Capita Income in the

country (Azamat, Fayzullokh and Nilufar, 2023). New businesses and startups are getting

interested in commencing businesses in Nigeria within its effective entrepreneurial ecosystem

leading to business growth in the country. Thus, it can be inferred that an effective

entrepreneurship ecosystem in Nigeria enhances regional development and economic output in

the country through alleviating poverty, generation of employment and economic vitality and

wealth creation.

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Figure 4: Capital inflow in Nigeria

(Source: Amata, 2023)

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3. Part b: Barriers to entrepreneurship

3.1 Identification of the barriers

Centred on the above discussion on the entrepreneurial ecosystem of Nigeria, it has been

observed that the Nigerian entrepreneurship business market is confronted with certain barriers

namely, poor infrastructure, lack of financial support, high tax burdens and poor transportation

system. The identified barriers impact negatively on the growing entrepreneurship business

market of the country.

3.2 Impact of the barriers on ambitions

It has been observed that poor infrastructure in Nigeria impacts negatively on the entrepreneurs

in growing their businesses and reaching a wider customer base through increasing business

uncertainty and operation costs. As per the analysis of Arejiogbe et al. (2023), poor

infrastructure and legal system of Nigeria impact on low productivity and performance of the

startup businesses. Hence, lack of organised and structured infrastructure would affect the

ambition of commencing a small startup business in the retail sector in Nigerian business

marketplace. Additionally, it has been found that lack of capital at affordable interest rates

obstructs entrepreneurship business growth in Nigeria. The high interest rates of Nigerian

banks hinder new businesses in any sector in finding required capitals for funding their

businesses effectively. Thus, commencing a small business in the retail sector might be

challenging in the Nigerian business market for lack of financial support from financial

institutions. The businesses in the Nigerian marketplace are to undergo multiple taxations, such

as Value Added Tax, Capital Gains Tax, Withholding Tax and Companies Income Tax for

survival which enhances cost of doing businesses and loss of profitability. As discussed by

Hager and Baines (2020), businesses are required to pay multiple levies and taxes in different

government levels which boosts operational costs and profit margins of the businesses. Thus,

commencing a small start-up in the Nigerian market in the retail sector would require multiple

taxes and levies leading to expensive business operational cost. Thus, it can be inferred that

barriers, such as poor infrastructure, lack of financial support and high tax burdens would

impact negatively in commencing a small business in the retail sector in the Nigerian business

marketplace.

ENTREPRENEURIAL OPPORTUNITIES IN NIGERIA

Figure 5: Barriers in Nigerian entrepreneurship business market

3.3 Acknowledgment Areas of development or refining of the home country in the

retail sector

As figured out from the above discussion, development or refinement in business

infrastructure, finance and legislation are required for promoting entrepreneurship business

growth in the Nigerian business market. In order to encourage startups in the retail sector in the

Nigerian business marketplace, adequate physical infrastructure, such as transportation for

effective supply chain, telecommunication and energy are required in the country. As described

by Kyriacou, Muinelo-Gallo and Roca-Sagalés (2019), efficient means of transportation is

extremely crucial in promoting business infrastructure of a country. Additionally, in order to

improve business infrastructure in Nigeria, government initiatives in promoting innovation,

economic situation, easy trade and investment would be highly crucial. The Government of

Nigeria needs to offer attractive financial incentives to attract venture capital investors and

businesses in the retail sector. Moreover, provision of several financial schemes and reduction

of financial regulatory burden on entrepreneurs through operating with the private sector and

financial institutions would be impactful for Nigeria to promote financial support in enhancing

entrepreneurship in the retail sector. Apart from that, in order to reduce high tax burdens in

Nigeria, broadening of tax based through rationalising ineffective tax expenditures of corporate

income taxes, value added taxes and personal income taxes would be impactful by the

government. Thus, it can be stated that business infrastructure, legislation and finance are the

areas which are to be redefined in Nigeria in promoting entrepreneurship in the retail sector.

4. Part C: Entrepreneurial characteristics

4.1 Needs of individual characteristics of an entrepreneur to overcome barriers

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An entrepreneur requires to be adaptive and visionary minded to overcome the barriers in a

business related to the poor infrastructure, high tax burden and lack of financial support in

Nigeria. Individual characteristics of an entrepreneur supports learning and growing a business

by finding the opportunities and removing barriers (Lee, Kang and Kim, 2022). In this regard,

a few characteristics of a small entrepreneur have been demonstrated below which will be

needed for an entrepreneur to make the small retail business to be successful.

Figure 6: Skills needed for an entrepreneur for supporting a new retail business

Ability of controlling and managing risks: The risk-taking ability in an entrepreneur supports

in enhancing the scope of exploration that motivates to be steady in a problematic period

(Newman et al., 2019). An entrepreneur with the risk management ability is productive to

identify the potential challenges, assess the resources and make a strategic plan to overcome

the barrier related to poor infrastructure. However, Bednarski (2023), claimed that the

infrastructural issues related to supply chain, regulatory changes, network issues and

incompatibility are tackled with an effective resource management plan where the risk-taking

ability by an entrepreneur positively works in project scoping and capacity building. These will

be highly beneficial while starting a small retail business in Nigeria as a new entrepreneur. For

example, FoodCo Supermarkets in Nigeria includes qualified risk management specialists to

analyse the internal control process as per needs (Lawless and Reynolds, 2015). Thus, the risk

taking and management skills will be effective to control all risks such as, operational,

financial, managerial and so on as well as manage the entire operations of a newly started

business as an efficient entrepreneur in Nigeria.

Adaptability and flexibility skills: Adaptability and flexibility are other characteristics that

are required in an entrepreneur due to the necessity of embracing a changing environment

(Rawal, 2023). In this context, entrepreneurs strategically adopt the Governmental initiatives

Collaboration and communication ability

Adaptability and flexibility skills

Ability of controlling and managing risks

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to overcome the tax barriers where tax incentives for start-up companies effectively work. This

kind of initiative will be advantageous to start a retail business in Nigeria as an entrepreneur.

Additionally, Button (2019), mentioned that adoption of financial strategies related to tax

deduction, credits and incentives possess benefits for the business. For example, the

entrepreneur Aliko Dangote from the small trading firm Dangote Group, supports being

adaptive and flexible in the dynamic environment to seize unexpected opportunities (Mckinsey,

2020). Therefore, it can be stated that the above-mentioned skills will help a new entrepreneur

in Nigeria for adopting new and advanced technologies and strategies which are helpful for

starting a new small retail business. On the other hand, the flexibility skill would help an

entrepreneur in implementing and executing the adopted technologies and skills to run the

entire operation of the small retail business very smoothly in Nigeria.

Collaboration and communication ability: Collaboration and communication ability is the

utmost required characteristics in an entrepreneur to resolve the financial issues by building

networks (Vodă and Florea, 2019). It can be stated from the evaluation that collaboration with

suppliers leads towards better and affordable payment terms along with discounts that ease the

financial burdens which would be beneficial for the start-up retail business. In addition to that,

Hua, Xiaoye and Yuanfang (2022), highlighted that entrepreneur with the ability of

collaboration and communication assist in spreading costs and sharing financial risks. Hence,

it can be stated that the communication skills would assist in generating funds through

crowdfunding as a new entrepreneur while running a small retail business successfully in

Nigeria. Additionally, the collaboration skill would assist in making partnership with a big

organisation, especially retailers while reducing financial challenges in the retail start-up

business in Nigeria through building networks with suppliers, customers and the community.

4.2 Opportunities in Nigeria

It has been observed that risk-taking ability and management, adaptability and flexibility and

collaboration and communication skills are highly required for an individual entrepreneur to

overcome the barriers in the Nigerian business market namely, poor infrastructure, high tax

burdens and ineffective financial support. Risk taking ability helps the entrepreneurs in the

retail sector in learning lessons from failures in the business marketplace and shaping future

business strategies in the market (Tunio et al., 2021). Additionally, risk taking abilities and

management would be helpful for the entrepreneurs in emerging as more resilient and foster

innovation from previous failures which support growing entrepreneurship businesses in the

dynamic retail sector in Nigeria. Apart from that, the adaptability and flexibility skill of the

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entrepreneurs is better equipped with handling uncertainties and tax management in the

business market (Somwethee, Aujirapongpan and Ru-Zhue, 2023). Flexibility, resilience and

open mindedness would be supportive for the entrepreneurs in avoiding high burden taxes

through maximising tax deductions and businesses utilities in the retail sector of Nigeria. Apart

from that, collaboration and communication ability support the entrepreneurs in generating

strategic alliances with government representatives and other businesses in the market resulting

in impactful funding and financial support. Thus, it can be stated that the above-mentioned

characteristics of an entrepreneur is helpful in taking the advantage and opportunities of the

Nigerian market to commence retail business effectively.

4.3 Successful Entrepreneurs in Nigeria

Aliko Dangote has been considered as the richest entrepreneur having robust connections in

conglomerate business in Nigeria. He is the founder of the Dangote Group that deals with flour,

sugar, cement and others (Olanrewaju, 2023). He is well known in the Nigerian market as he

has started his business from scratch through selling and buying different kinds of food items

and thereafter he got involved with manufacturing business. Another successful entrepreneur,

Jim Ovia, is famous in Nigeria as this young businessman has founded Zenith Bank Group

(Olanrewaju, 2023). However, the specific bank is one of the largest banks that provides

significant African service.

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5. Conclusion

Centred on the above discussion, it can be concluded that Nigeria is an extremely potential

market for entrepreneurship business growth. It has been observed that Nigeria has effective

policies and legislation which supports entrepreneurship business in the country in an effective

manner. Additionally, the government of Nigeria has adopted multiple financial incentives,

policies and schemes which also support entrepreneurial businesses in the country.

Additionally, the business market of Nigeria is also effective in running entrepreneurship

businesses impactfully. However, it has been observed that poor infrastructure, lack of financial

support and high tax burdens are certain challenges which are associated in the

entrepreneurship business in Nigeria in the retail sector. Further, it has been also addressed that

business infrastructure, legislation and finance are the areas which are to be redefined in

Nigeria with the strong support by the government in promoting entrepreneurship in the retail

sector. In this context, it has been observed that the characteristics such as risk-taking ability,

adaptability and flexibility and collaboration and communication are effective for

entrepreneurs in overcoming the existing risks of Nigerian business marketplace and taking

advantages and opportunities of the market to develop a start-up in the retail market.

6. Recommendations

Based on the research, the following recommendation can be provided-

The entrepreneurial environment in Nigeria needs to focus on improving the skills of

the human capital of the country. The improvement in the skills of the human capital of

the country can be beneficial for the entrepreneurship in Nigeria to get access to a

skilled labour force.

It is also necessary for the government of Nigeria to have political stability. The

implementation of political stability can significantly help the entrepreneurship

environment of Nigeria to carry out their businesses in a seamless manner.

The country also needs to focus on improving the current infrastructure in order to

promote entrepreneurship. The government needs to focus optimally on the

development of both digital and physical infrastructure to facilitate the operations of

the entrepreneurship.