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Thursday, 27 February 2014

ENTREPRENEURSHIP IN NIGERIA: NOT A POT OF GOLD

The motivations are that they want to wait for the cheque at the end of the month and they want to be their own bosses. Entrepreneurship in Nigeria, just like in any part of the world has been romanticized. Politicians claim to be them, unemployed youths or laid-off workers dream to be them and countless business books extol them. When your blogger was in the University of Benin, students in all fields did not see the use of this newly introduced prerequisite course. Shortly after graduation, given the high rate of 
unemployment everyone aspired to be one.

But do Nigerians understand who an entrepreneur is? 

At this point, the zeal melts into cerebral confusion. There are a couple of perspectives on this. The first, often the most popular is that entrepreneurs are people who run their own business. This is where the self-employed and small business owner’s fall into. The second, a Schumpeterian view, is that entrepreneurs are those who innovate (disrupt the normal ways of doing things), i.e. people who generate ideas and personify these ideas in high-growth businesses.

This dichotomy of views – between the small business owners and innovators – plays an important role within a country’s economy.  Measuring how entrepreneurial an economy is usually adopts the small business view. This however gives obstinate perspectives. With such measures, countries like Egypt would come out as more entrepreneurial than the United States. The truth is that most self-employed people do physically exhausting work. Like construction, plumbing, cleaning, car-repairing, taxi and truck driving. Small business people also tend to keep their businesses small enough to manage or want to grow them so fast that they go burst due to bad management.

Magnus Henrekson and Tino Sanandaji, researchers at Research Institute of Industrial Economics, Sweden, reckon a better measure for capturing entrepreneurial dynamism could be by measuring the amount of self-made billionaires or even multi-millionaires in a country. They demonstrate in their research paper that entrepreneurial density was related to economic dynamism (patents or venture capitalism).
The point is that countries with a lot of small start-ups and self-employed people are often stagnant ones, like Egypt and yes, Nigeria. This is because such businesses spring up because of the lack of opportunities. They can’t grow because everyone does what they do. In Nigeria it gets worse, business people lack a speciality, making it impossible to be serial entrepreneurs (the ability to come with new business ideas and start up new companies). They are not audited and don’t pay tax. This makes them want to remain small.

Many people are hybrid (those in wage work) or parallel (jacks-of-all-crafts) entrepreneurs or both. A possible reason for this could be because there are lot opportunities in various untapped areas of the economy. But the other side of the story is that with the lack of speciality, most business people spawn out new ones out of necessity, not innovation.

Finance is hard to get, there are layers upon layers of red tape and businesses are badly run. The consequences of these are that Nigerian business people become masters of nothing. Then the misconception of risk deters prospective entrepreneurs from putting all their resources in one basket. People everywhere, including Nigeria, are given the impression that entrepreneurship is all about risk taking. Sadly, that’s for gamblers. It’s wrong to think that something is at risk when starting a business. It’s more of an experiment, which is well thought off and carefully executed.

Teaching entrepreneurship in schools might not be the solution but it could help if modules focus on innovation, not risk. An entrepreneur should be someone that manages and organizes business with considerable initiative. The concept of risk should be directed towards potential investors. Unfortunately, in Nigeria, there are no self-made billionaires, maybe few multi-millionaires; many have extracted their wealth from the state or have inherited it. Your blogger was once told by a politician, that there were so many politicians that were seating on vast piles of cash and had no clue on what to do with it.

Can Nigeria produce Schumpeterian entrepreneurs who can modernise its economy? Many wealthy entrepreneurs got rich from starting their own businesses. Entrepreneurs tend to be well educated and are not school drop-outs who tinker with different businesses. The gold mines to focus on are in high-tech firms and in the financial services. That probably explains billionaire and multi-millionaire hubs like London, Silicon Valley, New York and Boston.