Nigerian Business Startups Hit Three-Year Slump Amid Economic Headwinds, Report Reveals

Nigeria's entrepreneurial spirit is facing a tough test, as new business formations have plunged into a three-year decline, according to the latest insights from a prominent watchdog group.

The 2024 State of Entrepreneurship Report, released by Fate Foundation, paints a sobering picture: The business birth rate tumbled to 24% last year, a sharp drop from 30% in 2023 and 32% in 2022. This slide has dragged the overall entrepreneurial index down to 0.46 in 2024, from 0.52 the previous year and 0.58 in 2022, signaling a cooling off in the once-buzzing startup scene.

Experts pin the downturn on a perfect storm of economic pressures, including scarce financing options, unreliable electricity, rising insecurity, foreign exchange woes, and crumbling infrastructure. Throw in rampant inflation and a weakening local currency, and it's no wonder aspiring founders are hitting pause. The report stresses that most new ventures stem from sheer necessity rather than opportunity, highlighting how these barriers are stifling innovation at the grassroots level.

Yet, amid the gloom, glimmers of hope emerge from underrepresented groups. Female entrepreneurs bucked the trend, launching 47% of new businesses in 2024—up from 42% in 2023—and now helm 48% of all surveyed enterprises, a rise from 43% in 2021. Youth-led outfits, making up 44.4% of the total, are leaning hard into tech, with 72% adopting digital tools; those who did saw 71.4% reporting growth. Still, challenges persist: Only 63% of female-led businesses expanded last year, trailing the 64.3% for male-led ones, and overall job creation and skills uptake have softened across the board.

Adenike Adeyemi, Executive Director at Fate Foundation, struck an optimistic note despite the hurdles. "The 2024 survey reveals lower business growth rates, fewer jobs created, lower levels of skills adoption among entrepreneurs, and the persistence of challenges such as local currency depreciation, high inflation, insecurity, and poor power supply," she said. "Yet, we note some green shoots, particularly among female and youth-led businesses. Female-led businesses have shown a notable increase in both market participation and growth. At the same time, youth entrepreneurs have become a driving force, leading technology adoption at an impressive rate of 72%. These trends underscore the potential of inclusive policies and technology-driven interventions to foster sustainable growth."

Looking ahead, the report calls for bold action from policymakers: Stabilize the economy to lure foreign investment and boost non-oil exports, streamline business registration for informal players, and foster public-private forums for knowledge-sharing. As Nigeria grapples with these realities, nurturing female and youth innovators could prove key to reigniting the entrepreneurial fire and steering the nation toward a more vibrant future.