Indeed, Lagos is a large market but, are you taking up this opportunity?
Enabling small and growing businesses in Lagos State is an essential pivot for local and national economic transformation. According to the recently released 2017 survey by the Nigerian Bureau of Statistics (NBS) and the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), Lagos State is home to 11% of Nigeria’s small and medium scale enterprises.
Since our founding in 2000, FATE Foundation has provided pre-incubation, incubation and accelerator support to over 5,300 aspiring and emerging Nigerian entrepreneurs. About 70% of these entrepreneurs are Lagos State based, and they lead start-ups mainly in growth sectors such as agri-business, creatives, food and drinks, manufacturing, education and technology.
The increasing growth in incubators, work spaces and start-up programmes from local and international enterprise support providers show the potential that is seen in the state. The Global Start-up Ecosystem Reporting and Ranking for 2017 released by Start-up Genome noted Lagos State to be “the most valuable start-up ecosystem” on the African continent worth US$2billion and second after Cape Town with respect to the number of start-ups.
Conducting business in Lagos State as with any part of Nigeria undoubtedly comes with its set of unique challenges such as lack of power, poor infrastructure, limited funding and a business environment that is often lacking the right policy framework to effectively enable and harness our entrepreneurship potential. As with Nigerian entrepreneurs, Lagos State founders continue to prove their resilience, focus and perseverance to the world, despite the odds.
In this Spark Magazine edition, I share the following 5 strategies to further enable the state’s entrepreneurship potential.
The Knowledge Foundation: One thing Lagos State (unlike most other states) does not lack is start-up capacity-building programmes and initiatives. On any given week, a number of incubation programmes, start-up competitions, hackathons and enterprise training programmes are being conducted. Despite the availability of these programmes, there are significant gaps in the depth of enterprise and business management knowledge really required to grow a business. As a result, many entrepreneurs often acquire the barest minimum level of knowledge to run a business at the detriment of building deep skills that will empower them to develop innovative solutions. One of the ways to address this is at the foundational stage in secondary and tertiary institutions through the educational curriculum. It is important to note that this is different from technical and vocational skills that are usually taught as entrepreneurship programmes. Aspiring entrepreneurs require deep and practical exposure to entrepreneurship and business management skills particularly, financial literacy and market strategy through project based learning and practical/experiential learning.
Industry-Academia Linkages: The second way to address the knowledge foundation highlighted in the first point above is by creating effective linkages between academia and industry. As the commercial nerve center of Nigeria, Lagos State is home to a number of the country’s leading private sector institutions. There are apparent dissociations between the academia and the private sector, thereby impacting the provision of innovative solutions that are economically valuable and viable and will lead to the development of high impact enterprises. For example, it would be great to see endeavours between Yaba College of Technology and private sector companies in the creative space that lead to product solutions in the state using technology and design. This approach is feasible if on the academia/tertiary institution side, the curriculum is market aligned; focused on nurturing talent pipeline with the required technical skills and competencies; and clearly understands the market gap. Private sector will also need to provide support in terms of infrastructure and funding; have win-win strategies that enable Intellectual Property and technology transfer; and also provide placement opportunities for both students and researchers.
Sector focused Infrastructural Support: Apart from general infrastructural challenges around energy and internet, most infrastructural challenges are usually sector related. Creating infrastructural plug and play platforms will help to enhance economies of scale, pool in relevant resources, enhance access to market and aggregate sectoral policy interventions which will help improve overall conditions for doing business. A few of these platforms exist through technology incubation centers and industrial parks, however capacity is significantly limited to address the demand and the design of the locations and operating processes require significant optimisation and technology adaptation.
Enablers for Access to Capital: The Lagos State Employment Trust Fund (LSETF) has shown what can be possible with a focused attempt at providing financing for entrepreneurs. The LSETF initially established with a $25 billion fund by the Lagos State Government provides up to about N5 million funding of 5% interest per annum for Lagos based entrepreneurs. The LSETF model has shown what is possible with private and public sector support for start-up funding and is a model that can be adapted to address the significant funding gap for growth focused funding.
Data is critical: Without data, we will not be able to have a view on entrepreneurship growth and impact in the state. Just as we tell entrepreneurs the importance of understanding and making decisions with data, so should those interested in fostering entrepreneurship be clear about their use of data in programme design, monitoring, evaluation and outcome assessment.
Transitioning from Startups to Scale-Ups: While start-up support is very important, scale-up support should be the key driver of entrepreneurial focus in the state. The NBS SMEDAN survey earlier mentioned indicates that over 99% of enterprises in Nigeria are micro businesses. These are not the type of businesses that will grow the economy in the long term.
There are negative socio-economic effects of focusing on just creating start-ups/new businesses without the commitment to initiatives that focus on growing and scaling the high potential/impact ventures. To create viable entrepreneurship ecosystems, policy programmes and initiatives should support the creation of an enabling environment which fosters the sustainability of businesses that grow and scale.
These enterprises will be the ones that can drive demand across their value chains, create employment, spur innovation, improve competition and positively impacting income distribution.
SMEDAN/NBS MSME Survey Summary Report – 2013/2017
EFINA Access to Financial Services Survey – 2018
CGAP Smaller Household Survey – 2017
Gems4 Rice Cluster Mapping Report – 2016
Adenike Is the Executive Director, FATE Foundation, and is passionate about designing and implementing strategies, programmes and policies that foster entrepreneurship and high growth enterprises in Nigeria. As the head of Nigeria's foremost enterprise development non-profit, she leads the fulfilment of FATE Foundation's mission to enable aspiring and emerging Nigerian entrepreneurs to start, grow and scale their businesses.