Business Constraints in Nigeria: Implications on Productivity

Abstract

This study was to identify major constraints and how they effect on productivity in Nigeria using a two stage random sampling of firms from all states in Nigeria and the Federal Capital Territory was used for the study. The descriptive statistics and factor analysis were used in the analysis of the data. Artificial Intelligence, an aspect of big data analysis was also used to gauge the sentiments of the identified constraints across the Nigerian internet space. This study identified major business constraints in Nigeria using factor analysis. Of the fifteen (18) constraints identified in extant literatures and considered in this study, four main constraints predominantly featured in this present study across the three sectors as well as the whole economy: insecurity, high/multiple taxes, extortion/corruption and high bank charges. The major constraints identified in the various sectors of the Nigerian economy are those perceived to be under the purview and control of government. The next most serious set of constraints were predominantly those within the purview and control of businesses: while the variables that predominantly featured as the third set of constraints are those related to labour and policy issues. The study used categorical regression model to fit the relationship between productivity and business constraints. The findings reveal that six of the eighteen constraints have negative and significant effect on productivity across the sectors: unclear economic law, low demand, labour problems, unfavourable economic climate, high bank charges and sector have significant effect on productivity. Lack of knowledge/training was however found to have positive and significant effect on productivity. The findings in this study will guide the Central bank of Nigeria (CBN) and the various level of government in making policies that will aid survival of businesses. Identifying the major business constraints for the whole economy will guide the CBN in making decisions on general business interventions while the constraints identified across the sectors will guide the CBN in making sector specific interventions especially in the agricultural and industrial sectors.