Low oil prices, weather fluctuations and poor crop yields, financial constraints, exchange rate crises, inflation, and massive unemployment are some of the major global economic challenges that have recently drawn attention to an often overlooked economic concept of entrepreneurship. The world is in need of economic transformation and Nigeria is in dare need of a breakthrough strategy as it passes through a major economic difficulty.
First used in the 1700s, the concept of entrepreneurship has evolved to more prominence since the 1900s. Entrepreneurship is the willingness and capacity to initiate, develop, and manage a business venture – a service or a product. An entrepreneur then can be referred to as someone who organizes and/or operates an innovative/profitable venture. Micro, Small, Medium, and Large enterprises can all suffice as forms of entrepreneurship.
World Bank defines economic development as an increase in economic productivity and average material wellbeing of a country’s population. Similarly, the bank postulates that when economic growth is achieved through more productive use of all resources, including labour, a nation’s per capital income increases and there is improvement in the standards of living of its people. It is only through entrepreneurship activities that all resources of a nation, both material and labour are fully utilized. Thus, for any country to fully maximize its growth potential, transform its economy, or come out of an economic crises, entrepreneurship is vital.
Several evidences of economic growth through enterprises lend credence to the fact that entrepreneurship is capable of improving a country’s economy. Take China as a case study; before 1978, China faced huge economic crises that left the economy in a devastating state however, the economic reforms from 1978 paved way for China’s economic growth which catapulted the country to become the second largest economy in the world after the United States. China transformed its economy by favourable Agricultural restructuring, allowing foreign investments, and allowing entrepreneurs to boom. Several studies support that the development of private enterprises, and reduction of legal barriers to entrepreneurship played active roles in transforming China’s economy. This led to the increase in rural enterprises, creation of job, decrease in unemployment and poverty, and an overall growth of the country’s economy.
For example, French centre for research on contemporary china in its China Perspective publication of 2006 report that the number of workers employed by rural enterprises in China rose from 9.2% to 28.1% of the rural population. Furthermore, the report reveal that rural enterprises contributed over 30% of China’s National GDP by 2000 with the economic reforms. Similarly in India, entrepreneurs have become the economic pillar of the country. Micro, Small and Medium Enterprises (MSMEs) ministry report of 2008 for example records that the sector contributes 8% of National GDP, 50% of total manufactured exports, 45% of total industrial employment, and 95% of all industrial units (in Issues & Ideas in Education, Vol. 1, No 2, 2013). Entrepreneurship is capable of transforming both the lives of a people and the economy of a country for good in diverse ways, if it is allowed to boom.
Entrepreneurs can turn an economy around in many ways ranging from job creation, discouraging importation while encouraging exportation, to encouraging healthy competition, which can all transform a country’s economy especially in periods of economic crises.
Job Creation and Poverty Eradication: According to the International Labour Organization (ILO 2015), about 73.3million young people are unemployed globally. In Nigeria, the National Bureau of Statistics (NBS) report that youth unemployment and underemployment stood at 49% in the second quarter (Q2) of 2016 that is, 17.6million of the youth labour force population of 39.6million were unemployed or underemployed. Consequently, 10.7million Nigerians are unemployed (13.3%). Yet, with the present state of the economy, loss of jobs have become a usual occurrence in almost all sectors; NBS reports that as at Q2 2016, unemployment rates have increased seven (7) consecutive times since Q4 2014.
In the midst of the rising unemployment however, it is a fact that entrepreneurs do not add to unemployment rather, they mitigate it; they do not search for jobs, they create jobs. These huge unemployment figures can be reduced if a good number of the job-seeking unemployed are willing and empowered to become creators of jobs rather than job seekers, through entrepreneurship. Furthermore, entrepreneurship does not only create employment for the entrepreneur solely, it is also a source of employment for many other people in a country. Several countries have enjoyed laudable economic transformations as cited earlier (in China and India) and more are still benefiting from the advantages of a booming entrepreneurial society.
More often than not, the major stumbling block to entrepreneurship is capital to start big however, in entrepreneurship, small enterprises are the ones which play a major role in job creation; they are the ones who create the largest number of employment and drive more innovation. Budding entrepreneurs can start small, grow along the line, create jobs, and help in eradicating poverty. A country that will make economic growth, while eradicating poverty thus, must pay attention to the development of entrepreneurs and businesses.
Discouraging Importation vs Increasing Exportation: One of the ways to stimulate a country’s economic growth is through exportation while one of the ways to kill an economy is through high dependence on importation. More exportation leads to more production, more jobs, and more revenues for the country. A country that is able to innovate and produce products and services using its resources not just meet the needs of its people but also makes revenues by exporting such produce; high exportation over importation increases the wealth of a country.
One of the reasons for the current economic crises Nigeria faces is the heavy concentration on the exportation of only one major product. Oil makes up over 80% of Nigeria’s exports, about 90% of gross earnings, and 75% of government’s revenue. Unfortunately, the country exports unrefined oil and imports refined oil for local use. Nigeria needs a diversified business environment which entrepreneurship brings, in order to increase exports of unique finished products from the abundance of its natural resources.
Besides, Nigeria depends so much on imported produce to the extent that basic produce of food, clothing, and shelter are imported, so much that even minutest of basic needs such as toothpicks are imported. Nevertheless, Nigerians have the human intelligence and resources to produce and meet most of their needs and reduce importation to the barest minimum, if only entrepreneurship is strengthened.
Encouraging Healthy Competition: The presence and increase of entrepreneurs in a country forces down the prices of commodities as it encourages healthy competition. Increased competition from more entrepreneurs challenge existing companies, making them more competitive, render better services, and meet the needs of more people. When the price of a good decreases, consumers get the power to buy more for their satisfaction, leading to better standards of living for the people.
A look into the telecommunications sector in Nigeria reveal how much more the country can grow its economy through entrepreneurship. In the days of the former Nigerian Telecommunications Limited (Nitel) which was government-owned, many Nigerians found it difficult to own telephones because of high costs which was partly due to the lack of any credible competition in the sector. When the first private telecommunications company brought in the Global System for Mobile Communication (GSM) into Nigeria in 2001, costs of communication reduced with the competition that sparked between the two communication companies.
The entry of more private telecommunications companies thereafter, highly forced down the cost of communication, bringing increased communication, better products and services. Moreover, telecommunications was recorded to have yielded $9.8billion to Nigeria’s revenue and contributed 1.7% to the country’s Gross Domestic Product in 2014(The Guardian). If the telecommunications sector can benefit greatly from entrepreneurship then, much more competition, affordable prices, and economic growth can be achieved from other sectors when more entrepreneurs, especially local ones spring up. Entrepreneurs challenge incumbent businesses to the benefit of the people and the economy.
Editor’s Note: In next week’s article, we will examine the role of government in encouraging entrepreneurship and how to become an entrepreneur.
ILO (2015), Global Employment Trends for Youth 2015: Scaling up Investments in Decent Jobs for Youth
The Guardian: http://guardian.ng/business-services/nigerias-telecoms-industry-generates-9-8b-in-2014/
Yang W., (2006), Reforms, Structural Adjustment, and Rural Income in China, in China Perspective: French Centre for Research on Contemporary China