How Policy Volatility Undermines Youth Entrepreneurship in Nigeria

Entrepreneurship is often hailed as the silver bullet for youth unemployment, particularly in developing countries like Nigeria. While the conversation usually revolves around financial barriers, there is an equally potent but often overlooked hurdle: the volatile policy environment.

Government policies can both propel and impede economic growth. Unfortunately, in Nigeria, abrupt shifts in policy have been more of a hindrance than a help. For example, the sudden currency devaluations and inconsistent foreign exchange policies threw many small businesses into financial disarray.

According to the World Bank’s Ease of Doing Business Index, Nigeria ranked 131 out of 190 countries, a score reflective of the intricate web of bureaucratic and policy challenges entrepreneurs must navigate.

These unpredictable policies are particularly detrimental to the youth, who already face a myriad of challenges when starting businesses. The Global Entrepreneurship Monitor (GEM) indicates that countries with stable policy environments see higher rates of new business creation. Unfortunately, the reverse is true for countries like Nigeria, which experience fluctuating policy climates.

A Closer Look at Youth Hesitancy

Nigeria is a country with immense potential and opportunities for its young population. With over 60 percent of its people below the age of 25, Nigeria has one of the largest youth cohorts in the world. However, this demographic dividend is also a challenge, as the country struggles to create enough jobs and opportunities for its growing youth population.

Many young Nigerians have turned to entrepreneurship as a way of creating their own livelihoods and contributing to the economic development of their country. Entrepreneurship is widely recognized as a driver of innovation, job creation and economic growth. According to the African Development Bank, micro, small and medium enterprises (MSMEs) represents 95 percent of all firms and generate 80% of jobs across Africa.

However, entrepreneurship is not an easy path in Nigeria, where young entrepreneurs face multiple challenges and barriers to start and grow their businesses, and access to finance is just one of many. One major challenge is the volatile and unpredictable policy environment that affects their businesses. 

For instance, to register a company, the Corporate Affairs Commission requires a Tax Identification Number, signalling to the young entrepreneurs that they have to deal with multiple taxes and levies from different levels of government. 

They also have to cope with frequent changes in policies and regulations that affect their sectors, such as import bans, tariff hikes, currency devaluations and border closures. These policy shocks create instability and uncertainty for their businesses, making it difficult for them to plan ahead and invest for the long term.

Studies suggest that volatile policies can significantly impact the youth’s willingness to venture into business. Clearly, the government can do more than just throw money at the problem. They can create an environment that offers a sense of stability and reliability, encouraging young people to consider entrepreneurship as a viable career option. 

Countries like Singapore and New Zealand, which top the Ease of Doing Business Index, offer valuable lessons on how coherent, stable policies can stimulate entrepreneurial activity. According to the World Doing Business Report, these countries are the easiest places in the world to do business, and they have topped the list for several years. 

Singapore has a pro-business environment with low tax rates and a stable political climate. The government implemented policies that encourage entrepreneurship and innovation. And New Zealand has a transparent and efficient regulatory environment that makes it easy to start and run a business. The country also has a strong intellectual property protection regime.

If Nigeria aims to unlock the entrepreneurial potential of its youth, a multidimensional approach is needed. This includes not only easing financial constraints through grants, tax breaks, and low-interest loans but also establishing a stable policy environment. Only then can we hope to turn our youth from job seekers into job creators. 

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Peter Lucille is a Mass Communication student at Ahmadu Bello University, Zaria.