How to Start a Profitable Small Business in Nigeria With Low Capital (₦10k–₦200k): Complete Step-by-Step Beginner’s Guide

Small business in Nigeria has over the years faced challenges which ranges from funding, skills, favorable trading conditions and multiple taxation. However, because these challenges had lingered for long does not mean one shouldn’t try to start a small business in Nigeria today.

Not everybody has the capital to establish big companies such as refineries, ethanol manufacturing companies, construction companies and even those in the maritime sectors.

There are low income earners and even the poor who are okay with starting small. They can invest as low as N20K or even N10K in a small business and because they are very consistent with the business, it may grow over time.

Introduction

Nigeria has a population of over 200 million people, which means that small businesses can also have good patronage especially in urban settlements. You must not start the business with millions of Naira.

Accordingly a publication from the Federal Ministry of Information and Orientation, Small and Medium Enterprises SMEs in Nigeria accounts for about 50% of the country’s Gross Domestic Products (GDP) and again it accounts for over 80% of the employment in the country.

There are people especially women within their neighborhood that are selling akara and pap, moi-moi, vegetables and fresh peppers, tomatoes, fried yams, noodles and omelette.

There are many people also that are nail cutters, some sell kola nuts, bitter kola and snacks hawking them around.

These are small businesses we are referring to, they are the bedrock of every economy in almost every country.

What is a small business?

A small business in Nigeria can be defined as the type of business in Nigeria in which one needs just a small capital to start. For example, people who mostly fall under this category of businesses are those who sell sachet water in coolers, those who hawk charcoal, cakes, roasted yam, fruits sellers and the popular Mama-Put food vendors.

Nigeria at the moment faces a tough economy, however, small businesses are the only survival ways for poor populace and even the middle class too.

Why Start a Small Business in Nigeria Now

There are several reasons why you should start a small business in Nigeria today and these include the following:

1. Rising Unemployment: it is no joke that unemployment is the major reason for the insecurity being faced in the country recently. High unemployment rates in Nigeria may increase economic hardship and even social vulnerability amongst our youths, thereby making income-generating activities more essential.
2. Inflation: when the prices of food and other things have increased in such a way that the purchasing power of money especially that same amount that was used to buy that same product before can no longer buy it, can be referred to as inflation. People can start a small business in Nigeria because of the current inflation being faced in the country.
3. Government and private sector support: sometimes when the government or even the private sector offers to support people with business ideas and start their own small businesses to encourage self dependency. The government may not just offer such support at times unless they train people on how to start and manage their small businesses well before rendering the support. The government through the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) acts as a mediator before commercial banks and the Central Bank of Nigeria (CBN) to offer interest-free loans to small business in Nigeria.

How Much Do You Need to Start a Small Business in Nigeria?

We can’t really say there is a fixed amount which one needs to start his or her small business in Nigeria. But at least N20K to N200k can safely start a profitable small business in Nigeria.

If the business owner has the required skills to manage the business it may potentially excel but this should not be regarded as a guarantee, everybody should do their own research before investing in any kind of small business in Nigeria.

It all depends on the niche of the small business that you want to start, the capital needed for a small business in Nigeria is not much at all.

There are some of the hidden startup costs or expenses that most people overlook, such as rent, marketing cost, registration/licenses and even data subscription.

These expenses are however, not mandatory as some people can start and run their businesses at home conveniently without them.

Step-by-Step Guide to Starting Your Small Business

I will be showing you a step-by-step process on how you can successfully start and manage your small business in Nigeria. The following are the steps you need to follow to successfully start your own small business in Nigeria:

Step 1: Identify a Profitable Business Idea

As an entrepreneur, you don’t just go into a business blindly. You need to first identify what is lacking in your neighborhood or the village or town that you are from which if you make it available people may patronize.

For example, during hot weather people in northern Nigeria would like to consume more water than any other part of the country. So an entrepreneur should now be thinking about the capital he needs to start a water business in northern Nigeria.

There are very low capital small business ideas one can start, such as POS, MOI-MOI, nail cutting, laundry and dry cleaning services, food vending and so on.

Step 2: Create a Simple Business Plan

There is every need to first write a business plan for your small business. A business plan in this case is the document that will show your small business’s goals, your strategies for achieving those goals and even the financial projection and the potential interests as well written together in one document.

When you have a business plan already intact, most commercial banks may be willing to offer you an SME loan. There are some persons who may be willing to also offer assistance through their own foundation too but may want to look at your business plan first.

Your business plan should include relevant informations such as what you sell, to whom you sell your products and how you sell or intend to sell them.

Step 3: Register Your Business (Optional but Wise)

The process of business registration is quite simple in Nigeria and it’s not mandatory for small businesses but it’s very wise if you ask me.

Registered businesses have more advantage over unregistered businesses especially when it has to do with accessing funds and other forms of support from either the government or private sector.

The process is not tedious, just walk into any corporate affairs commission office and ask anyone that you want to register your business (business name), they will gladly attend to your needs.

Alternatively, you may do it yourself by visiting their website cac.gov.ng and first reserve a name. After the name reservation, an availability code will be sent to your email.

Use that availability code that was sent to your email to finish the registration. It’s quite simple but a very wise thing to do indeed.

Business registration may seem to have consumed a portion of your capital (N18k for a business name and N50k for a company registration) but helps a lot in building trust and also opens doors to grants or loans from both the government, commercial banks and private sectors.

Step 4: Arrange Funding (If Needed)

You can now seek funding but most commercial banks in Nigeria do not offer loans to new businesses like this one, they prefer that you first open a business account with them and transact with the account for at least six months.

This way, they can also gauge how much your business is able to generate in a month, and how much expenses you are making monthly.

The six month transaction history also helps them to understand your credit scores and how much to offer your business.

Nevertheless, there are still some low-interest SME loans and even grants that your small business in Nigeria can access, such as those from the Bank of Industry (BOI), NIRSAL, Central Bank of Nigeria (CBN), TEF, and some state government programs aimed at empowering SMEs.

These programs are occasional and don’t come regularly but when they are carried out and your business is also favored, you may benefit from the it.

Your personal savings can also be used to fund your small business. It is not a good idea to withdraw from savings but for the purpose of investment it is very good and preferable too.

You can also get funding from your family and friends, yes, they may assist you with funds and sometimes ask you to payback without interest.

How to qualify and apply successfully

Do not just assume that your business will always be eligible to apply and benefit from a government empowerment program. There are several things that you have to do to always stay ahead of others:

• Credit score: make sure you have good borrowing history. That means you are not owing any other financial institutions and even if you do, the loan should be a performing one. Build a strong credit profile that will always put you ahead of others, it’s very important.
• Business registration: yes, I earlier told you that the decision to register your business is not mandatory but a wise one. When you register your business, it puts you ahead of your competitors especially when it comes to accessing loans and grants. Government require businesses to be registered with corporate affairs commission before accessing their support.
• Have a business account: this is also an added advantage, business grants and loans are not disbursed to personal accounts, so during the application process make sure you are submitting a business account and not your personal account.

Step 5: Market Your Business

Now, we have come to the part where you have to use the best strategies to start getting your money back.

You can use the Word-of-mouth strategy to tell people about your new small business, and you can alternatively use referral systems for small areas too.

For example, when Paul Ubwa, the owner of Pleasure Travels opened the Adikpo branch, he was rewarding okada riders who would take customers to his motor park. Okada riders were getting money from two folds (the customers and the park itself).

You can use a strategy like the one that Paul Ubwa used to attract more customers to your new business.

We are now living in the digital age so you can also make use of the Social media to display your business and attract customers as well. You can use platforms such as WhatsApp Business, Instagram, Facebook Marketplace and X (Twitter).

Step 6: Keep Records and Manage Finances

To manage and monitor your small business in Nigeria well, you have to keep records of all your transactions.

This will help you to know whether you are making profit or not and even if you are losing, the record keeping can help you to identify what went wrong so that you can make proper adjustments.

You can use a text book in most cases but some people may find it difficult to write under appropriate headings and tables. So I will advise you to use digital bookkeeping tools such as Google Sheets or mobile apps like Kippa or QuickBooks.

Make appropriate provision for basic tax for your business because it is mandatory, and it is better you prepare for it forehand.

So your record keeping should also include tax which is inevitable in the Nigerian economy.

Common Mistakes New Entrepreneurs Make

If you really want your business to succeed do not ignore this part of the article so that you don’t repeat the same thing.

There are some common mistakes that new entrepreneurs like you make when starting a small business in Nigeria, these include:

• Starting a business without any prior research: Do not rely solely on articles such as mine that you read online, do your own research in your neighborhood or the location where you want your business to be sited.
• Spending profits on personal needs instead of re-investing: The business may crash if you are spending the profit made on your personal needs instead of re-investing to gain more compound interest.
• Ignoring customer feedback: feedback is not criticism, and even if they were, any positive criticism is only challenging you to put more efforts and make adjustments where you did fail. Act on feedback as if they were some regulated guidelines for your business.
• No financial discipline: as a new entrepreneur, you must have some financial discipline. Know which money you should spend and which one you shouldn’t spend. Do not spend because your friends are also spending, you must be very cautious of which money is meant for spending and the one that is not.
• Poor marketing strategy: not all strategies may bring profit to your new business, just like I said earlier, do your own research before you start. If you notice that the strategy you’re using is not bringing customers or not yielding any profitable results, then quickly make adjustments as possible, the ultimate goal for any business is to maximize profit.

Tips to succeed as a small business owner in Nigeria

Your small business is very new, you yourself may also be new in the system, so there are some tips for new businesses such as yours that may help it succeed.

Again, this is not a guarantee so always do your own research properly before trying out whatever you read online about investment. Some of these tips are:

• Try to build consistency and resilience no matter how challenging it may be. New businesses face a lot of challenges but only those who are consistent may achieve success.
• Network with other entrepreneurs who are in the same line of business with you. This will help you connect with their customers especially when they run out of stocks, they may easily collect from your shop and sell to their customers.
• Learn some digital marketing skills especially as we now live in the digital age of the 21st century. You can be marketing your products physically but do not allow the opportunity of getting customers online pass you by, so learn at least the basic digital marketing skills.
• Build trust amongst your customers, when a customer buys something from your shop or patronizes your business and over pay, always return the balance to them. If they picked the wrong item and returned it later, always accept it back and allow them to pick another one especially if it is not tampered with.

Conclusion

Starting a small business in Nigeria is not always easy but with the right approach, you may start today and succeed.

Start small and if you manage it well it may grow into a big business, so make the right decision but always remember to do proper research within the location you intend to start your business first.

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