10 Government Policies Every Business Owner Must be Aware of in Nigeria
We were taught in government class that government is the machinery that runs the state or country. Likewise in business, government is one of the machinery that runs a business. For any business to be successful, we need to consider some factors, which include government policies. Government policies go a long way in determining the growth or stagnation, profit or loss of any business in Nigeria, especially small-scale businesses. The government, as much as it encourages the establishment of both small and large scale business, also have impacts on these businesses, some yield positive outcome while some yield negative outcome. In this post, you will learn about some policies of the government every business owner or entrepreneur must not be ignorant of.
- The cost of running business: the cost of running a business in Nigeria is high, even the cost of establishing. This is why many people with business ideas find it difficult to pursue their dream venture because of cost. This is not only peculiar to small businesses, government policies of high import and export dues also affect big establishments.
- Taxation: just like there are three levels of government, so also there are three levels of taxes affecting businesses. Big companies that operate under the federal government pay their taxes to the federal government, while companies and businesses that operate within the niche of the state pays to their respective state government. Small businesses pay their taxes to their various local governments. For companies that have ties around various states in the country, the branches pay taxes to their respective states. Every Nigerian citizens pay taxes either directly or indirectly. While the direct taxes include taxes that companies, business owners, salary earners, etc. pay. The indirect ones are taxes we pay as a result of goods we consume. A biscuit manufacturing company will calculate its tax and divide per head, then add it to the price of each biscuit it is producing. This is to the end that it makes profit irrespective of the tax allocated. Every business owner should know it is mandatory to pay government tax, not indirect ones, but direct ones . You might land yourself in trouble if the Inland Revenue Service (IRS) or “tax collectors” discovers that your business is evading (avoiding) tax. Tax evasion is a punishable offense under the law!
- Interest rates: government policies also influence interest rates on credits and loans. In Nigeria, the Monetary Policy Committee determine the interest rate. An increase in interest rate equals an increase in the cost of doing business. This could cause two things: the cause of running a business and getting loan becomes higher due to increase in interest rate, and on the path of customers, there is reduction in expenditure, which will lead to decrease in sales for business owners. This interest rates does not affect loans from the government alone, it also affects bank credits and loans.
- Market environment: yes, government policy also influences market environment. Government fiscal policies include taxation, which could affect market sales. Government could decide to increase tax charges on goods. Of course, this could yield more profit for the government, but it would mean less sales for business owners as decrease in tax sensitive products will be recorded while there will be an increase in demand for non-tax sensitive products. This is because increased taxes lowers consumers’ disposable income available for spending.
- Trade regulations: there are some regulations set up by the government to guide the descent marketing of goods in the country. Although some of them are in favor of business owners while some are not. The essence of trade laws is to promote competition among business without violence. Laws like health inspection carried out at hospitals and restaurants is a government tactic to make sure consumers have the best consumer experience by eating in a healthy environment and receiving care in healthy vicinity. The problem I see with this law by the way is its poor implementation, or perhaps one could say it is not implemented at all, because if it was (well) implemented, many changes ought to have been seen in our restaurants and hospitals ( both public and private). Advice to prospective entrepreneurs: make sure you work to give your customers the best experience, especially when you are venturing into businesses that deal with health. Let go of the “others are doing it syndrome”.
6. Trade unions: recognition of trade unions is another policy of the government. The Nigeria Labor Congress ( NLC) is the umbrella union that encompasses all other trade unions in Nigeria. The NLC creates other unions from within it , this is to the end that the rights of every business owners is receive protection.
7. Revenue generation: the government controls revenue generation from every business. This is where sectionalism comes in. Considering that Nigeria is one of the largest producers of oil in the world, preference has been given to the oil sector than any other businesses in Nigeria. The oil sector generates more income but do not pay exorbitant taxes, while other businesses generate lesser income in comparison to oil but still have to pay high taxes. Can anyone fight the government anyways?. Therefore, before I digressed, what I wanted to say briefly is that the government’s policy influences revenue generation in every business.
8. Growth of SMEs: Small and Medium Enterprises (SMEs) are not visible to the government’s watchful eyes. The government is aware of the contribution of SMEs to the growth of the country, which is why it is putting in place certain media for SMEs to function properly, even though there are some shortcomings, which would not be discussed now
9. Loans: government give out loans to business owners and it also controls who receives the loans. Government loans are primarily meant for small business owners because government see them as “helpful” so in a bid to help them boost their business, they get loans. Government however determines who gets loans among all the applicants and also determine the interest rates on the loans.
10.Truthful advertisement: government strive to ensure that its citizens do not get fake goods. It upholds truthfulness. In advertising your product, be as truthful as you can be, because if you are discovered to have been marketing fake goods, the government might penalize you.
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