Doing business in Nigeria has its pros and cons which we are going to address in this article. Have you decided to start a business in Nigeria? This decision of yours has its pros and cons, read on to find out. You should also check out our series on Doing Business in Nigeria: How is Nigeria Fairing. According to 2016 World Bank Report on Doing Business, Nigeria is ranked 169 in the world against 170 last year. The report shows improvements in the ease of registering properties and protecting minority investors.
Doing business in Nigeria is characterized by both advantages and disadvantages which should not be overlooked. With the current trend of things in the country, the pros outweigh the cons. This is evidence as countries such as South Africa, China, etc are scrambling to invest or set up shop in Nigeria. That’s why companies like DSTV, Tiger Brands, Shoprite, Tecno moved into Nigeria and are expanding aggressively.
The Pros of Doing Business in Nigeria
1. Nigeria’s Economy is in Recession
Nigeria has one of the largest free market economies in Africa. The economy has enjoyed sustained economic growth for a decade, with annual real GDP increasing by around 7%. The non-oil sector has been the main driver of growth, with services contributing about 57%, while manufacturing and agriculture, respectively contributed about 9% and 21%. Due to the fact that Nigeria’s economy has been largely based on the oil sector, the fall in oil price globally has plunged the country into recession. This recession does not spell doom for the country but rather it is a wake-up call for the government and the policymakers.
The economy is thus diversifying and is becoming more service-oriented, in particular through retail and wholesale trade, real estate, information and communication. Although it will take a while for the economy to recover, once this is achieved, with the available market in the country, Nigeria’s economy will experience a drastic growth.
2. High Population Growth
A country with a growing population of over 178 million citizens with little available means of sustaining her demands is definitely a place for you to do business. With this population the country has very few companies, industries and enterprises to supply the demands of her citizens ranging from food, shelter, energy, transportation, labour market, etc, the list is inexhaustible. As long as the business satisfies a need in the country and the strategies adopted are right, success is assured.
3. Untapped Resources
For more than 3 decades, the country’s economy has been solely dependent on oil. Nigeria is a country blessed with numerous natural and human resources, but these resources are not utilized. The fall in the oil price has drastically reduced the revenue generated in the country hence, the eye-opener for all quarters to diversify. The birth of numerous tech startups, eCommerce marketplace, etc in the country is a typical example of what the Nigerian market has to offer.
4. Increasing Consumer Base
More than 62% of Nigeria’s population is under 25 and its growing middle class makes up 23% of the population. With Nigeria’s growing young population, the demand for education services is increasing faster than the government can supply it. The turnover from the tertiary institutions into the labour market is also increasing hence, increased workforce. With Nigeria importing almost all its consumable, investing in the country’s economy and leveraging on the workforce and the available market will go a long way to support business growth.
The Cons of Doing Business in Nigeria
Insecurity is nothing new in the country, especially in the last four years. Nigeria has been battling with the issue of terrorism which has been a great cause of concern for business investors especially foreigners. Although the current administration is doing everything possible to salvage the situation, the terrorists are still impacting fears in the country with recent bombings and the agitations from the militants. I am confident that the war against terrorism in the country will be won. As we await that time, we have to deal with it.
2. Poor Power Supply
The poor power supply is one of the major challenge facing the industrialization and the successful growth of small business startups in Nigeria. A country with a growing population of over 178 million citizens can only boast of power generation that fluctuates between 2000 MW and 4000 MW. Successful companies operating in Nigeria have found a way to deal with the challenge of power supply by providing their own power.
3. Lack of Infrastructure
Although improving, Nigeria lacks the basic infrastructure and logistics to support entrepreneurship in the country. In some countries, the government provides some amenities such as water supply, electricity and other. All you need to do in these countries is to pay for the services provided. This is not the case in Nigeria. In Nigeria, you will need to build your own factory, provide your own water supply and other amenities that you need for business operations.
The infrastructural challenge will directly or indirectly increase your startup overhead cost so you have to properly factor in this challenge in your business plan. If you are going to run a successful business in Nigeria; then you must have the financial muscle to provide your own infrastructure.
4. Little Governmental Support
Although this aspect of government’s insensitivity to the plight of entrepreneurs and small business owners in Nigeria had improved during Goodluck Jonathan’s administration and is gradually getting better with the new administration, more need to be done. This insensitivity surfaces in the form of double taxation, corruption, unnecessary levies and duties, bureaucratic bottlenecks at various government agencies like CAC, NAFDAC, etc; and a high cost of obtaining business licenses.
As suggested by some renowned entrepreneurs in the country, a good strategy to balance the excesses of the government is to have a strong business team that will strategically position your business to withstand the ever-increasing demand of the government. Hopefully, there will be improvements in the years to come.
5. Inconsistent Government Policies
Government inconsistency is really a challenge you will have to tackle if you must succeed in Nigeria as an entrepreneur. Governance is something entrepreneurs have no control over; all entrepreneurs can do is try to influence government’s policy with respect to enacting favourable business laws. But you must have political clout and massive resources to be able to influence government laws.
Every new administration in the country comes with her own policies, ignoring or failing to implement the already set out policies by the previous administration. This in return has an effect on business in Nigeria.
Amidst all these challenges you may face doing business in Nigeria, the pros or advantages no matter how few outweigh them. If you are still sceptical about this, the likes of Aliko Dangote, Mike Adenuga, Jim Ovia, Femi Otedola should prove to you that Nigeria is a goldmine when it comes to business. Although faced with recession due to her sole dependence on oil over the years, once the country diversifies successfully, the economy will experience consistent and steady growth.