Doing Business in Nigeria – Prospects and Challenges

Doing Business in Nigeria 

Entrepreneurs planning to do business in Nigeria will certainly have to prepare themselves for some challenges. But, this should not discourage you in doing business in Nigeria. There is no business that doesn’t come with challenges irrespective of country.

Are you a foreigner planning to do business in Nigeria and you want to get some information about the country? Nigeria is a blessed country with natural resources and factors that can encourage young entrepreneurs to starting a business in their home land. Nigeria, one of the most oil-rich country in the world and the largest economy in Africa is a good place for any serious-minded entrepreneur to start a business.

Yes, doing business in Nigeria can always be challenging but there is always a way out. In this post, I will be sharing with you on everything you need to know in doing business in Nigeria. So, if you’re still skeptical about the idea of choosing Nigeria to setup your business, here are what you should know;

The Advantage of Doing Business in Nigeria

There are many advantages of doing business in Nigeria. But, not to make this post too lengthy, I will only give few advantages.

1. High Population Growth

Nigeria is a country with over 150 million citizens and the most populous African country with little available resources to meet her demands is obviously a place to do business in.

With this population, it means that there is always a market for your products or services. Nigeria, with all her natural resources, companies, industries is yet to meet the demands of her citizens in regard to food, employment, transportation, shelter etc.

As far as the entrepreneur focus on a given sector or niche, he or she is bound to succeed.

2. Untapped Resources

For more than 4 decades, this country has fully been dependent on oil but as the price of oil went down, the country then started seeing other sectors that has not been given attention.

Now, the country is diversifying and there is still enough space for investors to plunge in their interest and make good money. You can choose to tap into agriculture, mining, transportation or any other untapped sector.

Disadvantages of Doing Business in Nigeria

1. Poor Power Supply

This is one major problem organizations in Nigeria has been facing for decades. This has drastically affected business growth in the country. So far, the government has not been able to provide a lasting solution to power supply.

As an entrepreneur who plan to do business in Nigeria that will fully need power supply to keep it going, then, your alternative will be to go for solar plant or generator which in turn leads to lots of money spent for maintenance (for solar plant) and buying of fuel/diesel to power the generator.

2. Poor Transport Network

This is also one major challenge of doing business in Nigeria. Because of this, most companies and industry locate their business close to where they can easily get their resources for working.

In most cases where it is not possible, businesses have to suffer from the bad road network to get their products to their warehouse or customers.

There still exist many incidents where goods have to stay on the road for days before it can get to it destination.

Legal Requirement for Doing Business in Nigeria

If you want to successfully run a business in Nigeria, then you must follow the legal law to avoid been disturb or insulted by business regulatory body known as Companies and Allied Matters Act (CAMA).

This body are in charge of eligibility, registration, company structure, and rules of operation. Before you can start operating in Nigeria as an organization or company, your business must be registered with the appropriate authority which is the Corporate Affair Commission (CAC).

There are 5 business structures in which you can register your business under which are;

• Register business name.
• Company limited by shares.
• Company limited by guarantee.
• Unlimited company.
• Incorporated trustees.

Business Culture in Nigeria

There are some businesses culture in doing business in Nigeria that you as an entrepreneur have to know. Nigeria is a country that has over 250 different ethnic groups with different way of thinking and responding to instructions.

Nigeria business etiquette therefore demand that your business culture be flexible and be willing to improvise. Since it is very vital that businesses cement a strong relationship with their employees and customers, it is very important that you be patient and build trust before diving into implementing strong business rules in your organization.

Management Style

Nigeria management style is hierarchical. It is always headed by a male who is popularly known as the boss. However, that doesn’t mean that he is the only one to make decision and not depend on his subordinate.

Business relationship is very important in Nigeria. So, all entrepreneur planning to do business in Nigeria must practice that.

Attitude to Foreigners 

Nigerians love foreigners so well. So, if you are a foreigner coming to do business in Nigeria, be rest assure that you will be received with open hands. The hospitality Nigerians gives to foreigners can’t be compare to other countries.

These are what an entrepreneur needs to know about doing business in Nigeria. You have been given the information you need to start planning on launching that business. Don’t waste time, take action now!

The Challenges of Doing Business in Nigeria 

What are the main challenges facing businesses in Nigeria today? Among the committee of nations, Nigeria undoubtedly has abundant human and natural resources which are under-utilized or untapped at all.This phenomenon has directly or indirectly affected many sectors including the art of doing business in the country. In 2016, a report from World Bank shows that Nigeria ranked 169th out of 189 countries in the World Bank’s  Ease of Doing  Business.

SEE: Top 10 Most Profitable Small Businesses

Though this is a slight improvement compared to the 2015 ranking when the country  was ranked 170th. That improvement may be as a result of more business start-ups and protection enjoyed by the minority investors.

Challenges of starting a business in Nigeria
Sincerely, many business owners have successfully earned above-the-average profits but there are abundant challenges that are impeding the survival as well as high- profit margin of various businesses in Nigeria when compared to international companies. Those challenges facing Nigerian businesses have been discussed below.

What are the major challenges of small and medium scale family, hotel, financing, insurance, online, retail, poultry, fish, pig, pure water, recharge card, agriculture, e business in Nigeria?

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One of the challenges facing any business start up and running is power infrastructure.With its huge population of 170 million,Nigeria up till now produces national electricity less than 5,000 megawatts while South Africa with 47 million people produces about 49,000 megawatts.That ultimately translates to dependence on fuel (petrol and or diesel) to power generators which thereby increases the cost of  doing  business.

The second challenge is government bureaucracy that has affected doing business in Nigeria. One of  the obvious results of that is difficulties in obtaining permits and licenses. According to Obi and Chukwuemeka (2006:112) in a research stated that strict  adherence to the bureaucratic rule by the civil service usually leads to poor and belated policy making and its implementation. Haven’t you aware of how “official corruption and red tapism have crippled  the starting  and smooth running of businesses in the country? Yes they do!

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Not very far from  that is another government -induced -challenges of multiple  taxation or levies as a major fiscal policy.  This policy either advertently formulated or not  has sent many businesses to their earlier graves .How, you may ask? ¬Hear this: the Nigerian government in some occasions raised revenue and thus forced many firms to pay multiple levies or taxations. The report by the Manufacturers  Association of Nigeria(MAN) and Centers for International Private Enterprises (CIPE ) shows  that multiples taxation is a great challenge private sectors business faces in Nigeria (Anyavu,2012).  With that policy, the cost of doing business in Nigeria  increases and thus leads to divestment, loss of manpower to both government and the businesses, winding up of businesses among others.

Funding is another major challenge that business faces in Nigeria. Many entrepreneurs and small business find it difficult to expand their business as a result of lack of fund. Can’t they borrow from banks, you may ask? Yes it is possible,  but the banks is not meant for some kinds of businesses. Wale Tinubu stated in one economic summit in Nigeria that” any small business here must know that banks are not designed to fund startups. What is required is more private equity…” Apart from that, sourcing for fund requires well-detailed business plan  that can attract lenders and many business owners lack skills to prepare excellent business plan!

TUTORIAL: How To Invest and Start A Business in Nigeria

Poor management from individual or team doing business in Nigeria is another challenge confronting business in Nigeria. Many business-owners find it difficult to inject the services of individuals with skills and competence who can manage their business well even if the owner can’t do it himself/herself. This is a deadly disease to any business as no problem or issue will be attended to adequately. Some managers also worsen the matter as they failed in making thier subordinates to be problem-solvers and proactive.

Think about the above-mentioned challenges. Are they not really restraining or murdering doing  business in Nigeria? Definitely yes. Dr Herbert Ajayi, the president of Nigeria Association of Chambers of commerce, Industry Mines and Agriculture lamented that between 2009 and 2011, no fewer than 800 companies wound up in Nigeria due to harsh conditions faced.

DISCOVER: 10 Businesses In Nigeria That Require Very Little Or No Capital

The figure is never an overstatement as the Vice Chairman, Toiletries and Cosmetics (T&C) Group of Manufacturers Association of Nigeria Mr. Ikpong Umoh, corroborated it that the hardship facing operators of Small and Medium Enterprises (SMEs) alone has ,made 130 manufacturing firms folded up in few years. Sincerely, many businesses you knew then, and probably yours too have been swept off by those challenges!

GUIDE: How To Register Your Business Name With CAC In Nigeria Fast

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