Are you a Nigerian Diaspora Entrepreneur? Are you planning to start a business in Nigeria? Do you want to know the risk factors or challenges of doing business in Nigeria? Would you like to know more about the opportunities and benefits of doing business in Nigeria?
You are looking for an investor where to invest for a high return on investment ? If any of the above situations best describes you, then please read on as I highlight the main challenges associated with starting a small business in Nigeria or doing business in Nigeria.
Nigeria is a country endowed with human, mineral and natural resources. Resources. When it comes to starting a business in Nigeria; The potentials are so great that any investor or entrepreneur will be tempted to jump in with both feet without first testing the water.
Reasonable proof that Nigeria has huge potential for entrepreneurs and investors is the fact that we have many successful entrepreneurs who started from scratch and built huge business empires on the coast of Nigeria.
I’m talking about successful entrepreneurs and Nigerian billionaires like Aliko Dangote, Cletus Ibeto, Femi Otedola, Orji Kalu model, etc. The fact that Nigeria once produced the richest black man in the world proves once again that money can be made in Nigeria; if only you understand its commercial locality. The secret to the success of these Nigerian entrepreneurs is a story for another day.
Second, countries like South Africa, China, etc. are doing their best to invest or open a store in Nigeria. This is why companies like Tiger Brands, Shoprite, Techno have moved to Nigeria and are actively developing. Now if you are seriously considering starting a business in Nigeria; I will then provide you with the practical information needed to help you successfully start and grow a business in Nigeria.
As expected, there are common business issues and factors that aspiring entrepreneurs face all over the world, but when it comes to economic and environmental issues; it varies from region to region.
For example, the economic and environmental factors affecting businesses in the United States of America or Canada are different or better than those affecting entrepreneurs in Africa; Nigeria. So I based this fact on the fact that I wrote this article to introduce you to Nigeria’s business landscape and learn how to face its challenges.
Disadvantages and challenges of doing business in Nigeria
1. Lack of infrastructure
The first challenge you will face when doing business in Nigeria is the infrastructure issue. Nigeria lacks basic infrastructure and logistics to support entrepreneurship. If you are planning to run a successful business in Nigeria; then you have to be financially able to provide your own infrastructure.
For example, you want to open a manufacturing business in Nigeria; You will need to build your own factory, provide your own water supply and other equipment that facilitates business operations.
This factor alone lengthens the time between initial planning and full business operations compared to developed countries that have basic infrastructure. Infrastructure issues will directly or indirectly increase your up-front overhead costs, so you need to properly address this issue in your business plan.
2. Poor power supply
Poor energy supply is the next problem hindering the successful growth of small businesses in Nigeria. Successful companies operating in Nigeria have found a way to solve the energy problem by providing their own energy.
For example, Aliko Dangote; The founder of the Dangote group has developed a strategy to set up a mini power plant in the immediate vicinity of its factories as an alternative to the company’s uninterrupted power supply. So if you want to work successfully in Nigeria; Next, you need to outline a plan to reduce the serious consequences of a poor energy supply.
Update : The Nigerian Federal Government is taking giant steps to tackle the energy challenges facing the country. focused towards. From 1 1 October 2013; the energy sector has been deregulated and private investors have been granted licenses to operate their own independent power plants.
3. Insufficient security
Security is the next challenge you will face, especially if you are a foreigner looking to invest in setting up a business in Nigeria, but I think it is worth adding that the government has done a huge step forward in terms of and around security; I can say with certainty that I am impressed with the way the government manages state security. However, I don’t think the security issue will go away anytime soon; so you have to be prepared to face it.
4. Inconsistent government policies
Government inconsistency is indeed an issue that you must face if you want to be successful as an entrepreneur in Nigeria. Governance is something that entrepreneurs cannot control; all entrepreneurs can do is try to influence government policy to enact favorable business laws. But you have to have political influence and enormous resources to be able to influence government laws.
Now, you may not have the political clout or the financial power to influence government policy, so the best strategy for dealing with ever-changing politics is for the government to closely monitor government laws and ” quickly adapt its activities to politics.
5. Transport problems
The next problem with doing business in Nigeria is poor transport standards. As expected; the reliable source of the raw materials you need may not be located near your target market. So, you will have to decide whether your business is close to commodities or to your market in one way or another; Transportation of raw materials and finished products will be involved, which will create great difficulties if you are going to work in Nigeria.
Poor transport standards and the road network is a factor hampering the industrialization of Nigeria, but I believe this problem is solved by the government by upgrading the roads and building rail lines.
6. Inability to access funds
Of all the business problems associated with starting a small business in Nigeria; it is one of the most important interests of entrepreneurs. The inability to access funds and banks, and the reluctance to support entrepreneurship and small businesses are the main obstacles to the massive growth of entrepreneurship in Nigeria.
However, this problem can be overcome if you are a creative and hardworking entrepreneur. Large entrepreneurs are not held back by the lack of support from banks; they are not discouraged by the lack of start-up capital. Instead of bemoaning a difficult situation, they look for creative ways to fund their business plans and ideas.
So if you are in this category of entrepreneurs; so I want to be confident that your plans for doing business in Nigeria will not be thwarted or held back by the capital issue.
7.lack of government support
Finally, the challenge of doing business in Nigeria is the government’s insensitivity to the plight of entrepreneurs and small business owners. And the result of this insensitivity manifests itself in the form of double taxation, corruption, unnecessary fees and charges, bureaucratic bottlenecks in various government institutions such as CAC, NAFDAC, etc. and the high cost of obtaining business licenses.
But Nigeria operates like a free economy; which is good for capitalists, so I don’t think you will be disappointed with this challenge. A good strategy to counteract the excess of power is to have a strong sales team that will strategically position your business to withstand ever increasing demands from government.
For example, the federal government, in particular the Goodluck Jonathan administration, has taken several successful policy steps to support small and medium businesses by launching the YouWin program.
The YouWin program, created to help entrepreneurs speed up or grow their business – the recent increase in tariffs on used imports in 2013. cars; to reward local producers like Innoson ( IVM ), and also attract foreign car manufacturers such as Toyota, Nissan, etc.
In conclusion this is my honest plan for the territorial issues you will face when starting your business in Nigeria, I have highlighted these issues so as not to deter you; but to help you prepare ahead of time, for whoever is ready has half won the battle.