Doing business in Nigeria: Cost, challenges & Opportunities
Do you want to start a business in Nigeria? What are the cost, challenges, and opportunities of doing business in Nigeria?
If you’re asking such questions, Then you’re in the right place. If you read the article from start to the end, you’ll see all the answers.
Business has it’s high and low. Like in any other place, doing business in Nigeria has its cost, challenges, and opportunities, however, they vary based on the business location, and government policies that determine the type of business environment you’ll have.
This is in no way trying to scare you into going into business or quit your existing business, but to ensure that you equip yourself irrespective of what may arise.
This article will seek to know some of the cost, challenges, and opportunities of doing business in Nigeria.
The cost of doing business in Nigeria
The cost of doing business in Nigeria have scared a lot of entrepreneurs from doing business.
Firstly, Financial Cost: the startup cost and operating cost are on the high. This is largely due to lack of the availability of basic infrastructure, dependence on generators to provide power for operation and high accommodation prices are all adding to the cost.
There is near absence of affordable credit for startup business or expansion of an existing business. Provision of venture capital by financial institutions for a startup is nearly absent.
As a result of the cost of doing business, this has affected both the entrepreneur and consumer firmly press from the opposite or all sides. This has left many businesses to go into extinction.
The lack of experienced firms acting as advisers has seen the small business face tax evasion because they have learned little or nothing about social concerns and leadership.
In Nigeria, there is no bankruptcy protection or any form of shielding during hard times. Another social cost is keeping staff motivated outside of money. Many staff motivation comes when money is involved. Political and family interest are some of the social cost that can contribute to the social cost of doing business.
The social cost is usually what keeps business stagnant with no visible growth and as well affect the financial status of the business.
The change of regulation especially without planning has affected a lot of business operations. An example is how the foreign exchange regulation have affected the access of money to buy raw materials for their business. This has even made businesses leave the country for a more conducive environment.
There have been other regulations in other institutions as well. One that many have been affected is the banking regulations.
It started with the charge of 100 naira if you use your ATM to withdraw money from another bank, then that was cancel and you’re free to use your ATM at any point without any charge.
The regulation was also changed, and 65 naira was introduced after using your ATM to withdraw three times in a different account.
We have to see regulations in the pension scheme, taxation, educational tax, stamp duties and so on.
The financial cost of doing business in Nigeria can be staggering, but you’ll have to be prepared as they come.
Challenges of doing business in Nigeria
Inadequate power supply
Despite the huge population, power generation, and distribution is still a major problem. With Nigeria producing less electricity nationally than a London city consumes.
Both small and big businesses have to rely on generators for power in other to make production and to carry on their business operations, as a result, increase the cost of doing business.
Availability of raw materials
Raw materials are a major concern to many businesses. Some will have to rely on the third party to obtain raw materials which the availability may not be available always.
Other businesses have to import the raw material which at the end increases production cost.
Obtaining permit and licensing
Despite reforms by the government, obtaining permits and licensing can be pretty difficult for certain business. In other permit and licensing are quite expensive and not affordable to an entrepreneur who wants to start on a small scale.
Inadequate infrastructure has created a deficit that is now obvious in many cities like Lagos, Port Harcourt and has resulted to huge lapses in many sectors creating large traffic, security uncertainty and mobile network coverage missing in many places.
Lack of government policy continuation
Changes in government have seen changes in government policies. Because of the lack of government policies, it may affect certain business operation.
For instance, the lack of forex availability to business, have seen businesses changing location, folding up or downsizing their workforce.
The removal of subsidies on fertilizer is another government policy that has seen the prize of fertilizer goes up and the result has increased the prices of foodstuff.
Idea protection is not in place
Any idea you come up with, there is no way you can protect it. Anyone have the right to use it with no legal implication attach to it. As a result, we’ve seen a counterfeit of certain products and sometimes difficult to spot the difference.
Other industries have seen the increase in pirating of their product. An example of such industries is the movie industry which has little or no protection to their movies.
Opportunities of doing business in Nigeria
There is market for your product or service
With over 170 million people, there is enough market for any product or service. This population will need certainly any type of product in the marketplace.
The population is still not slowing down. As the population grows, there will be a need for more products or service will increase. Creating more opportunities for entrepreneurs who want to provide the needed product or service.
Some of the product or services are needed on a daily basis. For instance, people will need food, water cloth and so on.
There are still room for more entrepreneurs
We’re still an emerging market there is still room for more entrepreneurs to enter and fill the vacuum. Certain industries like agriculture, real estate are among the virgin industry you can venture.
Been among the first to venture into a virgin industry in your area, makes you positioned to dominate the market.
The growth of home-based businesses is on the increase
The need for products or services in the neighborhood is on the increase. One of my friend selling used clothed closed his business shop because his customers prefer coming to his residence to buy then go to the shop.
More business opportunities will be created
With the rise of the made in Nigeria advocacy, it’s just a matter of time, that we’ll begin to see the change of mindset and the patronage of the locally created product. But it’s the entrepreneurs that have their businesses in place that will benefit from the opportunities.
More funding opportunities
There are more programs and opportunities for funding from the private sectors to fund aspiring entrepreneurs. Some are grant while others are a soft loan.
The loan facilities mostly will require you to form a self-help(popularly call the cooperative society) group before they can give you the loan.
Some of the notable places where you can get funding are:
Toni Elumelu foundation (TEF)– Tony is on a mission to empower 10, 000 entrepreneurs and the great thing about the foundation, they’re giving you a grant.
Microfinance banks- The microfinance banks are always there for you to access credit for your business. All you need to do is to visit them and try and ask for how to access their credit and charges. The charges may differ according to the microfinance bank.
There you have it, this is the cost, challenges, and opportunities of doing business in Nigeria. Am optimistic, the business environment will continue to improve, there is light at the end of the tunnel.
What do you think? Make your contribution by making comment below.