While the previously great South Africa’s economy is in steady decline, the world has its eyes on Nigeria for business investment. Although faced with a booming rate of population growth, the economy is shifting away from agriculture to more lucrative enterprises. With an estimated growth rate of 2.6% in 2018 and an increase in oil output, there is much potential for future opportunities.
On the other hand, Nigeria is plagued with many issues that are common in developing world economies. Here is a list of hurdles that entrepreneurs may face while treading through this new economy:
A combination of corruption, mismanagement of funds, and the lack of tax revenue makes it difficult to upgrade the infrastructure of the country. This has lead to businesses having to set up their own independent amenities, like water lines or roads, to make their establishments functional.
The amount of money that needs to be spent for certain businesses can cost millions more in just this regard in comparison to first-world countries. To save money, smart infrastructure from scratch is needed as you cannot expect help from the government.
The Ridiculous Electrical Grid
As with many other African nations, the electrical grid is overloaded and very unreliable for large businesses. Since 2005, the government dissolved its government-owned monopoly over the electrical grid and allowed small companies to thrive. Although it helped to an extent, the power lines are still unstable and underfunded.
With a large, up-front investment, your business should include solar panels and generators to cope with the constant outages. Especially if your business is reliant on the constant use of computers and electrical equipment, it is best to stay off of the grid as it is plagued with surges brown-outs.
Although not unique to Nigeria, the country has very inefficient government offices with contradictory or selectively enforced policies. Even registering a local business as a foreigner will have a surprising amount of bureaucratic hurdles that just seem unnecessary.
Navigating through the muddy waters, which may be rife with corrupt functionaries, will be easily alleviated with an astute lawyer. Taxes, registration fees, and other small tariffs should be expected but it should be minimized with the right legal planning.
Limited Raw Materials
Nigeria is still not very diversified like many other larger economies. Because of this, some raw materials will have to be imported and it could come at a high price. Not only is the cost of shipping rather high in this part of the world, import taxes should also be considered into the equation.
If possible, coping with this would require making sacrifices to non-essential portions of your business and seeking alternatives. For example, if your business requires one type of wood, you may try to make due with another local variety that is widely available.
Crime, whether it is petty or severe, remains a large problem in most parts of the country. Specifically for business owners, it is common for workers to steal supplies or embezzle funds if there is a lack of oversight. The police are mostly unreliable as they are also underfunded and overworked in many areas of the country.
When in Rome, do as the Romans do. Copy the security measures that local businesses must take, like adding reinforced doors, barred windows, and an abundance of security cameras as barriers to criminals. You must also be astute in issuing very limited security clearances to employees so that untrustworthy underlings do not have access to expensive materials.
Considering the major issues with the country, investing in this gem of a country is definitely worth the effort in the grand scheme of things. The significant reserves of natural resources (including oil, coal, ore mining, and natural gas) and the growing population will only solidify the potential for future profits. As the economy naturally grows, the government will likely be keen enough to improve its services and infrastructure to invite more international investments.