Major Challenges Businesses Face in Nigeria

In Business Opportunity, Investment Opportunity by bomaLeave a Comment

In the last 24 months, I have discussed extensively with no less than 30 non Nigerian Founders, Entrepreneurs and company CEOs who want to export their business into the Nigeria. However more than 80% of them, don’t want to bear any risks in doing so.

Thinking now, I often wonder why a company would seek to do such an important activity and would vehemently refuse to take any risk. Doing business anywhere is a risk and the parameters to achieve profit must be considered and activated within a budget for successful business to occur.

There are a lot of Non Nigerian companies that are using the local approach.

Companies such as Nigerian Bottling Company bottlers of Coca Cola, Fanta and Sprite.

In case we have forgotten Shell Global is a foreign company and operates in Nigeria under Shell Nigeria and its subsidiaries.

They have been operating even before Nigeria got its Independence in 1960.

Other popular foreign companies operating locally include major telecommunication giants: MTN Nigeria, Etisalat and Airtel Nigeria.

Even new entrants that introduce popular franchise businesses like; Eat n Go, Devyani International, etc.

Ever heard of the Sokoa Chair Center?

4 Major Challenges Businesses face

All new market companies face 4 major challenges when doing business in Nigeria. Carrying Business activities anywhere that you are not familiar with can be extremely difficult.

 Listening to a very interesting story the other day from a friend of mine saying the same thing in a different context.

The story involves people who previously had a normal day job but during this time were able to form an original idea that no one had thought of before, or that they could provide a better service or solution to a problem.

So they decided to leave their day job, and go on a journey to become an entrepreneur.

They believed starting a business and becoming self-employed, will bring them three key things:

  1. More money
  2. More time
  3. Less stress

After 12 months of carrying out this ‘business’, they realise in actual fact, they’ve ended up with the following problems:

  1. Less or even no money
  2. Less time
  3. More stress

Comparing my friend’s story and this article the problem with starting anything new is exactly the same for every company or individual that decides to take the plunge invest in a new market (Nigeria inclusive) or anything new.

From the story, the affected entrepreneurs often go into these markets with the same expectations of:

  • more money,
  • market share,
  • lower costs,
  • increased revenue

A company planning to enter into Nigeria need to be wary of the following immediate challenges:

  • Marketing – which markets, which segments, how to manage and implement marketing effort, how to enter – with intermediaries or directly, with what information?
  • Sourcing – whether to obtain products, make or buy?
  • Investment and control – joint venture, global partner, acquisition?
  • Real Estate – where to house your business, owned or leased

Marketing

When an organization makes a decision to enter an new market, there are  various issues that needs to be thought out.

These options vary with cost, risk and the degree of control which can be exercised over them.

The simplest form of entry strategy is often exporting, using a direct (agent) or indirect method (counter trade).

Unfortunately, most businesses try to avoid going local and by going local we mean setting up a local company in Nigeria with the Corporate Affairs Commission like any Nigerian company currently carrying out business activities in Nigeria.

There are lots of benefits that come with becoming local despite the many laws in Nigeria.

More complex forms include truly global operations which may involve joint ventures, or export processing zones.

A market entry strategy is simply the planned method of delivering goods or services to a new target market and distributing them there.

When importing or exporting services, it refers to establishing and managing contracts in a foreign country.

Few companies successfully operate in a niche market without ever expanding into new markets but most businesses achieve increased sales, brand awareness and business stability by entering a new market.

Developing a win-win market entry strategy involves a thorough analysis of  multiple factors, in a planned sequential manner.

Firms can follow the mentioned steps in sequence to create that successful blend of strategies while entering a new market.

Planning these few steps in details would ensure that firms face less risk while entering a new market during expansion.

Although there is no absolute success mantra to enter a new market, these activities would significantly lower the risk exposure of the firm and create a winning scenario.

Sourcing

The decision to make or buy extends beyond manufacturing, human resources, information technology, maintenance, and other fundamental business functions.

Different ideologies exist here where in some cases it is the procurement managers who have a key role to play in helping business units make these decisions given the skills and objective perspective their teams bring to the effort.

In another school of thought, it is believed that it is best to outsource this function to experts whose only job is to source and move equipment, materials, supplies, etc from source to warehouse.

Most of the time these decisions are hinged on the right business strategy, risks and economic factors.

Investment and control

Investment methods of entry are the most significant in terms of investment of your resources – money, people and time correlating to that can be your most rewarding and risky entry mode.

Following on from the all-important ‘where to Go’?, question as you plan your foreign business growth strategy is the “How to enter new markets?” question.

In investing in new markets you need to deal with two fundamentals which is the export part of the business and the second being contractual.

Collaboration is the most popular in today’s markets. Collaboration between two or more known parties with mutual interest that may or may not necessarily be equal in shareholding and usually relates to a single product or market.

Fundamental to building any Joint Venture will be trust and mutual interests and understanding.

Ever heard of the Sokoa Chair Center?

major challenges

Mrs Ibukun Awosika surmounting major challenges that businesses face in doing business in nigeria

“However, with God-induced boldness, I went to Sokoa SA of France and discussed with them on the need to come to Nigeria with me.

They laughed at first, because as a company which did not have any investment outside of the shores of France at the time, Nigeria was the least attractive place they would have considered if they had wanted to start a foreign investment, considering all the things that have been said about us, but I was undeterred.

We held a series of meetings for two days, and then I left.

A few weeks later, they sent me a memorandum of understanding stating their intention to come into the venture with technical support and very little investment which I accepted, knowing that God would do the rest.

I continued working with my financial advisers, Frontier Capital, on the project and later on, Sokoa SA agreed to increase their investment in the Nigerian project to 21%.

With their full participation guarantee, we had the confidence to approach the banks for their participation under the SMEIS scheme. Guaranty Trust Bank bought into the venture with a 32% shareholding, two of my friends hold 5% each, while I hold 37%.”

              the above is an excerpt from https://cdnetng.org/

you can read the full article here: https://cdnetng.org/?q=node/6423&page=0,2 

The discuss above is the best practice model every non-Nigerian entrepreneur or business interested in Exporting business to Nigeria should follow with regards to creating successful partnerships.

If you don’t plan to invest in the Entrepreneur or in the business, you would find it very difficult to succeed.

There is a popular saying that goes like this: “If you invest peanuts you would definitely get monkeys” but this is a story for another day.

If you invest peanuts you would definitely get monkeys

Based on our personal experience, if at the very beginning of the business marriage, these parameters are not sorted out we would rather not deal.

Nigeria is not your normal United Kingdom in terms of doing anything where you can confidently predict how things would go.

Ever heard the line ‘This is Nigeria?’

This is indeed Nigeria

It is a really very difficult country to do business, even though it is the place you can go to bed broke the previous night and by the end of the next day you become a millionaire.

It is a very unpredictable business environment but once you get it right you become unstoppable.

Ask the likes of Aliko Dangote, Tony Elumelu, Sujimoto, etc.

Then on top of it all and the stress involved, the Non Nigerian investor wants to go to bed broke and at the end of the next day become a billionaire at the expense of the local company.

Real Estate

Often overlooked real estate is really important, because of Nigeria’s teething problems.
Gym
If you do not have an office address in Nigeria, doing business with you can be risky.

It does not end there, the more prestigious your office address is the more people would most likely do good business with you.

Areas you might be most comfortable in would be Victoria Island, Ikoyi and Lekki Peninsula. In Victoria Island, choice areas like Eko Atlantic City are up for grabs, Lekki has the

A Victoria Island, Ikoyi and most recently Eko Atlantic City office address can give you the type of business you seek.

There are so many other challenges that businesses face but the ones listed above are the basic  major challenges that businesses face that can be surmounted if you follow the right channels.

If you are a Non-Nigerian company or entrepreneur contact us today for market entry strategies that you can use to get into the Nigerian Business Environment easily. In the Subject Line put in Market Entry Strategies and in the content box, tell me your unique needs and we would take it from there.

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