Doing Business in Nigeria requires a deep understanding of various factors that make Nigeria to be the largest economy in Africa.
To succeed in doing business in Nigeria, you need to pay attention to factors such as Nigerian economy dynamics, dominant industries in Nigeria, population, business culture in Nigeria, legal landscape, key business and economic events, foreign investment, and many other considerations.
In this friendly guide, we’ll unravel the intricacies of navigating the business landscape in the largest economy in Africa.
Table of Contents
From economic considerations to cultural nuances, let’s explore the key factors that impact doing business in Nigeria and discover how a thoughtful approach can lead to success.
Welcome to the vibrant world of doing business in Nigeria!
The Nigeria Economy: A Profitable Venture for Doing Business in Nigeria
The Nigerian economy is currently ranked as the largest economy in Africa according to the International Monetary Fund (IMF). Nigeria’s economy, the largest in Africa, offers a spectrum of opportunities for savvy entrepreneurs and seasoned investors.
Nigeria has an estimated population of over 200 million people and a GDP of more than 45 trillion naira There is no doubt that doing business in Nigeria is a profitable venture.
The International Monetary Fund predicts that Nigeria’s economy is expected to grow by 3.4% by the end of 2022.
With sectors ranging from agriculture to technology on the rise, the potential for growth is vast. However, this economic playground is not without its undulating terrain.
Balancing the trade-offs involves understanding the ebb and flow of market demands.
Prospective investors must stay attuned to economic indicators, adapting strategies to capitalize on growth areas while navigating potential challenges.
A flexible mindset is the key to riding the waves of opportunities that Nigeria’s economy presents.
Dominant Industries in Nigeria for Doing Business in Nigeria
Dominant industries in Nigeria are no longer limited to oil sector alone as the Nigeria economy is diversifying and the non-oil sector is fast-becoming the key driver of growth, with a rapid expansion to financial, aviation, service, telecommunications and entertainment sectors.
Nigeria emergent manufacturing sector is the third largest on the continent, producing a significant proportion of goods and services for the West African region.
Though, the petroleum industry remains the dominant in Nigeria.
Oil alone produces approximately 10% of Nigeria’s Gross Domestic Products, 70% of the country’s revenue, and more than 83% of the country’s export earnings.
Despite that, there is a passionate interest on agriculture, agri-business, manufacturing, and service-related industries in Nigeria.
Industries with Restrictions for Foreign Ownership
Under the NIPC Act, foreign ownership is permitted in all industries. However, there are restrictions on the acquisition of shares by foreign nationals in the following specific industries:
- Oil and gas. To be competitive in the award of contracts, at least 51% of the shares of the company must be owned by Nigerians.
- Shipping. The Coastal and Inland Shipping (Cabotage) Act restricts the use of foreign-owned or manned vessels for coastal trade in Nigeria.
- Broadcasting. A company applying for a broadcasting licence must demonstrate that it is not representing any foreign interests and that it is substantially owned and operated by Nigerians.
- Advertising. Only a national agency (that is, an agency in which Nigerians own not less than 74.9% of the equity) can advertise to the Nigerian market.
- Private security. A foreign investor cannot acquire an equity interest in or sit on the board of a Nigerian private security guard company.
- Engineering. A company engaged in engineering services must be registered with the Council for the Regulation of Engineering in Nigeria (COREN). One requirement for registration is that the company must have Nigerian directors registered with the COREN holding at least 55% of the company’s shares.
- Aviation. To qualify for the grant of an aviation licence or permit, the Nigerian Civil Aviation Authority must be satisfied that an applicant is a Nigerian company or citizen.
- Pharmacy. The Pharmacist Council of Nigeria Act, 2004 provides for the registration of non-Nigerian citizens only if:
- the applicant’s home country grants reciprocal registration to Nigerians; and application.
- the applicant has been resident in Nigeria for at least 12 months before.
Legal Landscape – Navigating the Regulatory Maze
The legal landscape in Nigeria is a tapestry of regulations, and while efforts have been made to improve the ease of doing business, challenges persist.
Understanding the regulatory maze is essential for a smooth journey in the business realm.
There are four distinctive systems of law in Nigeria that are worthy of note:
- English law, which is derived from Nigeria’s colonial past with Britain;
- Common law, (case law development since independence);
- Customary law, which is derived from indigenous traditional norms and practices; and
- Sharia law (some parts of Northern Nigeria)
The trade-off lies in finding a harmonious balance between compliance and operational
flexibility.
Seeking local legal advice, staying abreast of regulatory changes, and fostering open communication with authorities can help investors navigate the legal intricacies effectively.
To have a full grasp of company law and administration in Nigeria, a prospective investor needs to familiarize himself/herself with the Nigerian Companies and Allied Matters Act.
The Companies and Allied Matters Act, 2020 (CAMA 2020) was signed into law on 7 August 2020. The CAMA 2020 contains several innovative provisions relating to Nigerian company law.
Business Culture in Nigeria
Business culture in Nigeria is that of friendly, approachable, respect for elders, trust and value for money, time and relationship. In Nigeria, business is not just about transactions; it’s about relationships.
Understanding and respecting the cultural nuances of this diverse nation is a cornerstone for success in doing business in Nigeria.
Nigerian business culture values personal connections, and building trust is as important as closing deals.
The challenge here is in striking a balance between a global outlook and local sensibilities.
Investors who invest time in understanding the cultural fabric, fostering relationships, and embracing diversity will find themselves not only welcomed but embraced by the Nigerian business community.
Nigeria has a business culture that depicts the strengths of its people. In Nigeria, business hours are usually between 8am to 5pm, Mondays to Fridays.
Nigeria recognizes and observes various public holidays comprising the significant religious holidays of the dominant religions in the country and other government-announced holidays.
Infrastructure – Overcoming Hurdles with Innovation
Infrastructure is one of the main challenges when it comes to ease of doing business in Nigeria but it is not insurmountable.
Navigating Nigeria’s infrastructure challenges can be an adventure, from power supply inconsistencies to transportation bottlenecks.
Investors must embark on a journey of innovation to overcome these hurdles and ensure smooth operations.
The trade-off involves strategic investments in alternative power sources, efficient supply chain management, and collaborations with local partners to enhance logistics.
While these may pose initial challenges, the long-term benefits of a streamlined operation can outweigh the bumps in the infrastructure road.
Related: A Good Business Idea in Nigeria: Determinants & Examples
Market Dynamics – Riding the Consumer Wave
Nigeria’s market dynamics are a symphony of diverse consumer preferences and trends.
Staying attuned to the rhythm of the market is essential for businesses looking to make a splash.
However, it’s not just about following trends; it’s about predicting and riding the consumer wave.
The challenge is in balancing established business models with the need for innovation.
Entrepreneurs who invest in market research, embrace adaptability, and align their offerings with evolving consumer needs will find themselves riding high on the crest of market success.
Networking Wonderland – Leveraging Connections for Growth
In Nigeria, the power of networking cannot be overstated. Establishing connections with local entrepreneurs, industry leaders, and potential clients is a passport to growth.
Networking goes beyond formalities; it’s about building a community that supports and uplifts.
The trade-off here is time and effort invested in relationship building.
Prospective investors would need to actively engage in networking events, join industry associations, and leverage digital platforms for connections will find them not only expanded network but also unlocking doors to new opportunities for them.
Financial Expedition – Maneuvering the Fiscal Terrain
Navigating the financial landscape in Nigeria requires a strategic approach. From managing currency fluctuations to optimizing pricing strategies, entrepreneurs must maneuver the fiscal terrain with finesse.
The challenge lies in balancing short-term gains with long-term stability. Strategic financial planning, including hedging against currency risks and diversifying revenue streams, becomes crucial.
A judicious approach to financial decisions is the compass that guides businesses through the fiscal expedition.
Social Impact – Business with a Heart
Doing business in Nigeria is not just about profits; it’s about making a positive impact on society.
Corporate social responsibility (CSR) is a compass that guides businesses towards contributing meaningfully to the community.
The way to go involves aligning business goals with societal well-being.
Investors who incorporate ethical practices, support local initiatives, and prioritize sustainability not only enhance their brand image but also contribute positively to the social fabric of Nigeria.
Resilience in the Face of Challenges – Thriving, Not Just Surviving
As you embark on your business journey in Nigeria, resilience is your greatest ally.
Challenges will inevitably arise, from economic downturns to unexpected hurdles.
However, the ability to adapt, innovate, and persevere will set you on the path not just to survival but to thriving in the Nigerian business landscape.
Conclusion
In conclusion, doing business in Nigeria is an exhilarating adventure, full of opportunities and challenges.
By understanding the economic dynamics, navigating the legal landscape, respecting cultural nuances, innovating in infrastructure, riding market dynamics, networking strategically, managing finances judiciously, making a positive social impact, and embracing resilience, investors can find success and fulfillment in this dynamic market.
Once again, welcome to Nigeria, one of the potential power economies of the world; Africa’s giant and West Africa’s choice destination for growth and investment