Why Start a Business in Nigeria?
If you are not a stranger to the country – Nigeria, then you should be familiar with its “Giant of Africa” moniker. This is owing to its large populace and economy. This country has approximately around 182 million inhabitants and is the most populous country in Africa and the seventh most populous nation in the world.
Nigeria possesses one of the largest populations of youth in the world. Nigeria can also be viewed as a multinational state because it has over 500 indigenous ethnic groups, of which the three largest are the Hausa, Igbo and Yoruba. There are diverse tongues in Nigeria as these ethnic groups speak over 500 different languages, and are identified with wide variety of unique cultural attributes.
One of the attractions about Nigeria when it comes to business is the large population of people. Nigeria has Christians living mostly in the southern part of the country, and Muslims in the northern part. Experts have projected that Nigeria is the world’s 20th largest economy, worth more than $500 billion and $1 trillion in terms of nominal GDP and purchasing power parity separately. It outshone South Africa to become Africa’s largest economy in 2014. Also, the debt-to-GDP ratio is only 11 percent, which is 8 percent below the 2012 globally accepted ratio.
Nigeria is ranked as a developing market by the World Bank. It has been acknowledged as a regional influencer on the African continent, a strategic power in international affairs, and has also been branded an emerging global economic power.
Nigeria is a fellow of the MINT group of countries, which are commonly seen as the globe’s next “BRIC-like” economies. It is also registered among the “Next Eleven” economies set to become among the biggest in the world. Nigeria is also a valuable member of the Commonwealth of Nations, the African Union, OPEC, and the United Nations amongst other international organizations.
With such an advantage in population and economic coefficient parameters it is no wonder that Nigeria has been the desired business destination for many international companies in spite of the daunting challenges a lot of entrepreneurs and established business organizations face in the country due to some underlying factors. When looking at the possibility of plunging headlong into the world of business in Africa's economic powerhouse you really have to consider several things.
1. Get Yourself Prepared -
The first step to starting a small business in Nigeria is to adequately prepare yourself. You may think this is not important but it can very well be the difference between success and failure. Running a business on Nigerian is tough but highly rewarding; so to survive, you have to be ready to be tougher. Nigeria is a harsh terrain to operate in but as Nigerians we are naturally well grounded to tackle most of the challenges on ground. So how do you prepare yourself?
You can prepare yourself by attending a seminar(s) on the preferred line of business you wish to venture into which is aimed at getting all the necessary information about your chosen industry. You can also prepare yourself by accepting the reality that success is not guaranteed; you prepare yourself by increasing your risk-bearing capacity. And ultimately, you prepare yourself by making up your mind to succeed despite the odds before you and the competition.
2. Have A Good Business Idea -
To successfully start a small business in Nigeria, you must have a good idea. In fact, any idea or business opportunity will do; except you are considering pioneering a new invention. I must lay emphasis on the fact that any business opportunity will do because most Nigerians focus mainly on the business idea without knowing that a business idea is just a tip of the iceberg in the entrepreneurial process of building a viable business.
A good business idea alone does not guarantee success in business; an average business idea with good business fundamentals and a workable template does. The world is filled with brilliant “million dollar ideas” but the world lacks seasoned entrepreneurs.
You don’t need to be a genius to create something new; you do not have to bother re-inventing the wheel. Just find a proven business line and learn the fundamentals. You can even decide to buy a franchise if the capital is on ground. Nigeria has the needed population to absorb any product that is backed by a strong business sense and entrepreneur spirit.
3. Do A Proper Feasibility Study -
Another important step to starting a small business in Nigeria has to do with having a thorough feasibility study done before investing a dime in any business opportunity. This is basically where the failure of most Nigerian entrepreneurs begin. A lot of people invest in a business idea or opportunity simply because a friend or relative said the business is very profitable so they jump right in without being properly prepared for such.
There has been many instances where people jump into an industry blindly in reaction to unverified information. We know entrepreneurship is all about risk-taking but jumping into an industry without an adequate knowledge of its fundamentals is financially suicidal. A lot of entrepreneurs know this from experience; we probably know people who made this very mistake and paid dearly for it.
Economic Analysis
When looking to start a business in Nigeria, a whole lot has to be looked at from an economic point of view. Some of the factors to consider include the following; Human Capacity Building and Job creation, Socioeconomic policies and corporate social responsibility initiative.
- The target market
- Complex Tax system
- Legal complexities of international business
- ForEx barriers
- Dynamic Marketing Styles
Factors or Incentives Encouraging Investors to Venture into Business in Nigeria
It is the wish of investors to reap where they have ploughed in their investments. Hence it is important that the country to be invested in is highly viable and can guarantee a high yield on returns. There are several incentives that attract investors in the Nigeria. These are some of the benefits of investing in Nigeria;
(a) Large market base
(b) Relatively cheap local labour
(c) Promising economic indices
(d) Government support to economic development through infrastructure development, facilitation, amongst others
(e) Economic freedom in the form of promising legislation and few hurdles to start and operate businesses encourage entrepreneurship.
(f) Sound laws related to the safeguard of labor rights and the environment.
4. Understand your Market
Before jumping into any business or industry; make sure you have thorough understanding about its fundamental metrics. Every business has an inside secret and if you must succeed; you must find such secret(s). Understand the market of the industry you are going into and you surely will increase your chances of success. The best way to begin such is by asking yourself the questions below:
- Who are the customers?
- How do they want to be served?
- Who are your major competitors?
- Who is the market leader?
- Do you have a chance for survival?
Can you grab some market share in that proposed business industry of yours? These are the questions you must answer before starting a small business in any industry.
5. Write A Business Plan -
This is another area where most Nigerians fail to get the memo. It is estimated that over 85 percent of small business owners in Nigeria operate without any business plans. While it's not necessary to criticize them because many people do start their first business without any business plan; It’s worthwhile you separate yourself from the blindfolded pack.
Since majority business owners are operating without business plans; why can’t you capitalize on it and gain a competitive advantage for your business? Banks don’t lend money to businesses that are operated without business plans but what if you have one? Well, I leave that for you to answer.
Ensure you write a business plan for any business venture you want to undertake. Even if it is an informal, one page business plan; write it. Your one page business plan may not get you the bank’s attention but it’s a way forward because it will help you concentrate on fulfilling your primary business mission.
6. Get A Good Location -
So you actually want to start a small business in Nigeria? If yes; then where are you going to locate your business? In real estate circles we all know that location is very crucial on many levels. Same thing goes for business sites. Your business location may make or mar your investment.
Are you going to site your business within your neighborhood or are you going to site your business in an industrial area?
Are you going to separate yourself from the crowd by building your own brand in a specially selected location?
Or you are going to operate from the centre of trade or commercial places in Nigeria?
Find below a list of locations that have been proven to be highly business-friendly for the obvious reasons.
- Lagos Island, Lagos State
- Kano, Kano State
- Onitsha, Anambra State
- Abuja, FCT
- Aba, Abia State
What you intend trading in or with will largely determine your preferred location.
7. Obtain The Necessary Licenses -
Well, there's really no need to emphasize much on this. If you don’t want to have the government and its law enforcement agents on your neck, make sure you obtain the necessary licenses and permit needed to operate your line of business.
Every industry has regulatory bodies governing it; so be sure to check their operational policy to make sure you are not going against the law. Also remember that you may need licenses and permits from both the local, state and federal government. So make sure you factor their costs in your budget.
Without these licenses you risk being clamped down on by the authorities involved in the execution of business laws in Nigeria. They include the following;
- Fire department permit
- Air and water control permit
- Site permit
- State permit
- State tax license
- Health department permit
List of Legal Documents You Need to Run a Business in Nigeria
There are several documents that must possess before you are expected to run a business in Nigeria. The inability to have all or more of these documents in place may inadvertently expose you to official sanctions from several government agencies. As such, here are some of the documents that you will be needing;
- Certificate of Incorporation
- Business Plan
- Insurance Policy
- Patent or Copyright registration
- Operating Agreement
- Non-Disclosure Agreement
- Business License
- Tax Identification Number
- Contract Documents
List of Government Agencies and Parastatals that are In-charge of Registering Businesses and Issuing Licenses and Permits in Nigeria
In different countries of the world, there are various licensing bodies. Nigeria is no different and thus has its own bodies that are saddled with the affairs of business permits and licensing. They see to it that before a business fully commences operations, they are properly licensed.
Here is a brief list;
(a) NAFDAC
(b) Corporate Affairs Commission CAC
(c) Signage and Advert Permit
(d) Federal Inland Revenue Service FIRS
8. Register Your Company -
Most businesses in Nigeria operate as sole proprietorships. You can choose to go the same way. But if you are truly out to build a successful business brand that will stand the test of time, it is advisable you register a Business Name or factor it in your cost projections as a short term plan.
You can choose between the sole proprietorship; limited liability or public liability form of entity. After choosing your business entity, you can get your business name registered at the Corporate Affairs Commission’s office in Abuja, Alausa in Lagos or anywhere nearest to you. Please engage the services of a lawyer to avoid making unnecessary and avoidable mistakes.
9. Raise Capital -
Before making up your mind to start a small business in Nigeria, let's assume that you already have the necessary capital to at least launch the business.
10. Start The Business -
After going through all the processes above; this is where you get down to the nitty gritty, this is where you start the business. Most people make wonderful plans, do feasibility research and even raise the needed capital to start a business. But for reasons best known to them; they just fail to start. They fall flat at the first hurdle.
Perhaps it’s because of the fear of failure; but what we do know is that not everybody has the guts to start a business. Most can only dream of it but only few dare to take the risk. Are you willing to take the risk and start your own business here in Nigeria? Only you can answer that important question.
Actually, this is where your work as an entrepreneur gets tougher because statistics reveal that 75% of all new businesses start failing in their first five years. And of the 25% that survive; 80% of them will fail in the next five years. It means that about 90% of all businesses that started the journey will fail in their first ten years. Mind-blowing?! Yes, of course!! These statistics may be harsh but it’s the plain truth in its entirety. Are you prepared to lose it all? If your answer is yes, then start.
11. Look for Leverage -
The fastest way to grow in business is to leverage on the structure of well established businesses. So if you want to grow; then look for leverage. Leverage can be in the form of getting a bank loan, getting credit line from suppliers; striking strategic alliances with much bigger players or getting a contract. No matter what leverage you decide to pursue; go for it.
12. Survival is The Name of The Game
If you can make it through to this stage, then it’s congratulations because you’ve just started your own small business in Nigeria. You have started the game and showed resilience; now is the time to break it through.
At this stage, survival is the name of the game. You might take some pounding from stronger competitors; you might make a business mistake or even face intricate business challenges like a change in government policy, topsy turvy market forces etc but don’t give up. Stay strong and fight it through.
That's it for now. Set that target and go for it!!!
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