The Challenges of Doing Business in Nigeria
Nigeria is often seen as a land of opportunity, with a large population and abundant natural resources. However, behind this façade of potential lie substantial challenges for those trying to build a sustainable business. Infrastructure deficiencies, policy inconsistencies, corruption, and security issues all pose obstacles that can quickly derail entrepreneurial efforts if one is not prepared.
The first major challenge is the country’s infrastructure gap. Nigeria has struggled to keep up with demand in critical areas like power, roads, and IT connectivity. The electricity grid delivers just a fraction of the capacity needed by homes and businesses. This leads to heavy reliance on expensive diesel generators, which drive up operating costs. Logistics costs are also inflated by poor road networks and port congestion. And affordable, high-speed internet access remains limited for many regions.
On top of infrastructure limitations, entrepreneurs in Nigeria face shifting regulatory and policy environments that bring unpredictability. Import bans on certain goods, foreign exchange restrictions, multiple taxes, and swift policy changes mean business plans require constant re-evaluation. Keeping up with compliance in areas like customs and immigration can sap resources. Corruption also remains a problem, as bribery and graft add hidden costs.
Security issues are another serious consideration, given the high profile of kidnappings and violence from groups like Boko Haram, bandit militias, and others. Business travel brings safety risks in certain areas, and organised crime can threaten supply chains. Ethnic and religious tensions occasionally erupt into civil unrest that disrupts operations. For companies with international employees, duty of care becomes a rising concern.
Cultivating Resilience in the Face of Challenges
Yet despite these struggles, Nigeria retains massive potential. And a certain type of entrepreneur continues to build sustainable, scalable business ventures despite the obstacles and volatility. These resilient founders all cultivate specific habits and skill sets to thrive where others may retreat. By studying their approaches, important lessons emerge for achieving long-term success:
Adaptability to Constant Learning Resilient entrepreneurs in Nigeria stay flexible, expecting frequent surprises and reversals. They are committed to lifelong learning, using every challenge as an opportunity to grow wiser. Even setbacks or failures are leveraged to expand capabilities for the future.
Network Building Across Communities Knowing the right people is crucial, but resilient founders go further, creating diverse personal networks across the public and private sectors. They cooperate with competitors when mutually beneficial and maintain an ear to the ground on policy discussions. These relationships provide stability when conditions shift.
Anticipation of Changing Conditions Rather than reacting to new regulations or infrastructure gaps, resilient leaders plan ahead for disruption. They run scenario-planning exercises to expect the unexpected. And they carefully assess policies, politics, and cultural tensions to get ahead of the risks. This prescience allows them to turn uncertainty into an advantage.
Patience and Persistence Through Difficult Times Persistent patience is essential during periods of social tensions, economic instability, or operational disruptions. Resilient founders persevere through tough times with grit and calmness, cutting costs where necessary while maintaining long-term vision. They don’t panic but rather double down on building the right foundations.
Creative Problem-Solving Abilities Unconventional thinking allows nimble entrepreneurs to find alternative paths when confronted with roadblocks like import restrictions or infrastructure gaps. Resilient leaders design innovative workarounds and improvise internal solutions. Constraints become opportunities to build robust and responsive operational capabilities.
Investment in Talent and Organisational Skills Successful founders attract and develop talented Nigerian professionals by offering engaging work cultures, development opportunities, and incentive structures. They focus on governance, communication flows, and human resources to build cohesive yet independent teams that align around flexibility and innovation.
By internalising such attributes of resilience, entrepreneurs can gain the power to handle uncertain business environments. The habits allow them to turn Nigeria’s volatility into a strategic advantage rather than a liability. And they empower long-term planning without overexposure during temporary challenges.
Picking the Right Industries and Business Models
Beyond building personal resilience, entrepreneurs also need to make strategic decisions regarding their target industries, customer segments, and business models. The realities of the Nigerian market significantly impact such choices when constructing sustainable ventures.
Some sectors and products intrinsically suit the environment better than others. The same goes for specific revenue models; what works elsewhere may flounder in the local context. Resilient founders pick and customise structures compatible with on-the-ground constraints and opportunities. They ensure alignment across operations, sales, and financing strategies.
Types of Industries With Potential
Certain industry sectors carry more potential than others when seeking sustainability in Nigeria. As a starting point, businesses focused on meeting local basic needs tend to find opportunities. Fields like:
- Agriculture and Agri-Processing
- Affordable housing, healthcare, and education
- Infrastructure Development
- Financial Inclusion and Payment Solutions
- Power, Renewable Energy, and Utilities
These areas all address critical domestic demands and contain room for technological innovations and sales models without substantial foreign competition barriers. They also provide some insulation from global commodity price shocks.
Within these segments, opportunities exist across value chains, from production through processing, distribution, service provision, and more. Examples run the gamut from urban farming to fintech apps, healthcare clinics, and modular building components.
Export-Focused Businesses
Some export-oriented industries also offer potential, given Nigeria’s endowments. Natural resource plays around oil and gas extraction have long attracted investment. But now labour-intensive manufacturing exports are emerging around fashion, film production, and information technology services.
Other possible export segments include:
- Agricultural commodities and processed goods
- Mining and mineral exports
- Creative industries like music and film
- Light manufacturing and consumer goods
Such arenas allow products and services developed for the Nigerian context to extend across Africa and global emerging markets. With domestic innovation and youthful demographics, they offer scalability and foreign currency income.
Requirements and Risks
However, for any enterprise, extensive due diligence across all aspects of the value chain is mandatory before market entry. When approaching new sectors, entrepreneurs must realistically assess:
- Production capabilities and input supplies
- Technology adoption and process optimisation
- Route-to-market and distribution complexities
- Competitor strengths and consumer access
- Trade policy impacts on exports
- Currency convertibility and repatriation hurdles
Without understanding these dynamics, otherwise promising opportunities can face severe headwinds. And misjudging structural challenges has sunk many outsider efforts in Nigeria across fields like rice production, auto assembly, and online retail.
Business Model Design
In tandem with sector selection, crafting a sustainable venture requires the adaptation of standard business models to overcome locality-specific hurdles.
Certain prevalent models, like direct import-driven distribution or e-commerce marketplaces, struggle with thin margins, foreign exchange fluctuations, and limited payment options. Low purchasing power also constrains models dependent on advertising or transaction fees. And inadequate electricity hampers businesses with high power consumption.
Models that resonate
By contrast, resilient founders deploy models aligned with the environment:
- Local sourcing and production: systems to escape import reliance and currency risk
- Innovative payment solutions: creative bundling approaches and financing plans tailored to income flows
- Hybrid online-offline retail: merging digital convenience with tangible locations and connections
- Service focus over products: labour export models and domestic solutions for pressing problems
- Agile pilot testing: methods to rapidly test small product or service experiments before scaling
- Asset sharing and circular models: rental, resale, and reuse platforms for capital-intensive assets
Such strategies allow sustainable monetization that bypasses common stumbling blocks. And they provide insulation when conditions inevitably shift. Of course, a multi-model mix also makes sense for localization and optionality.
**The Power of Partnerships and Alliances**
Beyond business model adjustments, building a broad strategic web of win-win partnerships represents a critical pillar for success in Nigeria. The diversity of languages, cultures, and business norms across regions makes solo ventures an uphill battle. Local allies can provide intelligence, relationships, and resources that unlock doors. They also spread risk across multiple stakeholders with aligned interests.
Potential strategic partners span a spectrum from informal networking to formal joint ventures.
- Government Agencies: For regulatory access, incentives, infrastructure development, and vital data
- Educational Institutions: For talent development programmes addressing skill gaps
- Business Associations: For collective policy influence, training, and industry self-regulation
- Multilaterals: For insight, impact funding, and implementation capabilities
- Financial Institutions: For customer access, alternative credit scoring, and loan products
- Technology firms: for product development, data analytics, and innovative solutions
- Impact Enterprises: For technical expertise, equipment sharing, and project financing
- Distribution Networks: For warehousing, logistics, and sales channel access beyond our own operations
- Local SMEs: for regional presence, sensitivities guidance, and administrative support
- Overseas Companies: For global connectivity, trade links, technology transfer, and investment
Structuring flexible partnerships across such entities allows the pooling of complementary resources, which is otherwise difficult for any single organization. It inoculates against shock events or disruption for any one partner.
Best Practices for Managing Partnerships
Designing durable, productive alliances requires discipline and guidelines.
- Ensure alignment around shared objectives and values from the outset.
- Co-develop mutually beneficial business plans with transparency.
- Formalise agreements with clear roles, governance rules, and metrics.
- Enforce robust conflict resolution mechanisms within the framework.
- Exchange regular communication through liaison staff and leadership.
- Cultivate interpersonal bridges across organisational culture gaps.
- Extend training programmes and talent rotations across partners.
By laying the proper foundations for win-win cooperation and committing to maintenance, entrepreneurs gain leverage to tackle pressing market failures beyond their individual capabilities. It also prepares for future uncertainties by distributing risk and combining preparedness.
The importance of developing leadership and company culture
Finally, the last essential ingredient for building sustainable businesses in Nigeria springs from within, specifically leadership and organisational culture.
Trying conditions in the external environment constantly test resolve and morale. Coping requires extraordinary leadership capable of strengthening institutional values and convictions enough to counter uncertainty. It also relies on cultures promoting the aforementioned resilience attributes among individuals and teams. Constructing such firms means emphasising several leadership priorities:
Vision and signalling
Leaders must broadcast a compelling vision outlining market gaps and how the company will responsibly fill them. This vision should acknowledge obstacles but describe innovations to transform them into opportunities. Regular messaging must reinforce the vision and signal commitment to seeing it through sustained waves of difficulty.
Autonomy and Accountability
Empowering individuals and teams with independence builds confidence despite external volatility. But accountability ensures alignment and performance. Balancing autonomy with responsibility is crucial for organisational resilience. Leaders must delegate authority, set expectations, develop capabilities, and evaluate outcomes.
Innovation and experimentation
Enabling calculated risk-taking increases the likelihood of discovering solutions and business models attuned to the highly dynamic environment. Leadership should encourage trying new approaches through incubators, funding pools, and stretch goal-setting coupled with a safe space for failure. They must foster constant learning and course correction groupwide.
Incentives and social responsibility
Incentive structures promoting resilience, resourcefulness, and responsibility also prove critical for motivation. But leaders must also instill a sense of social purpose so employees feel inspired by community impact. Combining economic drivers with ethical goals curbs churn while aligning workers to a higher collective cause.
Inclusion and Dialogue
Leadership presence across operations, active listening to surface insights and concerns, empathy, and two-way dialogue build trust in uncertain periods. Soliciting creative ideas from diverse internal and external perspectives spurs innovation too. Regular open forums allow authentic conversation and strengthen the organisational fabric to withstand duress.
Instilling such behaviours at leadership levels empowers resilience companywide when disruption strikes. It emboldens stakeholders to double down on the vision and explore alternative solutions. With strong cultural pillars rooted in shared motivations and ethical principles, organisations gain collective power to push through momentary instability.
In Closing
Trying times may test the mettle of Nigerian entrepreneurs, but those who cultivate resilience and align strategic decisions to market realities gain the ultimate competitive edge. Hardships sorted the enduring homegrown ventures from the short-lived. By learning from those who came before, founders today can similarly build adaptive, durable enterprises without being defined by the ever-changing business landscape.