Nigeria has seen substantial economic growth since the return to democracy in 1999.
Picture: TradeInvestNigeria

Many investors and business people are aware about the opportunities that Nigeria’s market of 150 million people offers but are still unsure of whether to take the plunge. Jaco Maritz answers some common questions often asked by prospective investors.

I want to get involved in the Nigerian market but am not sure about the first step to take. What is the best route to follow?

It obviously differs from industry to industry but it is highly advisable to find a Nigerian partner who knows the business environment. Nigerians are generally also more sympathetic to investors with local partners or staff. The next stop would be to visit the Nigerian Investment Promotion Commission (NIPC) where you will be able to get advice on investing in Nigeria. The NIPC has streamlined the investment process by setting up a ‘One Stop Investment Centre’. Many countries also have bilateral chambers of commerce that will be able to assist you. It is always a good idea to meet with other established foreign investors to receive some insight from their experiences in doing business in Nigeria.

The political situation in Nigeria has stabilised dramatically since 1999 but how can one be assured that things will stay this way?

As with all young democracies there is always a fear that the situation can destabilise at any moment. Although such a scenario is theoretically possible in Nigeria, it does seem that the majority of the population, including politicians, is sick and tired of struggling and really wants to see Nigeria work. The people are happy with the democratic gains made so far. Corruption is still an issue but this evil is gradually being rooted out; and in most cases should not be a deterrent for investment. Incidents of violence around election time are often no worse than in other developing countries. Nigeria also has a vibrant and firmly established free press that is not afraid to hold politicians and authority figures accountable.

What are some of the major challenges in doing business in Nigeria and how can they be overcome?

Many Nigerians would tell you the country’s electricity supply problems are the main hurdle in the way of meaningful economic growth. The lack of infrastructure is also a major problem as anyone who has ever been stuck in Lagos traffic would know. Bad roads and a lack of railway services also create challenges in moving goods around the country. Despite this there are still many highly successful businesses in Nigeria. Most investors are able to look beyond these difficulties when Nigeria’s massive market of 150 million people is considered. The infrastructure situation is however being addressed by the authorities and the situation is improving.

What are the implications of Nigeria’s electricity supply problems for businesses looking to invest in the country?

When spending time in a Nigerian office or hotel, there are normally short periods every few hours when the lights and air conditioning go off as the building switches from the national grid to its own generators; or vice versa. In the TradeInvestNigeria offices we have a UPS system that keeps computers running to ensure that our staff can work without interruption. Most businesses have similar systems in place. The direct impact that using generators will have on your business is that it raises the cost of electricity and subsequently the prices of most products in Nigeria. Foreigners are usually surprised at how ‘expensive’ Nigeria is. This situation has made it difficult for many local manufacturers to compete with cheap foreign imports. The federal government has however banned the importation of many products in order to stimulate local production. As with other infrastructure projects many plans are on the table to improve power generation in Nigeria.

Will I have access to a skilled workforce in Nigeria?

Nigeria has a number of good universities and other educational institutions which turn out many highly educated and skilled individuals. A large number of Nigerians also go to America and Europe to study and then return to Nigeria to apply their skills in their homeland. Although investors might have to search a bit longer to find highly specialized individuals in certain fields, educated and eager to learn Nigerians are not hard to come by. Because of its British colonial past English is well established in Nigeria and the vast majority of people are fluent in the language.

How big is the Nigerian middle class and at what rate is it growing?

There are no reliable statics on the size of Nigeria’s middle class but sales of consumer goods such as cars, fashionable clothing, air conditioners, computers and satellite television decoders suggest that it is growing at a steady pace. Nigeria’s economy is fast expanding, albeit from a very low base, lifting more people out of poverty every day and pushing many into higher income brackets.

What kind of assistance can investors expect from the Nigerian Government?

The Nigerian Government has demonstrated its desire to grow the non-oil sector of the economy by introducing various incentives for investors and reducing bureaucratic bottlenecks. Although investors should still expect some red tape there is definitely a political will to increase foreign investment in the country. Generally the Nigerian Government, on federal and state level, will help investors out in the areas of land acquisition, incentives, infrastructure provision and financing. The situation however differs from state to state and investors should go and meet with the local authorities where they want to establish their business.

Will I have to fear for my safety in Nigeria?

Nigeria's image as a dangerous and lawless society is vastly exaggerated. I feel much safer in Nigeria than in many other couintries. As is the case with the rest of the world, Nigeria’s metropolitan areas have more problems with crime than the rural areas. Most crime is however purely a result of poverty. Foreign investors have told me that although they sometimes experience crimes like petty theft they have never felt as if their lives are in danger in Nigeria. Incidences of kidnapping in the Niger-Delta area are confined to the oil industry where the local population wants to draw attention to the fact that they are being exploited by multinational oil companies – this area should however be avoided if possible. Visitors in Nigeria should just use common sense.

As a foreign investor, will I be accepted by local Nigerians, or will I be seen as trying to exploit the country?

Nigerians are generally very friendly and hospitable but also a proud people who don’t like to be trampled upon. Most are aware of the advantages of foreign investment in terms of job creation and economic growth. As an investor the key is to always treat people with respect and to behave like you are a guest in a foreign country.