Here’s What You Should Read Before Doing Business in Nigeria: A Guide

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Nigerian businesses are in a conundrum at this point in time. Many businesses are at both extremes of the divide; some are making profit while some companies are losing heavily. Some of these profits have been hinged on the dolarization of the economy, the global drop in oil prices among other factors.

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BANKING INDUSTRY

The banking sector has been in the lull; many banks such as Skye Bank, FCMB, Diamond Bank, FBN Holdings Plc and Ecobank Transnational Incorporated are all declaring declines in profit in the financial year ended December 2015. Other factors that have necessitated the decline in profit include the increased impairment to loans to sectors severely affected by the economic headwinds which are yet to abate.

MANUFACTURING INDUSTRY

The manufacturing sector as earlier mentioned is having challenges also. The current administration has promised to ensure that made-in-Nigeria goods are promoted but nine months in; no pragmatic action has been taken to nip the situation in the bud. This can continue to stress local manufacturers and lead to the eventual death of the local sector. The death of these companies will lead to unemployment and capital flight.

E-COMMERCE SECTOR

The e-commerce sector has continued to grow in leaps and bounds in Nigeria. Many platforms are springing up daily and Nigerians now shop on these platforms especially the residents of the commercial cities such as Lagos, Abuja, and Port Harcourt. Indigenous platforms like Jumia and Konga have gained more popularity and usage than foreign online shopping sites such as Amazon, Aliexpress etc. Some of the factors that have helped these platforms include proximity, currency of dealing, deliveries, and terms of payment.

THE NIGERIAN STOCK EXCHANGE

Many of the companies listed on the Nigerian Stock Exchange have also been on negative notes as the All-Share Index declines frequently. Many of the listed economies depend heavily on importation and the rise in exchange rates have these companies partly out of business.

THE INFLATIONARY PRESSURES

The inflationary pressures intensified in the month of March pushing all the five parameters of the Sales Managers Index to a 12-month low. A new set of data released on Monday by the London-based World Economics shows Nigeria’s Business Confidence Index down for the seventh consecutive month, reaching the lowest level in a year.

Businesses in the survey commented on poor consumer demand, rising unemployment, high inflation, lower oil prices and difficult exchange rate conditions.

INTERNATIONAL POLICIES

The United States has advised Nigeria to adopt a more flexible foreign exchange rate to boost growth and investment in Africans largest economy. The U.S. Assistant Secretary of State for Africa, Linda Thomas-Greenfield told an audience at the U.S. Institute of Peace that Nigeria should ensure that the value of naira currency versus the U.S. dollar was “more realistic.”

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INVESTORS HEAD FOR THE EXIT

Companies drawn to Nigeria by prospects of a population bigger than Germany and Turkey’s combined population are retreating. Truworths, for example, a South African clothing retailer, gave up and closed her two outlets in Nigeria.

THRIVING BUSINESSES

Despite the challenges in the Nigerian market, Coca-Cola agreed to pay about $240 million for a 40% stake in Chi Limited, a Lagos based fruit juice and diary product company. Boston Consulting Group has opened her first office in Nigeria and MoneyGram, one of the world’s leading financial institutions continues to lay stake in Nigeria.

THE NIGERIAN BUDGET

The National Assembly said yesterday that details of the 2016 budget will be ready in the next two weeks. The Chairman of the House Committee on Appropriation, Abdulmumin Jibrin said at a News Conference that work is still in progress on the budget.

According to him, “At the moment, we’re working on the details of the budget. We’ll take a week or two to work on the details. We’re doing the final harmonization. We’re looking at the various reports of the committees,” he said.

“This is the most difficult budget we have ever dealt with. The MTEF and the budget came late. With all the challenges we had, I doubt if the executive will be throwing stones at the National Assembly.

“Even while we were dealing with all such realities, multiple budget details came up and we were able to manage the situation in a very friendly manner with the executive,” he added.

Jibrin also said that there is nothing wrong with President Muhammadu Buhari signing the budget without seeing all the details.

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BILATERAL RELATIONS WITH CHINA

Nigeria is into bilateral relations with different countries one of such is China. Recently, Zao LingXiang, Economic and Commercial Counselor of the Chinese Embassy in Nigeria said that “China will start to import oil from the Nigeria”.

According to him, “China is the largest developing country in the world, and Nigeria is the largest developing country in Africa, and both countries have complimentary advantages in natural and human resources, funds and markets.”

This development is crucial for Nigeria because the economy is oil-dependent. Oil accounts for 80 percent of government revenue, and because of the plunge in prices since June 2014, the economy has suffered and the naira has fallen sharply.

Nigerian President Muhammadu Buhari’s government has been making strides to diversify the economy, which is fully in line with the 10 China-Africa cooperation plans announced at the summit on China-Africa trade in Johannesburg in 2015. The total bilateral trade volume between China and Nigeria, from the year 2004 to 2015, recorded at 101 billion dollars.

The economy is in a comatose state at the moment due to a lot of highlighted factors above, however, Nigerians are hopeful that all these happenings will soon be a thing of the past once the 2016 budget has been passed and the economy can progress substantially.

(References: This Day Live, Nigerianreporter.com, Omojuwa.com, and PremiumTimes)