This article is a section from a report “Investing in Nigeria” and shall be viewed in the context of the title. Please view the report for more information on the subject as well as references for this article.
The main challenges in Nigeria are infrastructural and institutional inefficiencies. The lack of electricity supply is making business tougher to run, offices and factories are known to run on generators. Ports can take weeks to clean goods and congestions are very common. The roads are of bad quality and there have been instances of produce getting spoiled while in transit.
It’s one thing to attract capital and finance ones business and another to actually find operating talent to run the business. A highly skilled and demanded Nigerian employee will rather go into a bank, telecoms or oil and gas company, than the less attractive industries the economy has.
Experience and connections in a field are highly valued in efficiently operating a Nigerian business. This leads to many businesses being dependent on the senior managers to run them efficiently and make the business vulnerable to the managers leaving to start their own ventures. There have been instances of this happening.
The governments protectionism policies are leading to decreased domestic manufacturing costs, since more of the capacity can be used to achieve economies of scale. This is helping to tackle one of the biggest obstacles faced by domestic firms – two digit interest rates that are known to increase production costs greatly. It’s hard to compete versus foreigners that have one digit interest rates.
There are little emphasis on asset management in Nigerian companies, this can be very problematic with a shortage of technical skills. Asset breakages can take long time to fix and have impact on the whole of the value chain.
It’s not just that you need partners in Nigeria, but also a partner mentality from both sides. A partner mentality is the key to business in Nigeria. There is a need to guide your businesses and managers, the changes will come slowly. Some employees have been working in a company for years and will turn back to their ways of doing things as soon as you go away.
Strategic flexibility should be prioritized and strong emphasis should be put on creating an operational model.