Is Nigeria an expensive place to do business?
The fact that Nigeria is a developing, emerging country does not mean it is a cheap place to do business but rather an expensive one. Infrastructural challenges include a highly unstable power supply, lengthy clearance delays at ports and a very poor road network. These challenges have a great cost impact and operating costs in Nigeria are higher than in surrounding countries. A simple example is that hotels can command €250-€300 a night in the business areas of Lagos (Ikoyi, Victoria Island and Lagos Island). Despite these challenges, Nigeria is the unmistakable giant in the region, accounting for over half of the GDP of the Economic Community of West African States (ECOWAS) and has immense potential to become the engine of trade growth in the region.
In terms of higher operational costs, one important lesson for Irish companies is that cheap solutions are usually a challenge in disguise. Possible strategies include:
- Outsourcing: It pays to work with reputable service providers, even though they may be more expensive. For example a reputable distribution partner may appear expensive at first, but this needs to be considered in the context of if they will deliver on time. Also, a service contract, for example for the provision and maintenance of generator services, can save a lot of time and money over the longer term.
- Keeping control: keep most of your value and supply chain in your own hands. This means having qualified staff, employing your own trucks, procuring your inputs directly and from abroad, etc. This is a very labour-intensive and time-consuming method, but it increases the chance of having things done as you had intended.
- Maintaining a supply of essential items: to have uninterrupted services, it is useful to have your own stock of items you use. A company cannot rely on all the products to be in the market; from specialised stationery to specific wires for industrial use, shops and supermarkets generally do not hold significant quantities of stock. Nigeria is an importing country and it often works best to secure your own supply.