In a globalized world, third-world countries from Africa and South America are finally being tuned in to global trade and economic development.

With Nigeria being the most populous country in the whole of Africa, and one of the most populous in the whole world (currently 7th); and with so many talented people and a good geo-strategic position in the middle of Africa, one would think that it is a great country to do business in. But is this really the case?

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Several commentators have highlighted the potential of Lagos, some even viewing it as the African Silicon Valley given its potential. Still, numerous international companies have tried doing business in Nigeria eventually withdrawing due to the difficulty of doing business here.

Given the fact that the economy is still recovering from a recession, and with several other more pressing issues on the government’s agenda expectations were low that international companies would get the regulatory or economic initiatives from the government to facilitate business in Nigeria.

We look at what changes have been made and what problems still remain for international businesses looking to set up in Lagos.

Improvements Made to The Business Environment

In most of Nigeria’s states, including Lagos, the government has implemented certain measures allowing for an easier company registration process, and less bureaucracy. Similarly, building permits for the private sector are now easier and cheaper to acquire. As of Nigeria’s national banks and credit availability, things have been moving forward but most banks are still risk averse with regards to credit lines.

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In addition of course, businesses looking to set up in Lagos, whether an office or plant, will still have to deal with the ubiquitous issues of any global expansion from hiring local employees, setting up a payroll, integrating HRIS systems etc. Whilst these issues are not unique to Nigeria, companies departing Nigeria noted the lack of local suppliers to assist in these matters

Technical Challenges to Opening and Running A Business

One of the biggest challenges of starting an international business in Lagos (and Nigeria in general) is the lack of infrastructure.  Being a private investor, you will have to provide your business with a clean water supply, alternative transportation options, logistics, and all other essentials that a business operation requires.

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There is still little to no business infrastructure in Nigeria, and a lot of organizations still have problems maintaining a constant power supply. If you plan on opening a factory this can present a major issue, and your best bet may be to invest in solar generators and plants – which will take a big bite out of your budget which has already been shaken up by the need to provide essential logistics.

Similarly, although Lagos has one of the biggest ports in the area, you will still face bureaucracy problems to conduct international trade. Add to that the fact that Lagos and Nigeria, in general, isn’t famous for adequate roads, you may have a challenge to receive and deliver all of your goods on time.

Wider Socio/Economic Problems in Doing Business

Nigeria is the most populous country in the whole of Africa,and tied to that is its huge unemployment rate, and especially high youth unemployment rate. Together with the poor general economic conditions makes Nigeria a challenging environment for international companies.

An alarming fact is that 92% of the population lives off no more than $2 a day, this level of poverty and unemployment has led to, if not social revolt than disturbances creating a sense of insecurity for company ex-patriates. Take this together with the fact that unless you have your finances clearly set out and ready, getting your business financed by a bank or government in Nigeria is almost impossible (no matter how good your idea is).

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Nigeria is famous for its corruption and bribery, so unless you are willing to comply with that, the chances of having a successful registration and permit application are low. Finally, are the various geo-political issues blighting Nigeria that has seen an increase in terror attacks over the last few years.

Government Imposed Challenges

Governments everywhere have regulatory demands on companies looking to set up an entity or operation in their country, in Nigeria though the bureaucracy is considered excessive – just starting a business will take you over a month.

While last year brought some positive changes, there is still a problem in the country of high taxes and related fees that the government will need to address if international companies are to be more present.

Summary

Nigeria has a good geo-strategic position and potential given its current economic reforms. Still, the business environment is far from ideal. In order for international investment to increase over the government will have to address the above-mentioned challenges.