Learning about the market you’re expanding into; the conditions, benefits and challenges is essential for success, or you might find yourself in hot water in a foreign land.
Expanding into Nigeria can be challenging, especially if you consider how many businesses, in multiple sectors, didn’t get it right and had to pull out.
If you don’t do enough research and understand the market you’re expanding into you could risk the stability of your South African operations. Pulling out of Nigeria can be costly, in both fiscal terms and reputational loss.
Nigeria boasts the largest population in Africa, and one of the biggest in the world. It has a dynamic, entrepreneurial, ambitious and well educated population. This is a desirable and lucrative market, if you can crack it, as the middle-class is growing and spending to their heart’s content.
Related: Could this be the secret to success? Business opportunities in Nigeria
Here are a few insights to keep in mind when expanding your South African business into Nigeria:
Economic conditions you can expect
For many years, Nigeria’s economy has been dominated by the oil sector. However, its marketplace is diversifying, with sectors such as telecommunications, real estate and financial services experiencing growth.
It is currently one of Africa’s major banking markets, with ten of its banks making the Top 1000 World Banks ranking in the Financial Times. Also, the promise of high returns establishes Nigeria as an attractive country to invest in.
Nigerian government has introduced reforms that are improving sentiment within the macroeconomic environment, and overall business climate, to attract further foreign investment. These reforms are enabling the country to further diversify its economy, which has created new investment opportunities in sectors including manufacturing, mining, agriculture, engineering, retail, construction and hospitality.
Challenges specific to Nigeria
The Nigerian business environment has its challenges that include insufficient infrastructure, erratic power supply, foreign exchange shortages, high rate of inflation, currency volatility, corruption, high capital cost, red tape, high rental fees, along with excessive and unpredictable regulations.
What distinguishes Nigeria from other African countries is its population size, and its complex social structure combined with divergent political, economic, religious, ethnic and family dynamics.
Related: 4 Business opportunities that Nigeria offers investors
South Africa businesses winning in Nigeria
Standard Bank, Shoprite, Pepkor and Multichoice are among the top South African companies that thrive in Nigeria. Unfortunately, there isn’t a blueprint for how to be successful in Nigeria, or any other Africa market, so unique research and planning is essential if you’re looking to set up an operation in the country.
It’s important to keep in mind that all these businesses were a success because they carried out detailed market research, due diligence, executed the right market strategy, chose the correct acquisition target and found a suitable local partner (because sometimes you need a little help, and locals know their market best).
To mitigate risks when venturing in Nigeria, your South Africa business should look to:
- Build relations with partners in the country
- Manage stakeholder relations on growth expectations
- Learn from your peers’ coping strategies, to make those tough decisions
- Be flexible and open-minded towards Nigeria’s wants and needs
- Invest in hard and soft infrastructure such as bricks-and-mortar and skilled workers
- Stay focused and take the long-term view.
- Ensure you research your new market before expanding.
- Incorporate the challenges and benefits of Nigeria into your business strategy.
- Use the strategies of successful companies to capture the Nigerian market.