Key Factors to Consider
1. Regulatory Environment
• Bureaucracy: Obtaining necessary licenses and permits can often be a time-consuming and lengthy process.
• Frequent legislative changes: Be prepared for frequent shifts in legislation, particularly in the taxation and foreign exchange sectors.
• Local Presence Requirement: In many industries, the presence of a local partner or representative is highly recommended and sometimes legally mandated.
2. Financial System and Exchange Controls
• FX Restrictions: The repatriation of profits abroad requires compliance with specific foreign exchange (FX) regulations and conditions imposed by the Central Bank of Nigeria (CBN).
• Naira (₦) Volatility: The instability of the Naira exchange rate can significantly impact operational costs, financial planning, and investment returns.
• Limited Local Financing: Foreign-owned companies may face restricted access to financing within the Nigerian domestic banking system.
3. Personnel and HR Issues
• Workforce Selection: The high level of unemployment creates a large talent pool, but requires thorough personnel selection and vetting.
• Workforce Localization: Certain sectors mandate specific labor localization requirements, favouring the employment of Nigerian nationals.
• Labor Culture: Be mindful of differences in work culture and employee expectations.
4. Logistics and Infrastructure
• Underdeveloped Infrastructure: Infrastructure (roads, power, communications) remains a challenge, particularly outside major metropolitan areas.
• Supply Chain Instability: Businesses face potential problems with deliveries and instability in supply chains.
• Import Dependence: Dependence on imports for many key goods and components exposes the business to global supply and local FX risks.
5. Cultural and Mental Traits
• Respect for Hierarchy and Status: Showing respect for hierarchy and status is vital during business negotiations and interactions.
• Diversity Sensitivity: The country’s religious and ethnic diversity requires sensitivity and contextual understanding in all business dealings.
• Personal Networking: Personal connections (networking) play an enormous and often decisive role in business success.
6. Security and Risk Management
• Regional Instability: Be aware of political and regional instability in specific parts of the country.
• Corruption Risks: Maintaining legal integrity and process transparency is essential to mitigate corruption risks.
• Due Diligence: It is crucial to conduct thorough preliminary legal and financial due diligence on all partners and counterparties.
At every stage, the ITH CONSULTING team provides comprehensive professional support, leveraging its extensive years of experience in Nigeria.