For intrepid investors, ‘Naija’ is worth the risks
Overload: one carefully plans where and when market excursions take place, but they are possible
Sometimes, when the traffic snarls up into the ubiquitous “go slow”, or the power goes off for the umpteenth time, or your secretary brings you a letter from a government agency announcing that unless you comply with some new directive your factory will be shut down, it is easy to stare out of the window and think: “When is this place going to get better?”
The truth is – at least since the start of Nigeria’s own peculiar form of democracy – that it has.
As with so many things Nigerian, the trend is not a comfortable, straight line but a series of stops and starts: improved telecommunications and internet access, a better structured and more transparent banking sector, even advances in largely still dire infrastructure in one or two key cities and states, most prominently in Lagos.
Clearly businesses that have prospered have built the experience to cope with “Naija” – the name natives have for their own country – but newcomers still incline to nervousness. Typically, the concerns of potential inward investors focus on security, corruption and the ease of doing business.
Security is inevitably an area of concern. Against the background noise from the western media, so ready to focus on the many stories of kidnap and atrocities, the challenge is to find a practical way to manage the welfare of people and assets without being paranoid.
Parts of the northeast are extremely difficult, as the war with Boko Haram continues. When telecommunications are down, markets are under curfew for days at a time, and the borders are closed, doing business can be arduous.
Outbreaks of seemingly random violence elsewhere in the north, kidnap and robbery in the east, and the perennial rumours of such violence coming to Lagos keep the security industry booming.
While it is expat-related incidents that grab the headlines, the reality is that life is far tougher for locals. We in Promasidor have more than 200 food sales and distribution staff outside Lagos and we rarely go a week without some form of incident. Invariably, staff who have experienced events that would have the average westerner taking three months sick leave to recover from are back at their posts within 48 hours.
Nigerians are resilient and their ability to run their businesses or do their jobs in such circumstances is testament to their courage, determination and pragmatism.
In Lagos, reality and rumour rarely coincide. While investment bankers and cosseted oil industry executives stay in the narrow confines of the islands, those of us with factories in industrial areas on the mainland go about our daily lives relatively relaxed. Meeting customers in the many lively markets remains one of the pleasures of working in consumer businesses. One carefully plans where and when these market excursions take place, but they are still possible.
Corruption is another difficult subject. The recent cabinet changes prompted some observers to comment that the ministries with the worst reputations had been left untouched. As we are heading towards the early 2015 elections, this is hardly surprising. Business with government can be difficult.
However, for companies such as ours in the consumer space, corruption is less of an issue. After all, we can’t bribe consumers to buy our goods – as with anywhere else, it is all about delivering a quality product at the right value.
Experience shows that companies that build a reputation for being “serious” and correct in their dealing with tax and regulatory bodies have much less trouble than might be supposed.
There are positive indications that the federal government has identified the plethora of agencies and the consequent duplication of regulations as an impediment to Nigeria’s competitiveness.
The attendant charges and fees that manufacturers and retailers bemoan are tantamount to multiple taxation. The government’s own Oronsaye report has recommended a drastic reduction in the number of federal agencies. However, the number at that level is only a fraction of the total.
Just as burdensome is the duplication between federal and state bodies, which often seem in competition for the most innovative form of fee or levy calculation. Lagos State has published a list of all state bodies’ chargeable fees but they are one of the few to do this.
The key to effective management of this issue is active membership of one of the many industry bodies. The Manufacturers’ Association of Nigeria, the Nigeria Employers’ Consultative Association and the Nigerian Economic Summit Group, a leading think-tank, are among the most effective.
A collaborative approach to industry-wide problems is surprisingly effective, although often frustratingly time-consuming. Engagement with arms of government on legislation and regulations are also best tackled through such bodies.
The truth is, we will be asking when Nigeria will reach its full potential for many more years and in many more FT supplements, but the market opportunities have been here long enough for those with the foresight, and the opportunities will continue to proliferate.
Just take Promasidor’s example. Twenty years ago, the founding shareholders set up modestly in Apapa and today we are a $300m-plus revenue business.
It has not been plain sailing every day, for sure – but despite the security and other difficulties – this market will continue to offer opportunities like few others.
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The writer is chairman of
Promasidor Nigeria
Keith Richards