Top 9 Challenges Of Doing Business In Nigeria And The Best Way To Solve Them

Challenges Of Doing Business In Nigeria
General Information / Small Business / Top Tips

Top 9 Challenges Of Doing Business In Nigeria And The Best Way To Solve Them

On the African continent, Nigeria is one of the world’s leading business locations. However, there are many challenges that a Nigerian business faces when it comes to doing business in Nigeria. Out of 189 countries, in 2016, Nigeria was ranked 169th in the World Bank’s Ease of Doing Business Report.

Up to 80% of new businesses and startups in Nigeria fail within their first three years. However, operating your business in Nigeria can be a fantastic experience when your business venture succeeds. Still, before success, there are bound to be significant difficulties and challenges that a newly-founded business or startup has to conquer.

Challenges Of Doing Business In Nigeria

Building a brand from the ground up typically comes with its own business risk that may impede the growth and development of such a business; however, some problems and challenges are very common to all companies in Nigeria.

This post discussed the top 9 challenges of doing business in Nigeria and how to conquer them to ensure they don’t ruin your business.

Challenges Of Doing Business In Nigeria

Not all businesses are created equally. There are many challenges that you’ll face when you decide to do business in Nigeria. The following is a compilation of the challenges you might come across when starting a new venture there.

A significant concern for businesses in Nigeria is getting access to a stable power supply and constant electricity. Since June 2018, an average household in Nigeria can only enjoy 6 hours of uninterrupted power supply from the daily 24 hours.

This is why generators are prevalent in Nigeria as an alternative power supply source. However, 90% of houses in Lagos State only have at least one power generator running as an alternative power source.

For decades now, successive governments have unsuccessfully endeavored to combat Nigeria’s energy deficit challenge. The current Minister of Power, Works, and Housing, Mr. Raji Fashola, blames inadequate electricity supply on consumers for their lack of sufficient financial investments in the power sector.

Although Nigeria is among the world’s leading investment destinations and has a well-functioning business environment, bribery and corruption are still serious challenges.

The federal structure of the political system means there are lots of regulatory agencies, which can result in demands for bribes from public officials.

According to Transparency International’s corruption perception index in 2013, Nigeria was ranked 14th on the list of the most corrupt countries in the world. Plus the fact that organized crime is a huge problem in some parts of the country.

But, this is a challenge the present administration of President M. Buhari is battling hard against at all government levels.

One of the most challenging tasks for any business owner wanting to build their venture is to raise capital for it.

Capital refers to the amount of money the business owner can spend on different business activities. Except if you’re among the rich kids in the country, raising capital has never been an easy task and often requires considerable determination and patience.

Lack of financial capital has proven to be the most critical challenge regarding doing business in Nigeria.

Coupled with the conceptualization and implementation of financial programs meant to assist businesses, the government has always struggled to ensure that financial capital is made accessible to entrepreneurs easily.

Entrepreneurs often rely on personal savings, families and friends, business loans, or government grants to get financial capital for their businesses.

The primary thing we discuss here is disruption, like digital or technological disorder. This is something that has been affecting businesses in various industries in Nigeria.

There is also a market risk regarding the global uncertainty around economic growth. When you’re not sure about the direction the whole economy will take, this makes business planning and strategy development a great deal more challenging and risky.

To get ready for these risks, several corporate organizations (like banks) are now showing support to start-ups.

This is so that they are part of the disruption or are trying to develop smaller, more agile, and very independent aspects of their organization to forecast the future and be aware of new trends in the market that can pose a threat to how business is done.

The government plays a significant function in deciding how business should be done in Nigeria. However, no economic system or government leaves all the decisions on how business is done to the market.

These regulations are made to keep businesses in check and follow a common rule. The law guiding how business is done is called the Companies & Allied Matters Act (CAMA).

On the World Bank’s “Doing Business” ratings, African countries rank low mainly because of the difficulty involved with building a business. In Nigeria, sometimes, it can take two weeks to one month to set up a business venture that still involves moving through many regulatory hoops.

Indeed, the government is becoming more supportive of local start-up ecosystems; however, generally, the Nigerian government needs to do more to make doing business easier and stress-free.

A survey was done in 2016 and 2019 on the main business challenges of Nigerian business owners and entrepreneurs. #1 on the list of business challenges is the limited supply of competent personnel and talent.

The rate at which a company can scale is directly proportional to the talents and skills of its team behind the business. Finding the right candidate with the right educational background, problem-solving skills, and professionalism is difficult for companies looking to scale their business.

Regardless of Nigeria’s large population, the number of talents available compared to the country’s size is low. The country’s poor educational system has limited the pool of talent.

According to UNICEF, Nigeria is estimated to have 10.5 million children of school age with no chance of getting into school at all, the highest in the world.

Organizations looking to excel and grow in Nigeria will need to properly vet candidates to be hired and prioritize getting referrals from their professional network to secure the right talent.

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The poor state of infrastructure:

Intangibles are the main problems discussed when considering the makeup of a challenging business environment since they are the hidden costs that need to be factored into your budget.

But, there are also many fundamental challenges to doing business in Nigeria that you need to consider, like poor infrastructure. Without a good road and constant electricity, you can only be as productive as the infrastructure within your locality.

Unluckily, unstable power supply and bad roads are Nigeria’s two major infrastructural challenges. These challenges reduce the level of productivity of every business venture in the country.

But, these issues affect some entrepreneurs more than others. For instance, the electricity problem affects manufacturers the most because they pay more bills. But, at the same time, bad roads affect everyone because important gatherings are often delayed due to traffic.

Also, the ineffective road network serves as an obstacle for businesses looking to distribute goods across the country.

Regardless of if you’re a small business owner or a manager at a multinational organization, the poor infrastructure will most likely affect your business in Nigeria. Organizations that come out successful are those that have built operational buffers around these challenges and added this cost into their business model.

Lack of information and data:

66% of Nigerian business owners’ main worry is where and how to find new customers. This is every business’s top priority; access to a customer base will drive business revenue.

Nigeria’s large population is a huge advantage for many businesses looking to tap into a broad customer base. The large market size also comes with the challenges of knowing exactly who and where your customer base is amidst the noise of the prominent market.

Lack of market information and credible business has also proven to be a significant challenge for brands looking to validate their business model and find product-market fit.

Due to a lack of market information, businesses find it hard to identify their target audience – what they need, where they are located, and how much they are willing to pay for a specific product and service.

Brands can also not understand the competitive landscape for a particular market and identify potential channel partners.

Without adequate “on-ground” data, brands cannot build robust business strategies that will help them mitigate potential business risks while aiming to capture available market opportunities.

To tackle this issue, successful businesses in Nigeria need to compile critical market information for their business using multiple sources. Though this method works, it can be time-consuming and take many resources that begin to slow down business growth.

Bureaucracy and changing government policies:

Since the time Nigeria struck oil in the late sixties, the exportation of crude oil has been the main driver of the Nigerian economy.

And though this brought wealth, so to say unevenly distributed wealth, to the country, it also caused a lot of companies to be ignored.

Therefore, several government policies put in place have not been in favor of non-oil industries, especially small businesses.

In addition, sudden changes in the bureaucratic systems and government policies have led to many businesses failing and moving out of the Nigerian market.

Several agencies demanding unclear payments and paperwork from businesses result in a lot of frustration for business owners.

Understanding the different government agencies and the number of administrative protocols necessary for business growth can be very overwhelming.

That is why getting yourself familiar with relevant Nigerian regulations might require you to consult the expertise of a local business partner or professional that is well-versed in sector-specific requirements.

Partnering with experts can help reduce the time spent doing your research and save you a lot of money and resources down the line.

Frequently Asked Questions

What are the significant challenges facing businesses?

a. There is no doubt that Nigeria is a country with huge potential in the area of agriculture, animal husbandry, fisheries, and other resource extraction. However, it has not been able to capitalize on its full potential due to a lack of proper policies and regulations as well as poor infrastructure development. As a result, many industries have been largely constrained from tapping into their full potential due to a lack of access to raw materials, low productivity, high cost of production, and low competitiveness.

b. A major challenge that hinders Nigeria’s growth is corruption which has become an endemic disease in this country. In order for us to achieve our desired level of development, we must urgently tackle this problem head-on and develop effective mechanisms for its prevention and eradication so as to attract foreign capital but also encourage domestic investors who will be willing to put their money where their mouth is.

c. another major challenges of doing business in Nigeria we currently face is the need for more efficient government structures, especially at the federal level which is necessary for providing services like healthcare and education to all Nigerians irrespective of whether they live in urban or rural areas without fail or without discrimination based on gender, religion or ethnicity, etc

The ten biggest Challenges Of Doing Business In Nigeria today are:

  • Financial management
  • Uncertainty about the future
  • Regulation and compliance
  • Monitoring performance
  • Competencies and recruiting the right talent
  • Exploding data
  • Technology
  • Customer service

What are the challenges of small business owners?

Five challenges faced by small businesses and how to solve them

  • Common pain points for small businesses
  • The challenge of exporting
  • Cash flow issues
  • Tax complexity
  • To go to the cloud or not
  • Finding the right talent

What are the advantages of doing business in Nigeria?

It is a safe place for foreign capital and offers investors investment guarantees, fiscal incentives, stable legal and political environment. Nigeria also offers a low VAT rate, corporate tax regime, flexible labor market conditions, and a simple process to establish a business.

Is it easy to do business in Nigeria?

In 2019, Nigeria ranked 131st out of 190 countries in the ease of doing business. On the other hand, the economies ranked one to 20 have more straightforward and friendly regulations for businesses. In Africa, the best country for doing basin ranks among the world’s first countries in the world.


This post isn’t meant to scare you away from attempting to do business in Nigeria. It’s just meant to prepare you for what you’ll face if you do attempt it. In that regard, I hope that this has been helpful and that it may even serve as a starting point for you to do some of your own research on doing business in Nigeria. Good luck!

Originally posted 2022-02-16 17:18:44.

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