Nigeria

It is undeniable that there is a correlation between a country’s business environment, foreign direct investment inflows and international trade performance. Countries that make setting up businesses easy, allow clearance of goods at ports with little hassle, grant entry and exit visas to investors and visitors alike in quick time, enable the registration of property with little trouble, provide reliable electricity, and make documentation like construction permits easy to acquire, attract more foreign direct investment (FDI).

Internet use in sub-Saharan Africa is on the rise, supported by growing smartphone ownership and connections to multiple undersea communications cable systems. Broadband uptake grew 34% per year between 2008 and 2015, and penetration is anticipated to reach 80% by 2020, up from 20% in 2015.[1]

Africa spends US$35.4bn on food imports annually, despite being home to 65% of the world’s undeveloped arable land. Unless something drastic is done, demographic factors such as population and urbanisation, which bring about increased demand for food and changing consumption patterns, are expected to raise Africa’s net food import to over $110bn by 2025.

Cassava is a starchy tuber produced mainly in the tropical and subtropical regions of the world, both north and south of the equator. The root was introduced to Africa between the 16th and 17th centuries by the Portuguese, who brought the stems from Brazil. From the delta of the Congo River (where it was initially planted in Africa), cassava spread throughout the continent and, today, the tuber is cultivated in more than 35 countries.

Adapt or leave

Even as most firms found it difficult to adapt to the hitherto foreign exchange (FX) scarcity in Nigeria – eased in June 2016 after the Nigerian central bank floated the naira – others embraced it by adopting innovative strategies to remain in business. Shoprite, a South African grocer, advertised in April 2016, asking Nigerian manufacturers to supply specific consumer goods – it used to import these items. As the sale of FX for the importation of some of its fast moving consumer goods had been banned in the official FX market, the retailer needed to seek local alternatives. There were concerns about quality. Even so, it was the grocer’s brand that assured customers, not where the goods came from. Some South African firms – Truworths and Clover for example – chose to leave the country instead. Their business models, it turned out, were not really adaptable to the new economic realities. As they imported goods cheaply from their home country, Nigeria’s then fixed and overvalued exchange rate almost always guaranteed them a positive FX return and sometimes made up for the occasional negative or meagre margins on goods sold. In spite of the tough economic environment – which remains challenging even after the naira was allowed to trade freely in June 2016 – Pick ‘n’ Pay, another major South African retailer, announced plans in April 2016 to set up shop in Nigeria, evidence it considered the long-term prospects of the country to be still attractive. A view echoed no less by Rich Lesser, global chief executive at Boston Consulting Group, a consultancy, at a July 2016 CEO conference by BusinessDay – the leading business daily in Nigeria.

 

 

 

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