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Nigeria 2016: Hidden Business Opportunities

Akin Afere | Alder Consulting | March 19, 2016

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- Largest in Africa

- The 8th largest in the world

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However, from all the

projections as well as all

that is happening, our

economy is struggling.

Consider the following:

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Nigerian Economy: Growth Rate

6.7 6.5

5.9

2.3 2.1

Nigerian Economy: Inflation Rate

8.7

9.2

9.3

9.6

11.4

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Although other countries

(especially those with a heavy

dependence on oil revenue) are

experiencing a downturn as well, the

bad news is that most of them are

better prepared to handle the situation

better than we are.

I will illustrate this shortly.

There are 3 primary

factors that highlight

the current economic

downturn.

Drop in oil price

$100

$63

$29

$30

$39

Note: If the oil price

stays above $38,

Government will be

able to fund the

2016 budget and

things may not be

as bad as expected.

Based on the drop in oil prices

(and other factors), the value of

the Naira has dropped drastically.

Although the official CBN exchange

rate is N196, black market rates

currently fluctuate between

N315 and N350 to a Dollar.

Finally, our external reserves

(or savings) are very low

($27.8b as at December 2015).

Consider the following countries:

Country Foreign Reserves ($)

China 3.4 Trillion

Brazil 359 Billion

India 346 Billion

Algeria 155 Billion

All the FOREX transaction

restrictions we are currently

experiencing is largely due to

Government efforts to shore up

our foreign exchange reserves

and halt the depreciation

of the Naira.

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1. As Nigeria’s main source of

income is oil (over 90% of FOREX

earnings & 70% of Government

revenue), it means we have less

money to spend as a country.

Therefore the amount of money

within the system is reduced,

and the cost of living & doing

business rises.

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2. We don’t refine enough fuel to

meet local consumption. And so, we

are spending scarce resources to

buy refined products at premium

prices.

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3. Nigeria is an export driven

economy. We import everything

(including tooth picks!) and we pay

in Dollars.

This means the cost paid by

importers increases, the more the

Dollar rises, therefore the cost

of goods and services will also

increase as I am sure you have

experienced.

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Where ever there is

squeeze or lack, there

is an opportunity to be

mined.

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There is a current push

towards a diversification of

the economy. Using this as

a stepping stone, I will

spotlight 3 areas of

opportunities briefly.

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Agriculture

Nigeria’s population (186.4m) is

the largest in Africa and 7th

largest in the world.

Someone has to feed all those

people. Also, consider the global

drive towards the consumption

of organic/fresh products.

Agriculture contd.

There is a lot of Government and

private funding opportunities in

this area. Some of these include:

Fund for Agricultural Finance in

Nigeria (FAFIN) and Agricultural

Credit Guarantee Scheme Fund

(ACGSF).

But you need strong idea and

business concept.

Agriculture contd.

Whatever part of the value chain

you choose to pursue, the

opportunities are there. But you

must bring creativity to it. Always

ask how can I make it better?

Cf: OmoAlata, Hay Country Foods,

KayMart

Services

The service sector accounts for

52% of Nigeria’s GDP in terms of

employment.

There are vast opportunities here

due to the large size of Nigeria’s

middle class (Africa’s middle class

of 313 million people is the fastest

growing middle class category in

the world).

Services contd.

The middle class spends on

comfort. Therefore, the question is

what service can you provide and

how can you provide it differently?

Technology & Social media

To understand the potential

here, consider the following

facts and figures.

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Statistics in

% of Nigeria’s population that is under 35.

Technology & social media contd.

The opportunity here is to find out

what you can provide for these

people (below 35) that they need

on a daily basis.

For this demographic,

technology and social media

are important.

Technology & social media contd.

Find out what they want, what

they need, what they eating, what

they wearing, where they going

e.t.c.

Then ask what can I provide

and how can I leverage

technology to do it.

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Whatever opportunity you decide

to pursue, you must strive do

things differently and you must

remain consistent.

Due to the tightness in the

economy, there is a drop in

demand as people become more

careful with spending.

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Demand will drop. But there is a

solution:

Standout! Differentiate yourself!

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The law of Demand & Supply

states that when a standard

commodity is offered by

numerous sellers to numerous

buyers, price falls.

Tweak the assumptions

undergirding this law and you

will differentiate yourself and

your business.

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Uncomoditise yourself, product or service

Create business distinction

Distinguish your customers

Be advantageously comparable to your competitors

Retain your customers

Create desire for your skills, products or service

Make access to your market difficult for competitors (because irreplaceable)

Adapted from Alder Consulting’s Brand Septagon. ©Alder Consulting 2016

If you just concentrate on any 2

of the foregoing, you are on

your way to making the best of

the opportunities that come

your way.

I wish you success in your

endeavours.

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