Business basics

Since 6 April this year, when the Nigerian government released its rebased Gross Domestic Product (GDP) figures, this giant West African country has laid claim to being the largest economy in Africa. Anver Versi explains how to do business there

BusinessBasicsNigeria has overtaken the erstwhile leader, South Africa, by some distance. The new figure puts Nigeria’s 2013 GDP at N80.2 trillion (US$510 billion) representing an 89% increase over the previous GDP of about US$267 billion. This figure puts South Africa’s GDP of US$384 billion in the shade. Nigeria is also now the 26th-largest economy in the world.

South Africa, naturally, is miffed by having its crown as the largest African economy taken away so rudely and there are some who are contesting Nigeria’s new status. But the fact remains that Nigeria’s GDP calculations had been hopelessly out of date – figures were based on 1990 prices and activities. Countries tend to rebase their calculations every two to three years to get a realistic measure of how their economies are doing. As a result, a whole slew of business developments were simply not captured by the figures released earlier. This included the phenomenal growth of the telecoms market, from the less than 500,000 fixed telephone lines in 1990 to the over 120 million subscribers today; the extraordinary success of the local film industry, Nollywood, which did not figure at all in the 1990 figures but which now generates over US$5 billion in revenue; the explosion of small- and medium-scale businesses over this period, and the strong growth of agriculture, manufacturing, banking, and services.

But, impressive as this may sound, the fact remains that 60% of Nigeria’s population of over 170 million people are still at or around the poverty level, despite one of the fastest growths of the middle class in the world. What this means is that there is scope for virtually all types of businesses to succeed in Nigeria.

The country has already produced the continent’s richest man, Aliko Dangote, and the number of millionaires and billionaires emerging from Nigeria will soon exceed those from any other African nation. There are more Nigerians owning their own jets than anywhere else in Africa and the country has now become the prime focus of high-end producers of goods ranging from designer fashion to eye-wateringly expensive cars.

In short, in terms of business, Nigeria is where it is at. Fortunes are being made, and lost, at the speed of light. No wonder the world is making a bee-line for Nigeria. For the winners, there are pots of gold at the end of the day; losers are lucky to be able to hold on to their shirts. The competition is intense – but for those with the right skill sets, and the right attitude to working in Nigeria, the opportunities are incredible.

“If you are thinking of joining this wonderfully vibrant business environment that Nigeria represents, your first port of call should be the Federal Capital, Abuja,” says Christian Udechukwu, the managing director of a multinational events organisation. Udechukwu is part of a special commission convened by the country’s Chief Justice to look at ways and means to make Nigeria a better place to live and work in. The commission meets regularly in Abuja. “We are saying welcome to the rest of Africa and, indeed, the world,” says Udechukwu. “There is plenty, and more, business here and we are looking for greater ties and links with the rest of Africa. Our business community is very competitive and is constantly on the lookout for new ideas and processes and for establishing new contacts and links. Abuja is a great place from which to get a clear perspective of the opportunities that lie across this vast land and from where to plan out your strategy. But you must know the ropes or you will get burned.”

Abuja – Gateway to Nigeria
Abuja, the Federal Capital of Nigeria, is also located as close to the geographic centre of the country as possible. It is bordered by Kaduna, Nassarawa, Kogi and Niger states and is thus regarded as ethnically neutral – an important consideration in a nation in which ethnicity still plays a crucial role. It also occupies a neutral space between the Muslim-dominated north and the mainly Christian South.

At Independence, Lagos was both the commercial and administrative capital, but it soon became clear that it would not work as a political capital. It was very much part of the Christian South, was already bursting at the seams in terms of population, and a rather chaotic city design ensured constant traffic snarl-ups. The decision was made to move the capital to a new site and, after a number of potential sites had been considered, the consensus was that the territory around Abuja was ideal.

Construction of the new city began in 1976, but it only became the capital officially in 1991. Construction continues to go on and a few Ministries are still located in Lagos
The master-plan for the new capital city envisaged a population of around 3 million by 2010 and a maximum population of 4 million for the rest of the century. But this was wildly overoptimistic. There has been a steady influx of migrants from all over the country to Abuja, and once you get beyond the modern structures, you enter a labyrinth of stalls, shops and lanes chock full of vehicles and people.

However, unlike most Nigerian cities, which have grown up higgledy-piggledy, Abuja was planned from the outset. The roads are wide and well maintained and connect up with highways leading to all major Nigerian cities and states. The city itself nestles under the hulk of Aso Rock, a massive geological structure that seems to have been shaped by the gods and which contains mysterious tunnels. As the institutions comprising the heart of Nigeria’s government are laid out in the shadow of the Rock, the term Aso Rock has come to stand for the country’s administration.

The most striking aspect of Abuja is the Three Arms Zone, based loosely on Capitol Hill in Washington DC, where the Presidency, the National Assembly and the Supreme Court are all grouped within easy reach of each other. The Central Business District is situated between this zone and the Rock. Wide, tree-lined avenues lead off into the more expensive residential and commercial areas of Maitama, Wuse, Garki and Asokoro. Foreign embassies, hidden behind high, well guarded walls, are scattered about among tree copses, immaculate lawns and perfectly tended flower beds.

A few companies have their headquarters here but, in general, firms tend to base themselves in Lagos or other commercial centres such as Port Harcourt, Kano and Kaduna. Nevertheless, all serious businesses have their representatives in Abuja, where they can meet and interact with politicians and other policy makers and, increasingly, with foreign business and diplomatic interests. Abuja is the headquarters of the Economic Commission of West African States (ECOWAS) and it also hosts the regional headquarters of OPEC.

The African connection
It is excellent news that Kenya Airways is starting a new direct four-times-a-week service from Nairobi to Abuja on 6 June this year. This will dovetail nicely with the greater regional integration that most of Africa has embarked on and firm up the East and West African business connections.

The service will also allow businessmen from the rest of the East African Community (Uganda, Tanzania, Rwanda and Burundi), as well as from the DRC and further south from Zambia and Zimbabwe to use Nairobi as a convenient hub to make the connection with Abuja.

Abuja is easily the most important conference venue in Nigeria – taking place either at the dedicated conference centre or in one of the many hotels in the city.

Heads of state from African countries, including Kenya’s Uhuru Kenyatta, have visited Abuja recently, often accompanied with trade and diplomatic delegations as the two geographical blocks deepen their relations. At the time of going to press Abuja is due to host the World Economic Forum on Africa in May 2014.

Trade and investment relations between West and East Africa remained underdeveloped for several decades after Independence but have been growing in importance over the last few years as banks headquartered in various West African countries have opened up subsidiaries, and companies such as Dangote Cement have set up factories in East and southern Africa. It is expected that East Africa-based firms, such as Safaricom and Equity Bank, will migrate to West Africa with their own successful business formulae.

“But even leaving the big ticket operations aside,” says Udechukwu, “there is plenty of opportunity for professionals – accountants, middle managers, retail experts, architects, chefs, hairdressers, outfitters and so on. There is also a big demand for firms involved in the hospitality industry, engineering, fabrication, entertainment, exports and imports, airline maintenance, auto repairs, education, health facilities, gyms, catering and suchlike.”

Getting down to business
Abuja is well connected by air to Europe, the US and the rest of Africa. The new Kenya Airways route will be a very welcome addition to the half-dozen or so international carriers that offer direct flights from Abuja to global commercial centres.

Kole Adenisa, a business consultant based in Abuja, says that Abuja was primarily designed as an administrative capital, not a commercial centre.  “However,” he says, “businesses and industries have grown up to service the administrative core and of course there has been, and continues to be, a lot of construction, so Abuja has developed a very vibrant commercial sector – a good deal of it unofficial. What is key about Abuja is that on any given day, you can come across all of Nigeria, so to speak, representing virtually all industries. In fact, you can meet the ‘business end’ of most of West Africa, including the Francophone countries, here in Abuja.”

His advice to foreigners wishing to engage in business in Nigeria is first be clear about the industry you want to enter into – whether it is manufacturing, agriculture, exports, imports, construction, retail, financial services, personal services, international law and so on.

“You will get a bird’s eye view from Abuja and from here you can dive into the commercial heart of Nigeria and decide whether to locate yourself in Lagos or Kano or Ibadan or Port Harcourt,” says Adenisa.

But Adenisa has a word of warning for the unwary: “Abuja is the wheeler-dealer’s paradise. Massive contracts are signed here everyday in the corridors of power and this has created a much more sophisticated breed of conman. Be sceptical of anyone who offers to provide you with ‘the big introduction’ or who claims to be a close relative of a powerful minister. If something is too good to be true, it is.”

In addition, he warns, “Nigeria unfortunately has the reputation of being the scam capital of Africa – but remember that these scams only work if you are prepared to bend the rules in the first place. Stay on the straight and narrow. You will find some of the world’s most honest and dependable businessmen here in Abuja but you have to cut through the chaff first to make contact.”

Do and don’ts
It is absolutely essential to ask a local to guide you through the business basics anywhere in Nigeria and critical in Abuja, where a lot of people come and go and it is easy to be stampeded into making commitments that you may regret later. “Remember that Nigerians who have not only survived, but thrived in the tough business environment in the country, know and understand the local culture and how things get done. They can also judge people very accurately. So while you are sizing up potential partners, be sure that they are also sizing you up.”

Abuja has a substantial Muslim population. Many establishments either close down completely on Fridays or are open only until around 1pm. Muslims shun pork and alcohol, so make sure you do not offend their religious sensibilities when you invite them to business lunches – which are a common and acceptable part of everyday commercial transactions. However, given its cosmopolitan nature, social and business intercourse is fairly relaxed and all major hotels serve alcohol and there are a large number of bars and a few clubs.

Abuja, like the rest of Nigeria, can be bewildering, confusing and overwhelming the first time around, but once you get into the flow of things and establish good contacts, you will find Nigerians warm and very welcoming. They also have a wonderful sense of humour. But remember that Nigerians are a very proud people, and with good reason; any hint of condescendence on your part will cut you off cold. And when you are invited to someone’s house, you will know that you are now accepted and can get down to business with a will.