Business Recommendation

BusinessRecommendation

Tableof Contents

1.0: Introduction 3

2.0: Overview of business opportunities and risks in Nigeria 4

3.0: Identification and evaluation of Business Opportunities 5

4.0: Business Risks in Nigeria 7

4.1: Ethnic issues in Nigeria 7

4.2: Political challenges in Nigeria 8

4.3: Economic risks 9

5.0: Business recommendations 10

5.1: Market opportunities 10

5.2: Setting a company in Nigeria 10

5.3: Incentives for investment 10

5.4: Business environment in some parts of Nigeria 11

6.0: Conclusion 11

References 13

1.0: Introduction

BRICcountries that include Brazil, Russia and India, as well as Chinabecame the world’s talks in 2001, as they were regarded as the mostpotential economic power bloc in the world (MacDonald&amp Lemco 2011).Most significantly, China responded to this forecast by revertinggrow rates to double digit in the period between 2003 and 2008.However, there was identification of emerging economic giants of fourcountries that included Mexico, Indonesia, Nigeria and Turkey. Thesecountries formed an economic grouping of what is known as MINT thatbecame the rallying point of engaging in the international economicrelationships. Although they have diverse culture, history andgeopolitics, these countries have some commonalities based on theeconomic situations. One of the commonalities is that these countrieshave huge and expanding populations characterized by many youngworkers that drive economy quicker as opposed to shrinking and agingpopulations that result in slower growth rates in developed countriessuch as China over decades in future. In terms of geography, MINTcountries are located in suitable areas that enable them to exploitthe huge markets in close proximity, as China is close Indonesia andTurkey located on the extreme side of the European Union, whileMexico is located at the America’s doorstep (Riad&amp&nbspJason2013). On the other hand, Nigeria has high possibility of becomingthe hub of Africa’s economy. Most importantly, Nigeria, Indonesiaand Mexico are the best commodity producers. However, Nigeria is theonly country belonging to the MINT that is not a G20 group’s memberof both developed and third world countries (InGhate et al. 2014).Therefore, this paper seeks to examine the opportunities that arethere in the Nigeria as a member of MINT in terms of political,socio-economic, and other factors, and proffering businessrecommendations for the company seeking consultation services for aBritish supermarket such as Morrison Supermarket.

2.0: Overview of businessopportunities and risks in Nigeria

Nigeriais located in the region of Sub-Saharan Africa with an estimatedGross Domestic Product and population of $ 522.6 billion and 173million in 2013 respectively. The estimated headcount ratio povertyin 201 and 2014 were 46.0 % and 48.4 % respectively. In 2014, theNigeria National Bureau of Statistics substituted the current pricestructure of GDP for first time to reflect key structural changes inthe Nigeria’s economy. It is important to note that the year 1990was used as a base year and the rebasing activities concluded 2010 asthe base year. This process came up due to springing up of newsectors of economy in the last 23 years. This statistical undertakingthat succeeded with the help of World Bank, African Development Bankand International Monetary resulted in more realistic estimate of thesize and value of Nigeria’s economic activities (World Bank 2014b).

Oneof the factors of categorizing Nigeria as one of potential economicgiants is the growing population that is considered as an importantnation’s asset for future economic growth (Toyin&ampMatthew2008).The young population is required to be at the forefront of world’seconomic, political and social developments. Young people are capableof mobilizing support and their intellectual contribution leads tounique perspectives that drive any society to prosperity. Thedevelopment of a society is based on the society’s ability toengage young men and women in building the future of society in termsof social, economic, and political empowerment. However, Nigerianyouths encounter various challenges which need to be addressed bycivil society, governments and private sector for youth to becomeuseful assets for Nigeria’s economic growth. Some of problemsinclude but not restricted to poverty, high unemployment rates andlimited resources, low expectancy rates, gender discrimination andinadequate opportunities for training and education. When youth areeducated and trained, they serve as human resources for local andinternational firms in Nigeria. It has been noted that there are manybusiness risks in Nigeria such as ethnicism, political and economicbusiness risks (Mwakikagile,2001).Therefore, there are important recommendations for MorrisonSupermarket in the United Kingdom wishing to invest in Nigeria, aconstituent of MINT countries.

3.0: Identification andevaluation of Business Opportunities

Onesignificant thing that happened after statistical exercise involvedagricultural sector becoming the largest in the Nigeria’s economyas it assumed approximately forty two percent of the total GrossDomestic Product. In addition, the fastest growing market segments inNigeria are Telecommunication and Post and Whole and Retail. All ofthese together take about thirty five percent of total output.Another largest economic sector in Nigeria is Natural Gas and CrudePetroleum which takes about 13.5 percent while the remaining sectionof the GDP taken by Industry and Construction with 9.5 percent(Trading Economics 2014).

Equallyimportantly, Nigeria is the most populated country in Africa and themost producer of oil as well. In addition, it is a nationcharacterized by ethnical diversity as it has more than four hundredlinguistic groups from thirty six states (Kabeer2005).It is worth to note that Nigeria is an internationally emergingmarket as it is continuously expanding its financial, communications,services, and entertainment sectors. Furthermore, the country isranked number twenty six globally based on the Gross Domestic Productwith a purchasing power gap as of 2014, and leading in Africa. RuchirSharma (2013) holds that Nigeria is imminently becoming one of thecivilized countries of the 21stcentury.

InNigeria, many business opportunities are not obvious as it seem tobe, but as a result of entrepreneur’s awareness to businesspossibilities or, else, the development of mechanisms that recognizepotential business opportunities. Where entrepreneurs lack formalmechanisms for exploiting business opportunities, there are severalfruitful sources such as business and Consumer associates, technicalpeople, and distribution channels that exist in Nigeria. Furthermore,the best source of business ideas for venture is consumers, forexample, business associates who buy products that suit a particularlifestyle. In Nigeria, businesses have sprouted from complain abouthigh cost or poor quality of product or service by those who consumeit. Most of the entrepreneurs have spotted business opportunities asa result of discussion with wholesalers, retailers, or evenmanufacturer’s representatives. In addition, technically drivenpeople frequently come up with business opportunities especially whenworking on projects (Iarossi,Mousley &amp Radwan 2009).

Equallyimportantly, the World Bank acknowledges that Nigeria is growing at arate of 8 percent per year and the country needs to accomplish highjob-oriented growth rates to minimize poverty. Therefore, the keyfocus of the World Bank on this initiative is to facilitate Nigeriain diversifying its economy and minimize its heavy dependence on oilthat makes the country susceptible to volatility of commodity prices(The World Bank 2014a). The World Bank has portrayed its support forNigeria in three strategic ways. First, the World Bank has assistedNigeria in promoting job creation and diversifying growth through keyreforms in power sector, agricultural sector and finance. Thisimproves efficiency and quality of social service provision atnational level to facilitate social inclusion, management of publicsectors and strengthening governance with conflict sensitivity andgender equality as essential aspects of good governance.

Nigeria’snew partnership with MINT countries is a strategy aimed at gearingthe country in the realization of vision 2020 and TransformationAgenda. Most significantly, Vision 2020 is a country’s long-termgoals for facilitating sustainable growth and improving welfare ofNigerians. On the other hand, Transformation Agenda is country’sshort-term strategy pertinent to the operationalization of vision2020. The experts of development would agree that persistent energyshortages are heavily affecting economic growth in the country. Forexample, the estimated 3500 MW total energy supply in 2013 cannotmeet the growing demand of 10000MW. Therefore, there areopportunities for investing in the generation of power to meet thegrowing demand (Kelly 2007).

4.0: Business Risks in Nigeria

Inorder for the Nigeria to realize its full capabilities, it mustconfront the following risks that affect business in the country:

4.1:Ethnic issues in Nigeria

Mostsignificantly, Nigeria is forty nine years of age and is stillfinding for a new political order. Therefore, the full recognition ofthis aim has been almost impossible due to the dominance ofethnicity, an issue that has affected the continued existence ofNigeria’s democratic rule. There are many causes that areassociated with ethic problem in Nigeria. One of the major causes ofethnicity in this country is ethnic nationalism. Ethnic nationalismis the tendency the people have of seeing themselves as ethnicgroup’s members rather than nation’s members. Furthermore, thistendency has been exemplified in many ways and principally in theallegiance individuals pay to the ethnic group in which they belongto. Very importantly, people in today’s Nigeria society preferidentifying themselves with a particular ethnic group instead ofidentifying themselves with the state. Thus, this observation depictsthat Nigerians still hold strongly the idea of ethnic groups and thisfact has led to the primordial sentiments among Nigerian citizens aswhole (Koigi 2003).

Theorigin of Nigeria’s ethnicity is tracked back to colonialexperience, more so on the union of Southern and Northernprotectorates of Nigeria in the year 1914. This idea of the union wasnot to the best interest of Nigeria’s federal framework that wasestablished as a result of political restructuring in 1954constitution. However, the federal principles are the real cause offear domination and mutual suspicion that spread so fast among manyethnic groups in Nigeria so that implementation of constitution wasimpossible (Afigbo&amp Falola 2005).

Similarly,Aluko (2003) recognizes Colonial Legacy and dominant power exhibitedby main ethnic groups and resulting minority marginalization as mainfactors enhancing ethnic nationalism in the country. Other causes ofthis problem include but not limited to poor leadership based onforging of national integration in various ethnic nationalities inNigeria (Babangida, 2002). Furthermore, Babangida suggest thatunemployment and massive poverty establishes insecurity andalienation. Therefore, ethnicity in Nigeria has caused frequentincidences of insecurity which has made business difficult to operatein some regions. For example, Boko Haram in the Northern region ofNigeria has become a big threat to business operations and noinvestor would be willing to risk his or her investment.

4.2:Political challenges in Nigeria

Thepolitical environment facing businesses in Nigeria is a result of badgovernance, bearing in mind that the country became democratic afterthe death of Gen. Sanni Abacha, the military dictator. The fruits ofdemocratic rule in Nigeria actualized after the 1999 constitutionamendment which allowed multiple political parties. However, PDP(People’s Democratic Party) has dominated the Nigeria’s politicsleading to bad governance coupled with ethnicity. The politicalparties in Nigeria are devoid of distinct modern economic andpolitical ideologies. One of the political challenges is the riskinstability of the country as the regions is characterized by overfour hundred ethnic groups which have different ideologies andinterest (Rotberg2004).For example, Boko Haram is one of such ethnic group which hasdisrupted businesses in Nigeria (Scheffran2012).Boko Haram is an Islamic jihadist that has disrupted instability ofthe country through kidnapping and frequent unanticipated attacks.The frequent attacks in the Northern Nigeria have made the regionunsuitable for business activities. Therefore, political and ethnicsituation in Nigeria are two inseparable issues facing Nigeria as acountry of business opportunities.

Thepolitical risk for business in Nigeria is very high as the country’sfull potential is not actualized due to corruption and insufficientbureaucratic and physical infrastructures, social instability andinadequate legal system hamper private and commercial investment. Forexample, the Niger Delta region is very unstable as it ischaracterized by waves of regional, religious and ethnic violencethat is a threat political stability. Furthermore, the turmoilfrequently interferes with oil production (Ojeleye,2010).

4.3:Economic risks

Mostsignificantly, there are many prospects in Nigeria in terms of strongeconomic growth but there are numerous economic risks that remainentrenched in the country. Therefore, such prospects are anticipatedto hinge on unrelenting recovery of the world’s economy, in termsof agriculture and efficient energy supply as result of reforms frompower sector and Agricultural Transformation Agenda respectively.These reforms are pertinent to economic growth. This is ajustification for Nigeria as an emerging economic giant. However,economic risks in the country are majorly influenced by insecurity inthe northern side of the Nigeria. In addition, there is constantviolence over resource control around Niger Delta region. Theundesired growth of the oil sector contributes to the slow overallgrowth due to challenges of oil theft and poor investment in oilexploration since the conception of Petroleum Industry Bill (WorldBank 2011).

Inaddition, there are problems of unemployment and poverty facingNigeria’s economy. However, Nigeria government is not oblivious ofsuch a reality. Poverty in this country is prevalent despite elevatedeconomic growth. The World Bank estimated that the Nigeria’seconomic growth rate is about 7. 4 percent, but poverty levels remainat 33.1 percent. The country that has huge population that cansupport economic growth and, therefore, such a poverty level isunacceptable. It has been noted that poverty has been initiated bypolitical instability. The poverty in the country has been attributedby ethnic conflicts and income inequality (Karl 2009). We find thatincome inequality in Nigeria is related with differential access toamenities and infrastructure. This is because oil revenue is unfairlydistributed across the population, as proved by the higher governmentexpenditures in urban than rural areas. In addition, highunemployment rates have caused differences in personal income becomeeven more diverge.

5.0: Business recommendations5.1:Market opportunities

Nigeriais has great opportunities market for Morrison Supermarket as thecountry has a population of over one hundred and fifty millionpeople. In addition, oil production in this country has enabled it tocreate huge capital inflows of foreign income which has stabilizedNigerian Naira to some extent. The enormous commercial potential asresult of Nigerian government facilitating non-oil economy makesfavourable for the company to set up its supermarket premises inNigeria. Furthermore, the international business society viewsNigeria as a central driver for African market that has remainedunder-developed for years (Ibp2009).

5.2:Setting a company in Nigeria

Itis significant to understand that Nigeria lays no restrictions onforeign international entities carrying out business operations inthe country (Ibp2010).Before starting business operations in Nigeria, foreign entities mustinclude a local vehicle, nonetheless. Moreover, a foreign entity mayappoint a local competent solicitor to function as agent who possesshares in the local company upon appointment by the company acting asthe principal. These requirements are easy to achieve for the foreigncompany such as Morrison Supermarket to start its operation inNigeria.

5.3:Incentives for investment

Thecompany should invest in Nigeria since the government has establishedvarious incentives for encouraging foreign direct investments. Firstand foremost, Nigerian government has created a free trade zones thatpresent great opportunities for business activities. In addition, thegovernment has instilled confidence in foreign investors in thecountry as portrayed by its commitment to enter into IPPAs (bilateralinvestment protection and promotion agreements with foreign countriesthat trade with Nigeria. With this and among other incentives, thecountry becomes attractive for foreign investors in some regions ofthe country (Azubuike2009).

5.4:Business environment in some parts of Nigeria

However,Nigeria is viewed as a dangerous country with history of politicalturbulence, although the country achieved its constitutionalstability in 1999. However, some regions such as Niger Delta andNorthern region of the country remain insecure for businessactivities (Ejiogu,2011).Therefore, the company should avoid doing business in these regionsand try to invest in secured regions of the country.

6.0: Conclusion

Inconclusion, economic potentials and prospects of Nigeria as aconstituent member of MINT countries have been covered extensively.However, challenges facing these potentials and prospects areexamined in depth. There are no qualms about enormous potentials ofNigeria in terms of natural and human endowments such as humanresources and natural oil explorations. There is a need for Nigeriato stop jihad extremist to foster peace so that internationalbusinesses such as Morison may invest in this country. In addition,the country should not over rely on the USA for trading purposes andshould diversify the destination and source of its export and importrespectively. Therefore, Nigeria must struggle with the internalsocial-political factors pertinent to actualization of the economicpotentials. It is also necessary to say that Nigeria’s futureeconomy with succeed as result of productive engagement of the younggeneration in job establishment and helping them to acquireentrepreneurial skills. Nigeria has a potential of becoming aneconomic giant due to its natural resource endowment andopportunities for partnering with other MINT countries, but the BokoHaram insurgents have caused mayhem in the country, jeopardizingbusiness environment. Therefore, Morrison Supermarket should not riskits money by investing in some part of this country due to insecurityand violence in Northern and Niger Delta regions.

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