Nigerian Business

Environment (BUS 221)

Assignment Topic: 10 factors affecting the Nigerian

business environment

Student Name: UKA KALU PETER

University of Lagos
BUS 221 - Write 10 factors you know affecting the Nigerian business environment.

10 factors affecting the Nigerian business

environment.
Business may be defined as any activity involved in the creation and distribution of goods and
services for profit. Business environment may be defined as the inter-relationship that exists
between the business organisation and the community (or country, as it were) in which it is sited.

There are many factors that affect the business environment. Some of them are general, common to
most or even all countries’ local business environments (though in varying degrees), while some of
them are peculiar to some specific countries or group of countries.

This text attempts to briefly look at 10 of the many factors affecting the Nigerian business
environment, some of them common to many other countries and others, peculiar to Nigeria.

1. The economic factor

As in any other country, the state of the Nigerian economy has direct bearing on the business
environment. Such macro and micro economic issues like the inflation rate, unemployment, labour
costs (which happens to be quite low in Nigeria due to chronic unemployment problems), taxes,
cost of materials (this depends on which materials and whether or not they’re readily available in
the country), demand, competition etc.

2. Access to funds
These days it’s very difficult getting financial help (in the form of loans) to start or expand an
already existing business enterprise in Nigeria. The commercial banks who’re supposed to be
helping out in this area have very stringent requirements (which few entrepreneurs manage to
meet). The interest rate in Nigeria (between 15%-20%) is also complicating the issue, being one of
the highest in the world, especially when compared to countries like the US (less than 3%).

So entrepreneurs who wish to start or expand their businesses do not have easy access to funds
(from banks, who should be the primary source) to do so and may have to source for it through
other means or even give up the idea altogether.

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BUS 221 - Write 10 factors you know affecting the Nigerian business environment.

3. The legal factor

The government through the laws governing Nigeria & the agencies created to enforce them affects
enterprises in many ways, some of which are: regulation of how the company does its business,
how it gives information about its existence and performance, how it treats its employees etc.

So organisations already sited here have to carry out business within the limits of Nigerian law and
intending entrepreneurs must carefully put this into consideration, if they must do business in
Nigeria.

4. The unemployment problem

In a country where most of the people old enough to work are either completely or structurally
unemployed, taking out a huge chunk of people who otherwise should’ve constituted part of the
target market for various goods and services – but as it is now, don’t have the buying power
required to purchase much of the goods and services being produced in the country, the
businessman has to live with the fact that most of his potential market actually don’t have enough
to buy his products or services.

That is of course with the exception of goods or services that are not luxuries, but necessity. In this
case this doesn’t pose much of a problem to the business, as everyone would have to pay very
virtually any price for its goods or services.

5. Ethics/Morality
As is the case in all other countries, the moral values of the Nigerian peoples either directly or
indirectly affect the local business environment, whether positively or negatively.

For example, it is quite common for larger organisations or even government corporations giving
out contracts to actually do so, not on the basis of merit, but on who or who does not bribe the
official(s) in charge of approving the contracts. In this case, the businessman who is unaware of
this, though duly qualified to win the contract, may end up wasting his time and resources, as he
may not get the contract, even though he deserves to.

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BUS 221 - Write 10 factors you know affecting the Nigerian business environment.

6. Level of technological advancement

The level of technological advancement in Nigeria also affects the business environment.
Technology is simply the application of knowledge or new discoveries from science to improve the
way things are done – and business is not an exception. Generally, the more advanced the level of
technology is in a country, the easier it is to produce goods or carry out tasks which otherwise
would require more time, effort, and/or materials – and Nigeria is no exception.

A good example of the impact of technology on the Nigerian business environment is in the area of
telecommunications. The introduction of the GSM mobile technology really boosted business
activities. The benefits of the current widespread use of computers and other related machines and
technologies is also an indication of the impact of technology on the Nigerian business
environment.

7. Societal and cultural environment

This comprises the attitudes, expectations, customs and beliefs of the people. The culture of a
particular community affects the type of business that can be done there. For example, in the
northern part of the country, alcohol production is against their culture (a crime, actually). So it
wouldn’t be such a good idea for a company or entrepreneur into alcohol production to even
consider going there to either manufacture or market its products.

8. Available infrastructure and social amenities

Nigeria lacks (either completely or partially) many basic infrastructures which ordinarily should be
readily available, not just for the sake of business activity in the country but for all other purposes
as well. The effects of the absence of these infrastructure cuts across all spheres of life in Nigeria,
not just business.

But its particular effect on business is that it has made the cost of starting business and running a
business in Nigeria very, very high. It also heavily slows down the progress and growth of
businesses, making very difficult for businesses to be started and for those already existing, to
survive for very long. Two of the major amenities not readily available are electricity/power
supply, without which virtually nothing can be done in this ‘jet’ age, and a good network of good
roads and a well planned and maintained transport system.
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BUS 221 - Write 10 factors you know affecting the Nigerian business environment.

Taking the electricity problem as an example here; businesses of all sizes have to deal with the
dreadfully high cost of buying and running (fueling and maintaining) generators (or other
alternative means of electricity generation) round the clock. Many businesses which would
otherwise have been profitable, had to shut down completely as they couldn’t keep up.

9. Educational sector
The Nigerian education sector greatly affects its business environment because it provides most of
the human resources for all organisations in the country. And since the strength of any business
organisation is virtually equivalent to the quality of personnel it has, the state of the education
sector of Nigeria actually dictates the tune in terms of the quality of human resources in the country
that business organisations have to choose from.

10. The international business environment

Nigeria is a member of many international economic organisations like IMF (International
Monetary Fund), ECOWAS (Economic Community of West African States), ILO (International
Labour Organisation) etc. It there follows that their economic policies would affect the business
environments of all their member-countries, which includes Nigeria.

Besides, many local Nigerian businessmen depend on foreign countries for both raw materials and
components for production, and also as outlets for exporting their goods. So they need to
understand the different philosophies, politics and cultures of the foreign countries.

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