Lagos, the commercial heart of Nigeria, possesses one of Africa’s largest urban populations and surging foreign direct investment.
McKinsey Global Institute named Lagos one of 20 emerging growth megacities that together will generate an estimated $5.8 trillion of GDP growth by 2025 — a compound annual growth rate of 7.6%. It is home to Nigeria’s financial institutions and more than half of its manufacturing sector.
“The opportunities for business are promising, but patience is a key requirement,” says Samantha Louis, regional director in Africa for the Chartered Institute of Management Accountants. “The Nigerian business community has a world-view and is expanding rapidly across African and global markets.”
EASE OF USE
The World Bank’s Doing Business 2013 report ranked Nigeria’s business friendliness at 131 out of 185 countries.
Average time to register a business: 34 days, nearly three times the Organisation for Economic Co-operation and Development average.
Construction permits: These take an average of 85 days to obtain, which is two months quicker than the OECD average.
Securing electricity: It takes an average of 260 days to establish permanent electricity in Nigeria, making it among the ten most difficult countries in which to get electricity.
Corruption: Nigeria is 139th out of 176 countries on Transparency International’s corruption index. Nigerian regulators have prosecuted and convicted a number of high-profile individuals in the past decade, but most of them have escaped effective sanctions, the organisation says.
Corporate tax: 30% for non-oil-and-gas companies; 10% capital gains and dividends tax.
Minimum wage: NGN 18,000 (about $113) per month.
Commercial rent: Real estate consultancy Knight Frank ranked Lagos as one of the most expensive global central business districts for commercial office space — up to $85 per square metre per month — as of early 2013, placing it near cities such as Sydney and Dubai.
ON THE GROUND
Bode Dada, ACMA, CGMA, senior drilling accountant– offshore at Shell Exploration and Production in Lagos, has three tips for foreign businesses considering new or expanded ventures in the city:
- Carry out extensive research.
- Look for a reliable local partner or adviser with deep local knowledge.
- Be prepared for anything.
“The main challenge facing businesses in Lagos (and the rest of the country) is the lack of a stable power supply,” he said. “Businesses have to rely on generators to provide power, and this has a significant effect on cost.” Other challenges facing businesses in Lagos include poor quality infrastructure, traffic (valuable man-hours are spent in traffic whilst trying to move around the city), a multiplicity of taxes and poor internet connectivity.
Strong sectors in the economy are financial services, hospitality, transport and manufacturing. These industries are supported by an increasingly sophisticated middle class.