Do you want to start a successful business in Nigeria without capital? If YES, here is a complete guide plus legal requisite for starting a business in Nigeria.
Okay, having provided an in-depth analysis of the top 50 best small business ideas in Nigeria and a series of industry-specific sample business plan templates; we will now analyze in detail the legal requirements, market feasibility and every other thing it takes to start a business in Nigeria. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- Why Start a Business in Nigeria?
- 1. Prepare Yourself
- 2. Have a Good Business idea
- 3. Do a Feasibility study
- Economic Analysis
- Factors or Incentives Encouraging Investors to Venture into Business in Nigeria
- 4. Understand your Market
- 5. Write a simple Business Plan
- 6. Find a Good Location
- Top 5 Best Cities to do Business in Nigeria
- 7. Obtain the necessary Licenses and Permit
- List of Legal Documents You Need to Run a Business in Nigeria
- List of Government Agencies and Parastatals that are In-charge of Registering Businesses and Issuing Licenses and Permits in Nigeria
- 8. Register your company
- 9. Raise Capital
- 10. Start the business
- 11. Look for Leverage
- 12. Survival is the Game
- A Brief Overview for Foreigners Interested in Starting a Business in Nigeria
- Facts and Figures of Nigeria That Will Interest You as an Investor/Entrepreneur
- List of 10 Well Known Foreign Brands Doing Business in Nigeria
- List of 10 Well Known Indigenous Entrepreneurs in Nigeria
- List of 10 Most Popular Indigenous Businesses in Nigeria
Why Start a Business in Nigeria?
If you aren’t new to the country – Nigeria, then you should know that it is referred to as the “Giant of Africa” This is owing to its large populace and economy. This country has approximately 182 million inhabitants and is the most populous country in Africa and the seventh most populous country in the world.
Nigeria possesses one of the largest populations of youth in the world; and so it can said that Nigeria is viewed as a multinational state because it has over 500 ethnic groups, of which the three largest are the Hausa, Igbo and Yoruba. There are diverse tongues in Nigeria as these ethnic groups speak over 500 different languages, and are identified with wide variety of cultures.
One of the attractions about Nigeria when it comes to business is the large population of people. Nigeria has Christians living mostly in the southern part of the country, and Muslims in the northern part. Experts have projected that Nigeria is the world’s 20th largest economy, worth more than $500 billion and $1 trillion in terms of nominal GDP and purchasing power parity separately. It outdid south africa to become Africa’s largest economy in 2014. Also, the debt-to-GDP ratio is only 11 percent, which is 8 percent below the 2012 ratio.
Nigeria is measured to be a developing market by the World Bank. It has been acknowledged as a regional influence on the African continent, a middle power in international affairs, and has also been branded an emerging global power.
Nigeria is a fellow of the MINT group of countries, which are commonly seen as the globe’s next “BRIC-like” economies. It is also registered among the “Next Eleven” economies set to become among the biggest in the world. Nigeria is also a setting up member of the Commonwealth of Nations, the African Union, OPEC, and the United Nations amongst other international organizations.
Starting a Successful Business in Nigeria Without Capital – A Complete Guide
The first step to starting a small business in Nigeria is to adequately prepare yourself. You may think this is not important but it can be the thin line between success and failure. Running a business on Nigerian is tough but highly rewarding; so to survive, you have to be tougher. Nigeria is a harsh terrain to operate in but since we are Nigerians; I believe we are well grounded to tackle the challenges on ground. Now how do you prepare yourself?
You can prepare yourself by attending a seminar on the chosen line of business you wish to venture in and getting all the necessary information about your chosen industry. You can also prepare yourself by accepting the reality that you can fail tomorrow; you prepare yourself by increasing your risk bearing capacity. And ultimately, you prepare yourself by making up your mind to succeed despite the odds and competition.
To successfully start a small business in Nigeria, you must have a good idea. In fact, any idea or business opportunity will do; except you are pioneering a new invention. I emphasized that any business opportunity will do because most Nigerians focus solely on the business idea without knowing that a business idea is just a tip of the iceberg in the entrepreneurial process of building a business.
“A business idea is just another idea. But an idea backed by a strong feasibility, a thorough business plan and a smart business team is no longer an idea. It’s now a solid business opportunity worth pursuing.” – Ajaero Tony Martins
A good business idea alone does not guarantee success in business; an average business idea with good business fundamentals does. The world is filled with brilliant “million dollar ideas” but the world lack seasoned entrepreneurs.
You don’t need to crack your head to create something new; don’t bother re-inventing the wheel, just find a proven business line and learn the fundamentals. You can even decide to buy a franchise if the capital is on ground. Nigeria has the needed population to absorb any product that is backed by a strong business sense.
The third step to starting a small business in Nigeria is to do a thorough feasibility study before investing a dime in any business opportunity. This is basically where the failure of most Nigerian entrepreneurs begin. I have seen people invest in a business idea or opportunity simply because a friend or relative said the business is profitable.
I have seen people jump into an industry blindly in reaction to unverified information. I know entrepreneurship is all about risk taking but jumping into an industry without an adequate knowledge of its fundamentals is suicidal. I know this because I am talking from experience; my dad made this very mistake and he paid dearly for it.
When looking to start a business in Nigeria, a whole lot has to be looked at from the economic point of view. Some of the factors in consideration include the following; Human Capacity Building and Job creation, Social policies and corporate social responsibility initiative.
- The target market
- Complex Tax system
- Legal complexities of international business
- Foreign exchange Barriers
- Difference in Marketing Styles
Factors or Incentives Encouraging Investors to Venture into Business in Nigeria
It is the wish of investors to rip when they sow. As such it would be really needful that the country to be invested in has a highly fertile ground that can cause a yield on returns. There are several incentives that attract investors in the Nigeria. Here are some of the benefits of investing in Nigeria;
- Large market
- Economy of scales
- Promising Economy
- Government support to economic development through infrastructure development, facilitation, amongst others
- Economic freedom in the form of promising legislation and few hurdles to start and operate businesses encourage entrepreneurship.
- Sound laws related to the safeguard of labor rights and the environment.
4. Understand your Market
Before jumping into any business or industry; make sure you have thorough understanding about its fundamental metrics. Every business has an inside secret and if you must succeed; you must find such secret. Understand the market of the industry you are going into and you will increase your chances of success. The best way to begin such is by asking yourself the questions below:
- Who are the customers?
- How do they want to be served?
- Who are your major competitors?
- Who is the market leader?
- Do you have a chance for survival?
Can you grab some market share in that proposed business industry of yours? These are the questions you must answer before starting a small business in any industry.
This is another point where most Nigerians miss it. It is estimated that over 85 percent of small business owners in Nigeria operate without business plans. While I won’t criticize them because I started my first business without any business plan; I think it’s worthwhile you separate yourself from the pack.
Since majority business owners are operating without business plans; why can’t you capitalize on it and make it a competitive advantage for your business. Banks don’t lend money to businesses that are operated without business plans but what if you have one? Well, I leave that for you to answer.
Please write a business plan for any business venture you want to undertake. Even if it is an informal, one page business plan; write it. Your one page business plan may not get you the bank’s attention but it’s a way forward because it will help you concentrate on fulfilling your business mission.
So you want to start a small business in Nigeria? If yes; then where are you going to locate your business?
- Are you going to site your business within your neighborhood or are you going to site your business in an industrial area?
- Are you going to separate yourself from the crowd by building your own brand in a specially selected location?
- Or you are going to operate from the centre of trade or commercial places in Nigeria?
Top 5 Best Cities to do Business in Nigeria
Nigeria is indeed a land blessed with milk and honey, but there are places that business may not thrive well in. This is because of the fact that there may be factors working against the success of the particular business in question.
- Lagos Island, Lagos State
- Onitsha – Anambra State
- Abuja – Federal capital territory of Nigeria
- Aba – Abia State
- Kano – Kano State
If you intend dealing on general merchandise; then you can consider locating your business in districts such as Aba, Yaba, Tradefair, Idumota, Lagos Island, Oshodi, Mile 12, etc. But if you are in a service business or you are building a specialized brand; you can situate in areas such as Ikeja, Allen Avenue, Apapa, VGC, Victoria Island, CMS, Ikoyi, etc. But wherever you choose to situate, make sure you are well prepared to face the challenges of that terrain.
7. Obtain the necessary Licenses and Permit
Well, I don’t need to hit much on this. If you don’t want to have the government and its law enforcement agents on your heels; make sure you obtain the necessary licenses and permit needed to operate your line of business.
Every industry has regulatory bodies governing it; so be sure to check their operational policy to make sure you are not going against the law. Also remember that you may need licenses and permits from both the local, state and federal government. So make sure you factor their costs in your budget.
Without these licenses you risk being clamped down on by the authorities involved in the execution of business laws in Nigeria. They include the following;
- Fire department permit – You should get a permit from your fire department if your business uses any flammable materials or if your premises will be open to the public
- Air and water control permit – Check with the state environmental protection agency regarding federal or state regulations that may apply to your business.
- Sign permit – check regulations and secure the written approval of your landlord, before dabbling into having a sign designed and installed.
- State permit – State governments frequently need the same types of permits and licenses as cities. As such, if your business is outside any city or town’s jurisdiction, these permits apply to you
- Sales tax license – Sales taxes differ by state and are compulsory at the retail level. It’s vital to know the rules in the states and localities where you operate your business because if you’re a retailer, you must collect state sales tax on each sale you make.
- Health department permit – This differs depending on the size of the business and the amount and type of equipment you have. The health department will want to inspect your facilities before issuing the permit.
List of Legal Documents You Need to Run a Business in Nigeria
There are several documents that must be in place to run a business in Nigeria. The inability to have all or more of these documents in place means that you just might be found wanting along the line. As such, here are some of the documents that you will be needing;
- Certificate of Incorporation
- Business Plan
- Non-Disclosure Agreement (NDA)
- Insurance Policy
- Contract documents
- Patent or Copyright registration
- Operating Agreement
- Business License
- Tax Identification Number
List of Government Agencies and Parastatals that are In-charge of Registering Businesses and Issuing Licenses and Permits in Nigeria
In different countries of the world, there are various licensing bodies. Nigeria has its own bodies that are saddled with the affairs of business permits and licensing. They see to it that before a business fully commences trade, they have to be well licensed.
Here is a brief list;
- NAFDAC-: This body is a body that was set up to checkmate businesses that are into drug sales, manufacturing, food productions, and sales, amongst many others. They are responsible for issuing licenses.
- The Corporate Affairs Commission (CAC)-: This body is an agency of Nigeria that is highly responsible for the issuance of incorporation papers and licenses. Anyone who plans to operate a business in Nigeria has to contend with this body
- Federal Inland Revenue Service (IRS)-: The Inland Revenue service is a very important parastatal of Nigeria. The government agency is of the tax division of the government. The IRS is answerable for collecting taxes and the administration of the Internal Revenue Code.
- Signage and Advert Permit-: If you plan to operate a business in Nigeria, then you have to be ready to get license / permit form this body. This permit has to do with public display of adverts about your business and all.
Most businesses operate as sole proprietorships in Nigeria; you can choose to go the same way. But if you are truly out to build a successful business that will stand the test of time; I will advice you register a Business Name or factor it in your cost projections as a short term plan.
You can choose between the sole proprietorship; limited liability or public liability form of entity. After choosing your business entity, you can get your business name registered at the Corporate Affairs Commission’s office in Abuja, Alausa Lagos or anywhere nearest to you. I will advice you go through a lawyer to avoid unnecessary mistakes.
Before making up your mind to start a small business in Nigeria, I want to assume that you have the necessary capital to at least launch the business.
After going through all the processes above; this is where you get down to the real deal, this is where you start the business. Most people make wonderful plans, do feasibility research and even raise the needed capital to start a business. But for reasons best known to them; they just fail to start.
Maybe it’s because of the fear of failure; but what I do know is that not everybody has the guts to start a business. Most can only dream of it but only few dare to take the risk. Are you willing to take the risk and start your own business here in Nigeria? Only you can answer that.
Actually, this is where your work as an entrepreneur gets tougher because statistics reveal that 75% of all new businesses started fail in their first five years. And of the 25% that survived; 80% of them will fail in the next five years. It means that about 90% of all businesses started will fail in their first ten years. This statistics may be harsh but it’s the truth in its entirety. Are you prepared to lose it all? If your answer is yes, then start.
11. Look for Leverage
The fastest way to grow in business is to leverage on the structure of well established businesses. So if you want to grow; then look for leverage. Leverage can be in the form of getting a bank loan, getting credit line from suppliers; striking strategic alliance with a bigger player or getting a contract. No matter what leverage you decide to pursue; go for it.
If you can make it to this stage, then it’s congratulations because you’ve just started your own small business in Nigeria. You have started the game and showed resilience; now is the time to break it through.
At this stage, survival is the name of the game. You might take some pounding from stronger competitors; you might make a business mistake or even face intricate business challenges like a change in government policy but don’t give up. Stay strong and fight it through.
A Brief Overview for Foreigners Interested in Starting a Business in Nigeria
Nigeria is positioned in western Africa on the Gulf of Guinea and has an entire area of 923,768 km, making it the world’s 32nd-largest country (after Tanzania). It is actually comparable in scope to Venezuela, and is about twice the extent of the US state of California. It shares a 4,047-kilometre border with Benin , Niger , Chad , Cameroon , and has a shoreline of at least 853 km. Nigeria lies between latitudes 4° and 14°N, and longitudes 2° and 15°E.
Nigeria is categorized as a varied economy emerging market, and has already reached lower middle income status according to the World Bank. It has an abundant supply of natural resources, well-developed economic, legal, communications, transport sectors and stock exchange (the Nigerian Stock Exchange), which happens to be the second largest in Africa.
Nigeria was graded 30th in the world in terms of GDP (PPP) in 2012. Nigeria is the united states‘ major trading partner in sub-Saharan Africa and provides a fifth of its oil (11% of oil imports). It has the seventh-largest trade surplus with the US of any country worldwide. Nigeria is the 50th-largest export market for US goods and the 14th-largest exporter of goods to the US. The United States is the country’s largest foreign investor.
Previously, economic growth had been hindered by years of military rule, dishonesty, and misconduct. The restoration of democracy and subsequent economic reforms have successfully put Nigeria back on track towards achieving its full economic potential. As of 2019, it is the largest economy in Africa, having overtaken South Africa
Facts and Figures of Nigeria That Will Interest You as an Investor/Entrepreneur
There are loads of facts and figures that make Nigeria tick. It is no wonder that people throng the states to do one form of business or the other there. This is because of the vast minds and resources that the country possesses. Here are some good facts that you might find handy;
- Nigeria, with a 2013 estimated population of 174,507,539 and is the most populated Black nation and the 7th most populated nation in the world. This means that Nigeria is trailing Pakistan, Brazil, Indonesia, USA, india and China (1.3bn).
- Nigerians are 1/5th the total population of Black Africa.
- Nigeria, with 521 languages has the fourth most in the world. This includes 510 living languages, two second languages without native speakers and 9 extinct languages.
- The Portuguese reached Nigeria in 1472. In 1880 the British began conquering Nigeria’s south. The north was conquered by 1903.
- Using the net worth of $16.1bn to judge, Nigeria’s Aliko Dangote is the richest Black person in the world.
- The 2006 Census found Nigerians to be the highest educated ethnic or racial group in America.
- The Colonial Cantonments Proclamation of 1914 established ‘foreign quarters,’ ‘Sabon Gari,’ institutionalizing the Sabon Garuruwa system of ‘foreigner’ residential segregation in Nigeria.
- Amaros was the name for repatriated Brazilian and Cuban slaves; the ‘Aguda’ people of Lagos today. This Brazilian community includes deportees of the brave “Malê Revolt” in Portugal.
- Nigeria has the second-largest economy in Africa. It is categorized as an evolving market owing to its rich reserves of natural resources, and well-developed financial and communications sectors.
- The transportation sector and stock exchange of the country enhance its finances. The Nigerian Stock Exchange is the second-largest in Africa.
- Petroleum is a major product playing a significant role in the economy of the country; it is the twelfth-largest producer of petroleum in the world.
- Manufactured products like leather, textiles, t-shirts, plastics and processed food enhance the economy of the country.
- Agriculture is also important, employing almost sixty percent of Nigerians. Cocoa, sugar cane, yams, maize, palm oil, groundnuts, coconuts, citrus fruits, pearl millet, and cassava are the major agricultural products.
List of 10 Well Known Foreign Brands Doing Business in Nigeria
Over the years, several brands have come to Nigeria and they are doing so well. They have grown from small to big and they are waxing stronger as the days go by. Here is a list of 10 well known foreign brands in Nigeria;
- Promasidor – Cowbell
- Indomie Noodles
- Klin Detergent
- Shoprite Stores – Shoprite
- Nestle Foods – Cerelac
- UAC Foods – Mr Biggs Stores Franchise
- Friesland – Peak Milk
- Boulous Group of Company – Rose Toilet Roll
- Multichoice – DSTV and GOTV
List of 10 Well Known Indigenous Entrepreneurs in Nigeria
Just as there are foreign entrepreneurs doing business and excelling in Nigeria, so are there indigenous counterparts. These indigenous moguls have grown from small to solid and have become a force to reckon with. Here is a list of indigenous brands doing business in Nigeria;
- Aliko Dangote – Dangote groups of companies
- Mike Adenuga – Globalcom telecomms
- Tonye Cole – Sahara oil
- Ibukun Awosika – Chair Centre
- Jimoh Ibrahim
- Ifeanyi Ubah
- Linda Ikeji – Linda Ikeji’s Blog
- Seun Osewa – Nairaland
- Femi Otedola
- Ben Murray Bruce – Silver bird group
- Bola Tinubu – Television Continental
List of 10 Most Popular Indigenous Businesses in Nigeria
Owning a business in Nigeria isn’t rocket science. A lot of folks over the centuries have built strong businesses. Whilst some have not made it past the first few years of operation, yet others have stood the test of time and have continued to wax stronger and stronger as the years go by. Infect these businesses have gone beyond being known in Nigeria alone, to the world at large. Here are 10 most popular indigenous businesses in Nigeria;
- Dangote Cement
- Ashaka Cement
- Sahara oil
- Silverbird Television
- Television Continental
- Capital Oil and Gas
- Guarantee Trust Bank
- Zenith Bank