Are you interested in starting a business in Nigeria without capital? If YES, here is a complete guide to starting a business in Nigeria as a foreigner.
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.
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 Business in Nigeria Without Capital – A Complete Guide
- General Overview
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 2014 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.
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.
Starting a Business in Nigeria Without Capital – Market Feasibility Research
There are more and more people who travel to Africa to do business, and their number one port of call is Nigeria. Those who have found themselves there, are leaving no stone unturned in seeing that they continue to do what they know to do best.
It is therefore no overstatement to say that Nigeria is one of the best places to plant a business in order to reach a large populace. This is one of the reasons why small brands have continued to soar higher to become a formidable force to reckon with.
Even though the economy of Nigeria is dwindling at the moment, but that wasn’t the case in recent past. The Nigerian economy will continue to be a force to reckon with as industries emerge and soar higher.
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
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
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
Starting a Business in Nigeria Without Capital – Legal Aspect
- Business Licenses and Permits You Needed to Start a Business in Nigeria
For you to start a business in Nigeria, .you will need federal and state business licenses and permits. However, there are basic and most common licenses and permits that all businesses need. 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.
The Best Legal Entity to Use in Nigeria
Choosing a business entity as you start out in trade is your responsibility. On the flipside, the type of business which you plan to operate may also suggest the type of entity to use. It all depends on the type of business you want to run. Here is a list of entities to guide you;
- Sole Proprietorship
Adopting a sole proprietorship type of entity means that you may be looking to start on a small scale from the outset. The less complex structure is the sole proprietorship, which usually involves just one individual who owns and operates the enterprise.
If you intend to work alone, this may be the way to go. The tax aspects of a sole proprietorship are particularly attractive because income and expenses from the business are included on your personal income tax return
If you are starting a business where you wouldn’t be the only one involved in ownership, then you can consider adopting the partnership style of entity. If your business will be possessed and run by several individuals, you may want to take a look at organizing your business as a partnership. Partnerships come in two variations: general partnerships and limited partnerships.
In a general partnership, the partners accomplish the company and shoulder the responsibility for the partnership’s debts and other responsibilities. On the flipside, a limited partnership has both general and limited partners. The general partners possess and activate the business and assume liability for the partnership, while the limited partners function as investors only. This means that they take no control over the company and are not saddled with the same liabilities as the general partners.
This type of entity is adopted on a very large scale and adopting the corporate structure is more complex and costly than most other business structures. A corporation is an independent legal entity, separate from its owners, and as such, it needs fulfilling more regulations and tax requirements.
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.