As a manager at a multinational firm, you are probably familiar with the risk involved with expanding globally into new and challenging markets. But, as the old saying goes, “the bigger the risk, the greater the reward”. Therefore, rather than avoiding risk altogether, learning about the potential business risk in Nigeria, as well as how to mitigate said risk, can help your business achieve substantial growth in the region.
The risk of doing business is high for new entrants in the Nigerian market. Successful companies mitigate risk in Nigeria with careful market research and preparation. Being proactive by planning thoroughly ahead of time, rather than reacting to issues as they arise, is key to achieving strategic business goals in Nigeria.
Highlighted below are a few steps, which will help your company mitigate risk in Nigeria.
Build resilient strategies with proper due diligence
To build a resilient strategy you should first begin accumulating information about the industry you’re operating in, as well as information about your target customer base, to better understand the market landscape. Then, use that information to create an informed business model that takes into account Nigeria’s unique demographics, ways of conducting business, and current business environment. Incorporating these considerations into your model will allow you to plan ahead for potential threats and deal with the effects of other volatile situations. Finally, conducting business in a more economically stable region, such as a major city in Nigeria, before expanding to other parts of the country, will help ensure that the execution of your strategy is a success.
Pay attention to macroeconomic conditions
Even though Nigeria is an emerging market it is still a part of the growing global economy, therefore, it is necessary for multinational companies to take into account the health of the global economy while simultaneously monitoring economic conditions within Nigeria. This monitoring should consist of regularly evaluating Nigeria’s current political landscape, its business environment, currency fluctuations, and banking operations.
Find the right business partners
To help your company mitigate risk in Nigeria as a new entrant, it is essential that you employ local, credible business partners who are knowledgeable about the industry you’re operating in. These business partners will help you develop distribution channels and construct supply chains that will allow you to efficiently deliver your product to your target customer base. Furthermore, since they are local entities that are well-versed in how business is conducted in the region, they will be able to help your company mitigate potential risks and avoid perilous pitfalls.
Keep an eye out for political risks that could affect your business
It is no secret that significant political changes can easily shake up the operations of a business that is directly affected by new rules, regulations, or initiatives, set forth by a different administration. Therefore, it is imperative that you also form a contingency plan that you can execute in case there’s an abrupt change in policy.
Investing in talent
While gathering information and planning for short-term goals and long-term accomplishments are helpful when it comes to mitigating risk, it is also equally as necessary to invest in your current resources. That is to say, outside of just hiring local talent, ensuring that the employees you hire to help run your business in Nigeria have the appropriate training and development opportunities they need to grow in their positions is a must. Cultivating a team of staff members who are not only good at their jobs but who can respond aptly to market volatility is important when operating in an emerging market such as Nigeria.
Stick to strict, ethical practices
Unfortunately, corruption is one of the major risks associated with doing business in Africa. Therefore, in an effort to mitigate risk in Nigeria, you should develop a code that will allow your company to operate in a manner that adheres to strict, ethical practices. Most importantly, these principles should be used as a guiding light for your leadership team as they make decisions that will have an impact your company. For instance, U.S. based companies will want to pay close attention to The Foreign Corrupt Practices Act (FCPA), which is the most widely enforced anti-corruption law particularly in regards to managing third-party relationships abroad.
Maintain strong community and stakeholder engagement
Developing relationships with the community and its stakeholders is a great way to ensure your business’s success while minimizing potential risks. One way to form and maintain these important relationships is to make sure that your company is contributing to the socioeconomic development of the region. By helping to boost the Nigerian economy by selling in-demand products and employing locals, you will most likely, in turn, earn the community’s buy-in. Not only does this make you a formidable competitor in the Nigerian market, it will also help your business become more resilient if affected by sudden changes in the market.
While these steps will help your company mitigate risk in Nigeria, they should also be used to inform the strategies incorporated into your business plan. Furthermore, you should also consider developing a contingency plan based on your research, to further ensure that your company is able to respond to any unavoidable changes in the region that could harm your business. Doing so will improve the chances of your business maintaining longevity in the Nigerian market.
