Nigeria: Trung Nguyen’s New Market?

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Beside from taxation, tariff and import regulations are also vital for investors’ knowledge. According to WTO (2013), tariff of coffee and goods in general in Nigeria is 20%. Investors can be relief since there is no strict rule about importation. However, Nigeria Customs Service (n.d) notes that imported goods must be labeled in English in addition; otherwise the goods will be confiscated.

On the other hand, Nigeria’s government is very open towards foreign direct investment (FDI). “Nigerian investment laws allow 100% foreign ownership in all sectors, apart from those related to national security and defense and the oil and gas sector” (Euromonitor 2015a). The government also offers various investing encouragements such as “100% tax holiday of five years. Industries that use 60.0%-80.0% of local raw materials in production may benefit from a 30.0% tax concession for five years” (Euromonitor 2015a). Euromonitor (2015a) also points out that Nigeria has become a member of the World Trade Organization (WTO) from 1995 and Trade and Investment Framework Agreement (TIFA) from 2000, in which will reduce trade barrier and trade disputes among members.

Economic

Nigeria is one of the fastest growing countries in Africa. “Nigeria has a mixed economic system in which the economy includes a variety of private freedom, combined with centralized economic planning and government regulation”, Globaledge (n.d) declares. Mixed economic system is defined as a combination of capitalism and socialism. Under mixed economy, producers and consumers have sovereignty to decide what to produce and consume, similar to pure capitalistic economy. However, public sectors still have controlled over some industries; “the government is involved in planning the use of resources and can exert control over businesses in the private sector. Governments may seek to redistribute wealth by taxing the private sector, and using funds from taxes to promote social objectives” Investopedia (n.d).

According to World Bank (2014b), Nigeria’s GDP was $568.5 billion in 2014 and the GDP growth rate is 6.3%, relatively higher than in 2013 ($514.9 billion and 5.4%, respectively). The economy success is largely dominated by the oil sector since “Nigeria is the largest oil producer in Africa, holds the largest natural gas reserves on the continent, and is among the world's top five exporters of liquefied natural gas (LNG)”, US Energy Information Administration (2015) analyzes.

Apart from the benefits, petroleum production has brought Nigeria many issues such as the rising of violence (as mentioned in the Political analysis) and the slump of GDP growth rate due to the changes in global oil price. “Annual real GDP growth went from a period high of 7.8% in 2010 to 4.3% in 2012, as oil and gas production limitations held back economic development” (Euromonitor 2015g).

Comparing to other Sub Saharan Africa countries, Nigeria suffered a much higher inflation rate. According to Trading economic (2015), Nigeria inflation rate till April 2015 was 9.2%, which was the highest figure since February 2013. Nevertheless, this figure is an improvement compared to the rate in 2005 (17.9%) (Trading economic 2015). High inflation rate can damage country’s economic and social aspect since the value of money keeps decreasing. “During a high inflation period, wide fluctuations in the inflation rate make it difficult for business organizations to predict the future and accurately calculate prices and returns from investments” (Wijesekera 2012). Similar to other nations, Nigeria wishes to minimum their unemployment rate. (Euromonitor 2015g) claims that in May 2015, Nigeria’s government has redefined the term “unemployment” by lowering the number of working hours a week to be considered “employed”. This procedure automatically drops the unemployment rate from 24.2% to 7.5% with the youth unemployment rate of 13.7% (Euromonitor 2015g). Pluralities of the unemployed people are from rural areas, where education is not being taken seriously to meet employer’s demand. High illiteracy and inadequate learning will be discuss further in the Social part. Although only the minority of young people have completed their study, “the Nigerian labor market has not been able to make use of the services of university and polytechnic graduates”, “unless the government and private sector generate over 2.5 million jobs each year” (Euromonitor 2014). Brain drain is also a problem since educated Nigerian have left the countries to seek for better opportunities in other countries (Euromonitor 2015a).

Beside from the unemployed issue, Nigeria’s labor market and wages is relatively flexible since the hiring and firing process are uncomplicated, which ranked 7th out of 144th in the Global Competitiveness Report (World Economic Forum, 2015). The minimum wage per month in Nigeria is NGN18,000 (US$115) in 2014, which remains lower than South Africa’s R2,474 (US$228) (Euromonitor 2015a). However, Nigeria’s minimum wages is relatively higher than in Vietnam (US$77.8) (Euromonitor 2015b).

Nigeria generally ranked poorly at 127th out of 144 in the Global Competitiveness Report (World Economic Forum 2015). Institutions remain weak (129th): public fund is being extremely diversified (142nd), high corruption and illicit cost of business due to terrorism continue to rise (137th) (World Economic Forum 2015). Moreover, inadequate supply of infrastructure, especially the quality of electric supply (141st), is one of the most problematic factors in Nigeria’s economic, 26.1% businessman responded (World Economic Forum 2015). In addition, Nigeria’s financial services are not affordable for businesses (122nd) and businesses still have difficulties in accessing to loans (137th), World Economic Forum (2015) analyses. In contrast, Nigeria benefits on its large market size (31st) and its flexible labor market, which was mentioned above.

Social

The official language of Nigeria is English, which is their colonial country- the United Kingdom’s language (Index Mundi 2015). Majority of Nigerian can speak this international language fluently, which will be an advantage for employer when it comes to hiring.

Nigeria population and growth rate in 2014 is approximately 177 million and 2.47%, respectively; 30.5% population are from 25-54 years old – the working age and also potential target consumer for Trung Nguyen (Index Mundi 2015). “A young, vast and booming population- make Nigeria a compelling emerging consumer market”, said Euromonitor (2015d). In term of consumer lifestyle, as Euromonitor (2014) states, Nigerian consumers are increasingly concern about healthy eating