Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.
Distributions and sales channels for U.S. companies emanate from the local companies with which they have signed an agreement. All three transportation systems available in the country can be utilized for this purpose. There are also very good courier companies that could help expedite both delivery and logistics services at a pre-determined cost.
The cities of Lagos, Kano, Abuja, and Enugu have airports serving international flight operations for both passenger and cargo traffic. Additionally, the most active seaports of Apapa and Tin Can Island in Lagos handle large volume of sea freight and containerized goods.
The government of Nigeria (GON) is now investing in railway transportation as a viable option for the movement of goods between ports/production facilities and other regions of the country. The focus on rail transportation has gained more attention from public and private sector leaders as the poor condition of road transportation and frequent traffic congestion presents huge challenges for businesses. Depending on the product type, most wholesalers and merchants have warehousing/storage facilities in the major markets from which they resell to distributors and retailers.
Using an Agent or Distributor
Often when U.S. companies export into Nigeria, they involve local representatives. Companies often choose to leverage the services provided by the Commercial Service in Nigeria to find and vet qualified representatives to meet their business partnership requirements and facilitate their market entry.
CS Nigeria encourages U.S. companies to employ the services of experienced commercial lawyers in completing the incorporation process and in dealing with providers of ground support services such as product registration, license acquisition, housing, and tenancy agreements.
Establishing an Office
U.S. firms wishing to do business in Nigeria, other than through incorporated local companies acting as representatives, agents, distributors, or partners, are required by law to establish a local presence. The business must be incorporated locally in Nigeria. Foreign firms cannot operate through a branch office in Nigeria. As part of the GON’s efforts to improve the ease of doing business, the government established a Presidential Enabling Business Environment Council (PEBEC) in early 2017 to help review challenges encumbering the business environment. The timeline for registering a business with the country’s Corporate Affairs Commission (CAC) has also been reduced.
Significant opportunities exist for companies to franchise in the Nigerian market. U.S brands are highly regarded in this market, because of their reputation for quality products and services. However, Nigeria is a price sensitive market, hence, businesses coming into this market must strike a balance between quality and price considerations. The average spending power is low. Nigeria’s franchise market is estimated to be $25 billion in products and services. The most promising industry sectors in franchising include fast food, hotel services, professional and service training, fashion, healthcare, oil/gas distribution services, transportation, telecommunications, and distribution services. There is a high demand for American-style education and industry-specific training for businesses in diverse sectors including oil and gas. The key competitive advantage that American franchises possess is quality of product, quality of service, and superior brand name. These three components distinguish American franchises, along with an efficient management system integrated into operations, strategy, planning, and human resource (training). To succeed in Nigeria, it is vital that U.S. franchisees maintain the top-quality offering for which they are known, while offering competitive prices. Slight localization of service offering is also fundamental to succeed in this market. A more detailed report on franchising is given in the franchise sector section of this document.
Every year, CS Nigeria recruits and escorts an official Nigerian delegation to the annual International Franchise Expo organized by the International Franchise Association (IFA) based in Washington, D.C. Interested U.S. franchisors may utilize the services of CS Nigeria to identify, pre-qualify, and select a competent and reliable master franchisee or area developer for the country.
Direct marketing is a popular concept or method of international business expansion in Nigeria as well, especially in beauty and wellness sectors. Several U.S. companies have been operating in Nigeria for a decade. Among them are Forever Living Products (health and wellness food supplements), Jeunesse, a Florida company, (anti-aging skin care and food supplements), Total Life Changes, a Michigan company (nutritional supplements), Moringa Bioactive, a Utah company (personal care and food supplements), and Trevo, an Oklahoma company (nutritional supplements). Many local and foreign companies especially in the personal care sector now utilize direct marketing to reach their target buyers in the country. The most commonly used methods include face-to-face and social media marketing, while others also deploy multi-level marketing structures.
Joint Ventures & Licensing
Joint venture agreements and relationships are governed by Nigerian commercial law, which is based on British common law. GON is aggressively promoting joint ventures, particularly in the oil and gas and maritime industries. The objective is to encourage technology and knowledge transfer and improve local content. Similar efforts are manifest in the information and communications technology industry, manufacturing, and distribution sectors.
Express delivery and courier services are highly prevalent in Nigeria with many international delivery services operating. The Nigerian Postal Service (NIPOST) is the government-owned and operated corporation with the largest network for postal services delivery in Nigeria. Several other private businesses especially in the transportation sector handle local and interstate package deliveries. For international deliveries, the following express delivery mail services are readily available in Nigeria: EMS Nigeria operated by the Nigerian Postal Service, DHL, Red Star Express, FedEx, UPS, and Airborne Express. Money transfer services include Western Union and Moneygram.
All U.S. companies coming to do business in Nigeria are advised to carry out a comprehensive due diligence before commitments are made. This is to help the companies understand the partnership to which they are entering. This exercise includes checks on the owners of a local business, their corporate social responsibilities, standards compliance, meeting with local taxation obligations, and making sure that the finances of the local organizations are coming from legitimate sources.