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 typically emanate from the local partners with which they have signed an agreement. There are reliable domestic and international courier companies that could help expedite both delivery and logistics services.
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 volumes of sea freight and containerized goods, though delays are common at these terminals.
The government of Nigeria is now reinvesting in railway transportation as a viable option for the movement of goods from ports or production facilities to 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 ports and businesses. Depending on the product type, most wholesalers and merchants have warehousing or storage facilities in the major markets from which they resell to distributors and retailers.
Using an Agent or Distributor
U.S. companies that export into Nigeria often engage local representatives. Companies also often choose to leverage the services provided by the Commercial Service in Nigeria to find and vet qualified representatives who 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 incorporation processes and in dealing with providers of ground support services such as product registration, license acquisition, real estate, 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 government’s effort to improve the ease of doing business, they 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 been reduced.
For the latest Investment Climate Statement (ICS) which includes information on investment and business environments in foreign economies pertinent to establishing and operating an office and to hiring employees, visit the U.S. Department of Department of State’s Investment Climate Statements website.
Nigeria’s franchise market is estimated to be $25 billion in products and services. Significant opportunities exist for companies to franchise in the Nigerian market. U.S brands are highly regarded because of their reputation for quality products and services. However, Nigeria is a price sensitive market, hence, businesses must strike a balance between quality, standards, and price considerations. The average consumer’s purchasing power is low. 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 sectors such as 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 helpful. A more detailed report on franchising is given in the franchise section of this document.
CS Nigeria regularly 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. 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. The Nigerian government has actively promoted 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 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 private businesses in the transportation sector handle local and interstate package deliveries. For international deliveries, the following express delivery mail services are readily available in Nigeria: Red Star Express/FedEx, UPS, DHL, and Airborne Express. Money transfer services include Western Union and Moneygram, as well as local technologies such as Flutterwave.
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 into which they are entering. Nigeria is prevalent for fraud and impersonation of government entities. Due diligence includes checks on the owners of a local business, corporate social responsibility, standards compliance, local taxation obligations, and finance.