Economic Factors Affecting Business in Nigeria – Economic factors
generally affect the impact of the economy and further include politics,
government activities, tax rates, wages, legislative policies, etc. Including,
but not limited to, affecting other smaller units. Such divisions often lead to
the failure of any business in the long run. All activities related to the
production and sale of products and services for profit are called businesses.
The relationship between a business organization and the community (or
country) in which it is located can be called the business environment.
Many factors affect the business environment. Some of these apply only to
certain countries or groups of countries, while others are universal and common
(to varying degrees) to local business ecosystems in many or even all
countries.
This article briefly examines ten economic factors affecting the business
environment in Nigeria. Some of these factors are unique to Nigeria while
others are similar to many other countries.
Here are the 10 Economic Factors Affecting Business in Nigeria
1. Economic Factors
Like any other country, the economic situation in Nigeria has a direct
impact on the business environment. Examples of macroeconomic and micro economic issues such as inflation, unemployment, labor costs (surprisingly low in
Nigeria due to Nigeria's persistent unemployment problem), taxes, material
costs (depending on the materials and whether they are readily available in
country), demand, competition, etc.
2. The Problem of Unemployment
Entrepreneurs must recognize that in a country where most people of
working age are completely or structurally unemployed and many of them have
been eliminated, most of their potential market does not have enough money to
buy their products. These are the people who should be part of the target
market for various products and services. Except that products and services are
necessities, not pleasures. This is not a big problem for the company in this
situation because everyone has to pay almost full price for the company's goods
or services.
3. The Elements of law
Businesses are influenced by government in many ways, including by regulating
how they operate. How we disclose information about our presence and
performance How we treat our employees; And other factors. To do business in
Nigeria, organizations currently based here must operate within Nigerian law
and potential entrepreneurs must take this into account.
4. The Problem of Morality/Ethics
Like all other countries, the moral standards of the Nigerian people are
influenced directly or indirectly by favorable or unfavorable local economic
environments. For example, it is very common in large organizations and even
state-owned enterprises to award contracts based on whether officials
responsible for approving contracts have received or paid bribes rather than
performance. In this situation, a businessman who does not know this can waste
time and money, even if he has the necessary skills to conclude the contract.
5. Inflation
Prices of goods and services often rise over time. This reduces
purchasing power and affects the prices of raw materials, production and labor.
Low inflation promotes investment and growth, but high inflation can reduce
consumer spending and reduce corporate profits.
6. Exchange Rate
Exchange rates determine the value of a currency relative to other
currencies and affect the prices of imported products, foreign investment and
global trade. A company's competitiveness and profitability can be affected by
large changes in exchange rates.
7. Accessible Infrastructure and Social Services
In Nigeria, many basic facilities that should be easily accessible are
not accessible at all or are only partially accessible. This infrastructure is
required not only for the business activities of the country but also for all
other purposes. The consequences of this lack of infrastructure affect not only
the business community but also Nigerian society as a whole. However, this has
had a particularly negative impact on business as starting and maintaining a
business in Nigeria is very expensive.
In addition, it significantly slows down the development and expansion of
businesses, making it difficult to start a new business and for the long-term
survival of existing businesses. Two of the most important facilities are not
readily available. An adequate network of good roads and a well-planned and maintained
transport system. In this "Jet Age" we can do nothing without
electricity/power source.
8. Interest Rate
Interest rates affect how much it costs a business to borrow, which
affects expansion and investment decisions. Low interest rates encourage
borrowing and spending, while high interest rates make borrowing more expensive
and can limit economic growth.
9. Economic Development
Consumer spending and the demand for goods and services are influenced by
economic growth, which measures the overall expansion or contraction of the
economy. Slow growth can lead to lower demand and lower incomes, but strong
economic growth creates a business-friendly environment.
10. To Earn Money
Getting financial assistance (in the form of loans) to start a new
business or grow an existing business in Nigeria is a significant challenge
today. Commercial banks have very strict guidelines to help in this area (few
entrepreneurs know how to follow them). Nigeria has one of the highest interest
rates in the world (15-20%), especially compared to countries like the United
States (under 3%), which further complicates the situation. Therefore, business
owners looking to start or grow a business may have to look elsewhere for
funding or perhaps abandon the concept altogether. This is because banks, which
should be the main source, do not have easy access to finance.
Final Thought
In other words, various economic factors such as interest rates, inflation, exchange rates and economic growth have a significant impact on the Nigerian economy.
These factors are very important in influencing the business environment and the productivity and profitability of domestic companies.
To
remain competitive and successful in the Nigerian market, it is essential that
businesses monitor these factors and adapt as they change.
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