New Discovering: 10 Economic Factors Affecting Business in Nigeria


New Discovering: 10 Economic Factors Affecting Business in Nigeria

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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