Is Your Business on Track to Thrive in Nigeria’s Poor Infrastructure Economy?

Sage Africa

Essential Reading

Is Your Business on Track to Thrive in Nigeria’s Poor Infrastructure Economy?

80% Of SMEs in Nigeria fail, according to the United Nations Industrial Development Organisation’s Investment and Technology Promotion Office in Nigeria. How confident are you that yours is on track to not only survive, but thrive in Nigeria?

Unfortunately, Nigeria’s business landscape is not conducive for entrepreneurship. Many of the challenges faced by small business owners can be attributed to poor infrastructure in the country, like the unreliable supply of electricity. Nigeria alone is home to 60–70 million generators and is currently ranked the second worst electricity supply nation in the world, even as it embarks on a journey to resuscitate the power sector. The erratic power supply has been a major cause of failure for small businesses in the country.1

Poor infrastructure means that entrepreneurs must provide basic amenities at their own expense, without state assistance, to fuel business operations. This cost a lot of money; between $0,85 and $1.75 per kilowatt hour of power – compared to about $0,20 per kilowatt hour in Germany where the cost of power grid is considered to be expensive.2

How much is poor infrastructure costing your business?

Successful business owners have clear visibility into their businesses which empowers them to make better informed decisions and take immediate, game-changing action. Do you have complete visibility of your business?

To run a smoother, more successful business, you need to know what’s going on in your business and what it means for your operations. Plagued with insufficient cash flow, many small Nigerian business owners run their businesses day to day, with no insight into what the future holds. This is telling of why only 20% stay in business. It’s critical to constantly keep an eye on the status of the business.

Considering your business operations, do you have a good idea how much poor infrastructure is costing you? From electricity, to the time you spend in traffic – how much money are you throwing away because of inefficient infrastructure? More importantly, do you have a plan to mitigate these costs? Here’s an example: If you are in the retail business and you have a clothing shop serving a particular community, you need to:

  1. Pay rent for the store
  2. Buy a generator and maintain it
  3. Pay staff to help sell and keep an eye on the merchandise
  4. Restock inventory
  5. Stay above competition.
  6. Figure out how to promote your goods

That’s possibly more expensive than setting up an online store which would just need you to hire a photographer for good quality photos, pay a basic monthly fee for hosting and other web services, pay delivery costs and apply a Just-In-Time inventory management strategy.   

To improve business operations and save costs, you need to know what’s going on in your business. This includes good management of your business finances and inventory, and there are many ways to do this. You can start by using Excel or you can purchase an accounting or business management solution. No matter what challenges you face in your business, you need to keep track of what’s going on, so you can make clearly informed decisions that will lead to its success.