Doing Business in Nigeria

Skin care products

Akash Katariya
17IB306
 INTRODUCTION
The Federal Republic of Nigeria, commonly referred to as Nigeria. It comprises of 36 states and
the federal capital territory where the capital, Abuja is located. Nigeria is officially democratic
secular country. It is located in the West African Sub-region with a population of about 186 million
growing annually at a rate of 2%. It has the largest population in Africa, thus showing huge
potential in market growth.
Nigeria’s massive oil reserves can be seen as both a blessing and a curse. The sale of crude oil
represents about 70% of government revenue and an incredible 90% of the country’s exports. A
blessing when oil prices are high but a real problem when prices fall dramatically. Nigeria
definitely needs foreign investment and know-how. Thus, making it an attractive potential market.

Nigeria ranks 145 in ease of doing business

(Source-http://www.doingbusiness.org/data/exploreeconomies/Nigeria)

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BUSINESS DYNAMICS
Nigeria is executing reforms to help reduce the cost linked with getting credit and enforcing
contracts. However, the country continues to suffer from bureaucratic hurdles and high levels of
corruption that makes doing business difficult. Additionally, business must cope with an inefficient
regulatory environment and high interest rates. However, the country continues to benefit from a
relative low tac burden, large consumer market and flexible labor laws.
SWOT ANALYSIS

 Business in Nigeria benefits from relatively low tax rates and flexible labor laws.
 There are negligible restrictions on foreign ownership, as the government has opened
almost all its sectors to foreign investment, allowing for 100% foreign ownership.
However, FDI is limited to joint ventures or production sharing contracts in petroleum
sectors.
 In 2018, Nigerians total tax rate stood relatively low compared to most of its Sub-Saharan
peers.
 In the World Banks Ease of Doing Business Index, Nigeria’s ranking improved over 2014-
2018, as the state in 2017 and 2018 implemented new laws that made it easier to get credit
and increased protection towards minority investors.
 GDP OF Nigeria is $401 billion and is expected to grow by 2% year-on-year.

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GDP growth rate
(source- https://www.statista.com/statistics/382360/gross-domestic-product-gdp-growth-rate-in-nigeria/)

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OPERATING RISKS
 Businesses operating in Nigeria remain adversely impacted by corruption and poor
regulatory quality.
 In transparency International “Corruption Perception Index”, Nigeria’s ranking fell over
2012-2017, signifying widespread corruption throughout institutions.
 In the World Banks Regulatory Quality Index 2016, Nigeria ranking was amongst the worst
globally. However, the government is taking various initiatives to improve its ranking for
ex. Using electronic stamping of registration documents in 2018.

ACCESS TO FINANCE
 “Getting Credit” ranking stands amongst the top 10 globally. Nigeria’s interest rate stood
among the highest regionally in 2017.
 The key interest rate was hiked from 12% to 14% in June 2016, to take inflation.
 Nigeria witnessed a significant upgrade in “Getting Credit” ranking over 2012-2018
period, making it sixth best globally, as the government made access to the credit easier by
creating a centralized collateral registry and warranting debtors the legal right to examine
their credit data from the credit bureau and by starting to provide credit scores to banks,
financial institutions and debtors.

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SKIN CARE INDUSTRY
Skin care is expected to grow in future. Population growth, increasing incomes and rising demand
for value-added products due to the growing middle class and consumer sophistication will help
to drive growth over the years in future. In particular, the growing urban population will result in
more consumers switching from traditional and low-priced skin care products to packaged and
value-added products. Women remain the main consumer segment within skin care, with the
increase of the young female population also fueling the future demand.
General purpose body care, drives the overall sales and is expected to lead growth over the years.
Extreme weather conditions in Nigeria, especially during the Harmattan and dry seasons,
contribute to strong growth within general purpose body care as products in this area can help
protect, moisturize and soothe the skin over the extreme weather conditions and are also affordable.
While mass brands dominate skin care, premium products are expected to perform well over the
forecast region. The development of niche areas such as face masks and nourishers/ anti-agers is
fueling interest among the high-quality product buyers. As income grows, more consumers will
look to use high quality products that deliver optimum skin care. In particular there is strong
demand for high quality toning as well as other value- added properties in general purpose skin
care products.

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Sales of skin care by category % value growth 2012-2017

The CAGR between 2012-2017 in various categories such as body care 8.2%, Facial care 5.3%,
hand care 5.8%, skin care 7.2% all the major categories show positive growth between 5-10%. The
interesting part about it is that the facial cleaning wipes and mass facial cleaning wipes showed
highest growth percentage of 15.6% and 18.3% respectively. These sectors provide an important
opportunity to enter in the market.

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COMPETITIVE LANDSCAPE
Beiersdorf Leads Skin Care
Beiersdorf led skin care value sales in 2017. The company benefits from the growing popularity
and household name of its Nivea brand, particularly among women, given their added-value
advantage and competitive price positioning. In addition, the company also has a strong
distribution network which has helped boost penetration by increasing presence in the retail
channels. It carries out point of sale advertising at beauty specialist retailers, including store signs
sponsorship, which help boost brand visibility.
Unilever Ranks Second
Unilever ranked narrowly behind Beiersdorf in 2017. The company’s strong position can be
attributed to the popularity of its three leading brands: Dove, Vaseline and Lux. These brands have
a long presence in the country and wide distribution networks and thus enjoy a high level of
familiarity and popularity.
International Brands Dominate
Although domestic brands such as Venus, manufactures by PZ Cussons, Nigeria have a good sales
share in skin care, they face tough competition from international brands, which are quite
prevalent. Manu such brands are imported by third-parties other than the brand owners themselves
and are thought to offer better quality than local brands, thus enjoying good demand among
middle/upper income consumers.

SCALE OF OPERATIONS

It tells us about the major players in this industry and the number of shares they each hold.

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The forecast of the market for skin care products as seen in the above graph shows that it is
constantly growing and in the coming years will show boosting growth potential thanks to its
highest population in Sub-Saharan region.
The year on year sales performance is also forecasted to grow steadily at 8.8%.

Forecast sales of skin care by category value 2017-2022

As from the above graph it is clear that the forecasted sales of skin care are steadily on rise so it
provides us with great opportunity to enter into the market.

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MARKETING AND DISTRIBUTION PLAN

This is the distribution adopted by many companies operating in Nigeria and for my company also
the sales and distribution network would be same.
Though the initial Marketing budget would be relatively high due to high investment in developing
our own sales and distribution network as well as we will also focus heavily on print, ad and
brochures, billboards etc. to create awareness about our product in the minds of consumers.

SOURCING OF CAPITAL
Company can fund its business by taking debt from Banks, local investment firms, by raising
equity in the market or company’s own funds. Corporate Bank loans are not specific for all
the companies as it depends upon the amount of loan as well as the credit rating of the
company. In our case we have to assume the interest rates as we don’t have the exact amount
which my company has to borrow from the bank.

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EXCHANGE RATE RISK

USD/NGN
(Source https://in.finance.yahoo.com)
There is a high currency exchange risk, the governments revenue is heavily dependent on sale of
crude oil (70%) and an incredible 90% on exports of it. Which can prove to be a blessing when
crude oil prices are high but a real problem when prices fell dramatically. However due to
government efforts by opening up FDI to 100% in most sectors and various reforms undertaken in
policies, it has increased its GDP and ease of doing business rankings as well as the forecast also
shows a positive growth.

CONCLUSION
Though Nigeria presents real problem in terms of corruption but due to government recent steps
in reforming its policies as well as the improving rank in Ease of Doing Business, GDP is also
showing a positive growth of 2% year-on-year. The most important aspect is to keep in mind the
local culture of Nigeria and understand its customs before entering into the market.
The place I have chosen to setup my business in Nigeria is Lagos. It is one of the most developed
cities in Nigeria, housing most of the major commercial activities in Nigeria. The fact that it is
positioned along the ocean and is the first port of entry by the sea even makes it more suitable for
businesses involving importation and exportation. It is also the hub of Information technology in
Nigeria.
 It is densely populated and thus offers a larger customer or clientele base.
 It is less prone to riots or violence fueled by cultural conflicts since no one particular ethnic
group has the larger population in it.
 The cost of living is relatively low.
 Traffic hold ups occurs so often that you may always miss the most important meetings
while held up in traffic.

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 REFERENCES

 www.euromonitor.com

 https://www.worldbusinessculture.com/country-profiles/nigeria/

 http://www.doingbusiness.org/data/exploreeconomies/nigeria

 https://www.focus-economics.com/country-indicator/nigeria/exchange-rate

 https://www.statista.com/statistics/382360/gross-domestic-product-gdp-growth-rate-in-

nigeria/

 https://in.finance.yahoo.com/quote/NGN%3DX/chart?p=NGN%3DX#eyJpbnRlcnZhbCI

6ImRheSIsInBlcmlvZGljaXR5IjoxLCJ0aW1lVW5pdCI6bnVsbCwiY2FuZGxlV2lkdGgi

OjgsInZvbHVtZVVuZGVybGF5IjpmYWxzZSwiYWRqIjp0cnVlLCJjcm9zc2hhaXIiOn

RydWUsIm

 https://tradingeconomics.com/nigeria/ease-of-doing-business

 https://www.dfa.ie/irish-embassy/nigeria/our-role/doing-business-in-nigeria/

 http://www.expatarrivals.com/africa/nigeria/doing-business-nigeria

 https://www.entrepreneurn.com/advice/cities-to-set-up-a-business-in-nigeria/#ixzz5OkdiWtm1

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