Posted August 24, 2014 8:07 pm by Comments

A recent Economist article noted how Nigeria’s promise has made it a test-bed for the Africa strategies of consumer-goods firms. This is not only because of its size but also because of the spread of Nigerian culture — its music and movies — around Africa.

Hence, Unilever plc (NYSE: UL), which has been trading in Nigeria for nearly a century, is expanding its operations while Nestle SA (OTCMKTS: NSRGY) plans to triple sales over the next decade. Procter & Gamble Company (NYSE: PG) has just completed a factory near Lagos, its second in Nigeria while SABMiller plc (OTCMKTS: SBMRY), the world’s second-largest beermaker, built a state-of-the-art brewery in Onitsha, in the Niger Delta.

The Economist also pointed out three lessons emerge for outsiders doing business in Nigeria:

  1. Be even more careful than usual about your choice of partner as the biggest error a business can make is to pick an incompetent or dishonest distributor while growing through acquisitions needs to be treated with considerable caution.
  2. Don’t assume that a model that works elsewhere will be successful in Nigeria. Woolworths Holdings Limited (JSE: WHL), a South African clothing and food retailer, closed its three shops in Nigeria after less than two years, citing high rents and complex supply-chains as reasons. However, they also relied on the changing seasons to boost turnover for clothes but Nigeria’s clothing market had no such natural churn as its hot there all year round.
  3. Don’t run a Nigerian business by remote control as companies do well by becoming Nigerian. In fact, Guinness, brewed in Lagos since the 1960s, has been adopted as a Nigerian brand with only Britain drinking more of the stuff while Nestlé, Unilever and PZ Cussons plc (LON: PZC) have been in the country for so long they have strong local identities. These businesses also give power to local managers so they can adapt to shifting conditions.

To read the whole article, Africa’s testing ground, go to the website of the Economist.

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