Nigeria, the Best Business Environment for any Manufacturing Business

Popular opinions suggest that Nigeria is one of the countries with the least enabling business environment for businesses in the manufacturing sector. Our piece argues that there are many sides to this thought contrary to the view. First, there is a mutual relationship and interdependence between a business and its environment as a company cannot operate in a vacuum. To a large extent, the setting determines any business's nature, type, success, and failure.

What is a Business Environment?

Arthur Weimer propounds that a business environment encompasses the climate or set of economic, social, political, or institutional conditions in which businesses operate. Hence, manufacturing businesses must observe elements and conditions of the environment and develop strategies to negotiate and navigate through it. William Gluch and Jauch provide a more precise line of thought to Weimer's argument. They opine that a business environment encompasses the external factors that create opportunities and threats to the business.?

These threats and challenges plaguing the business environment may have fueled the opinions of ruling Nigeria out as a suitable business environment for manufacturing companies. This article takes a supporting stand for the viability and sustainability of the business environment in Nigeria for manufacturing businesses. It asserts Nigeria as the best environment for any manufacturing business. Given those mentioned above, this article will explore features of the business environment, competitive advantages of the Nigerian environment alongside its challenges.

Nigerian Business Environment: An Overview

Nigeria is the most robust economy in Africa and one of the largest worldwide. In addition, Nigeria is the most populous country in Africa, with one-sixth of Africa's population and the most significant gross domestic product (GDP).?

Nigeria has a population of over 120 million. In addition, the country has abundant natural resources. Consequently, this presents a healthy climate for investment. However, despite these resources, the infrastructure needed to drive the economy are not as standard as it should be. Like any other business environment, there are two significant parts: internal and external. Therefore, a keen understanding of the modalities of these environments is vital for manufacturing businesses to thrive in the Nigerian economy.

Internal

The internal environment is that part of the business environment that is concerned with the different factors present within the organization. It comprises conditions, forces, members, and events that can influence the company’s decisions and operations.

External

The External Business environment comprises all the extrinsic factors, influences, events, entities, and conditions, often existing outside the company's boundaries. However, they significantly impact the business enterprise's operation, performance, profitability, and survival.

Key external factors that shape the business environment include:

• Technological factors: This includes research and development activity, specialized incentives, and the rate of technological change. They can determine barriers to entry, minimum efficient production level, and influence outsourcing decisions.?
• Ecological factors: These include environmental aspects such as weather, climate, and climate change, which may affect industries like tourism, farming, and insurance.?
• Legal factors: Included in this component are discriminatory law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.?
• Political factors: Political factors include the following areas; tax policy, labor law, environmental law, trade restrictions, tariffs, incentives, and political stability.

Competitive Advantages of the Nigerian Business Environment

Various opportunities and competitive costs make Nigeria an excellent destination for foreign participation in the Nigerian economy.

• Attractive to Foreign Investors

Nigeria is Africa's most prominent investment market. It provides investors with fiscal incentives, investment guarantees, and a stable political and legal climate, making it a haven for foreign capital. Generally, Nigeria has a low corporate tax rate, a low VAT rate, flexible labor market circumstances, and simple procedures for starting a manufacturing company. In addition, the Free Trade Zone (FTZ) encourages multinational corporations to establish operations. The FTZ system is central to Nigeria's export and investment promotion strategy.

• Tax Incentives

Companies solely engaged in fabricating tools, spare parts, and simple machinery for local consumption and export are eligible for a 25% investment tax credit on qualifying capital expenditures. In addition, taxpayers who buy locally manufactured plants and machinery enjoy a 15% investment tax credit on such fixed assets purchased for use.

Furthermore, withholding taxes are not deductible on dividends issued by Units in Nigeria. They are tax-free. Other benefits include the tax exemption of profits on items exported from Nigeria. Such relief is only earnable if the funds are repatriated to Nigeria and used solely to purchase raw materials, plant equipment, and spare parts.

• Export Development Fund Scheme

This Scheme provides financial assistance to the private sector exporting products. To cover part of their initial expenses in respect of the following export promotion activities:

• Participation in training courses, symposia, seminars, and workshops in all aspects of export promotion
• Advertising and publicity campaigns in foreign markets
• Export market research and studies
• Production design and consultancy
• Participation in trade missions, buyer-oriented activities, overseas trade fairs, exhibitions, and sales promotion
• Double Tax Agreement?

To encourage international trade and investment by cutting down on the costs of international transactions, Nigeria has Double Taxation Agreements ("DTAs") with several countries. The DTA provides relief from double taxation regarding taxes payable on any taxable profit in Nigeria and any taxes of similar character imposed by the laws of the foreign country involved. Countries with which Nigeria has signed subsisting DTAs include Belgium, Canada, China, France, the Netherlands, Pakistan, Philippines, Romania, South Africa, and the United Kingdom.

Trade Liberalization Scheme (TLS) of the ECOWAS

This is a liberalization incentive that focuses on the ECOWAS sub-region. The Scheme is an incentive primarily geared toward free trade within the ECOWAS sub-region. This is aimed at significantly expanding the volume of intra-community trade and commerce in these sub-regions via the removal of tariff and non-tariff barriers to trade in goods originating from ECOWAS countries. This affords preferential access to the ECOWAS market for exports from Nigeria.

Favorable Climate

Nigeria has a tropical climate with an average temperature of 28 degrees Celsius (82 degrees Fahrenheit). Hence, the climate conditions in Nigeria are pleasant for manufacturing businesses during the dry and rainy seasons.

Low Establishment Costs

Establishing a manufacturing business in Nigeria is relatively cheap as it is cost-effective, providing available options for a skilled labor force with affordable salaries.

Proximity and Centrality

Situated in the heart of Africa, Nigeria has more than 450 million consumers. The country has twenty- three local airports with major international airports located in Abuja, Calabar, Enugu, Lagos, Kano, Port Harcourt, and Uyo. In addition, Nigeria has five seaports with free trade zone facilities at Apapa, Calabar, PortHarcourt, Tin Can Island, and Warri.

Rich in Culture and Heritage

As a nation, Nigeria is rich with African cultural heritage. The country boasts wildlife conservation parks, golf courses, beaches, cinemas, museums, festivals, and cultural fiestas. Tourism and cultural advantage are an added benefit to Nigeria's foreign investors and manufacturing businesses.

The abovementioned points provide reasonable arguments for Nigeria having an elite business environment for manufacturing businesses in Nigeria. Are you in support of this argument?

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