Nigeria's No #1 Entrepreneurship/Business Blog

Top Ten Cost Every Nigerian Business Must Incur

Nigeria is currently ranked 131 among 190 economies in the Ease of Doing Business Report. That puts Nigeria among the worst when it comes to doing business in comparative countries around the world. On a brighter side, the same report also estimates the minimum capital required to do business in Nigeria at 0.00% meaning it can take absolutely nothing to start a business in Nigeria, thus putting us among the best (82 countries) in the world. Strangely though, the report failed to identify the peculiar cost of doing business in Nigeria as a going concern. An index which is believed to be more important than just outlining the ease and what it takes to start a business in Nigeria. More importantly is identifying those cost which no matter the nature of business will likely be incurred directly in the course of supplying of goods or services. So, in procareer typical fashion, we outline the top ten (in no particular order) cost every business in Nigeria must likely incur.

1. Cash Cost – Every business requires that you either receive or spend money. To do so would also require various levels of cost for those who spend the money and those who save it. No one is spared here, not even those who do not save their money in banks. In fact it might actually be more if the CBN report on money supply is anything to go by.  According to the Central Bank as at April 2012, a sum of about N1.4tr was total currency in circulation. Also, a total of about N1.1tr or 79% of that amount is outside the banking system. For the owners of the N1.1tr outside the banking system, whilst they do not incur banking cost such as C.O.T, Vat on C.O.T, Fees etc they incur cost of securing that money in safe places, be it under their mattresses, in safe houses, fireproof safes etc. These are similar to cost that those who deposit money in the banks will incur such as C.O.T. Those who deposit in banks and those who do not also are exposed to the cost of loosing the money either through the bank’s demise or through robbery respectively.

2. Transportation Cost – This is a cost every business in Nigeria must also incur. Be it road, air or sea goods and services are moved from one location to the other and will always involve some form of payment. There are no exceptions here.

3. Phone Bills – This got the procareer household arguing as some didn’t believe all businesses incur phone bills as a direct cost. Since the advent of GSM Phone Bills have become a sin qua non for almost every facet of life. You do not even need to own a phone to make a call, a road side phone booth is around the corner. The Plantain seller for example will surely make a call to the truck driver confirming time and place of loading. The cart pusher needs to be contacted in one form or the other if he is to supply water, carry goods or even pick up dirt. Phone Bills are an everyday cost all Nigerian Business incur, which is in no small measure the reason why GSM company’s such as MTN will continue to grow profits at astronomical rates.

4. Levies – Motor Park Touts, Unions, Agencies of government, local authorities, community representatives, palace reps etc all have one thing in common – Levies. Business in Nigeria of every size and function pay all sorts of levies to various regulatory authority under which their businesses operate. Bus conductors for example pay levies to motor park touts and unions just as importers of goods pay to touts (when transporting the goods from one location to the order) and to port authorities. Levies are an everyday transaction cost which every business must grapple with. You cannot avoid it even if your business warrants that you stay indoors and transact from your computer. Even in that circumstance you do pay some form of professional membership fees.

5. Power – Yes power, like you already know is a cost every one must incur, let alone business. Some argued that is not the case sighting the night market traders as an example who they claim do not necessarily rely on PHCN on even generators. However, even candle cost is a power cost which one cannot ignore. A market woman who trades at night typically use oil or kerosene lamps which involves some form of purchase cost. Power is central to the functioning and survival of every business in Nigeria. Whether provided via the local authorities, generators, candles and lamps every business must incur its associated cost to remain competitive. The “Okada” rider who typically has no office requires power from torch lights or even their bikes to ride through the dark streets of Lagos and various parts of Nigeria which are lacking in street lights. Like the others power is sacrosanct.

A woman hawking water on the road.

6. Rent – To my astonishment a cart pusher once sighted increase in “rent” as one of the reason why he had increased his cost of supplying water. He indicated that under the bridge where his cart and that of his competitors are parked for the night, an amount of token is paid to ensure his space is not taken from him amidst the influx of new and intending cart pushers who are looking for greener pastures. Rent is paid by every business in Nigeria as there are no free (pro bono) space or accommodation no matter your kind of business. You are either paying to the State or a Private Authority or to both depending on where you find your self. Space do not come free in Nigeria

7. Stationery – Gift, the 12 years old boy who hawks oranges still does not know how to write or spell despite attending evening schools in his highly densely populated suburb in mainland Lagos.  Before he leaves for his daily routine, his mother counts the oranges he is set to carry on his head and scribbles the results down is a piece of paper that was originally bought for his schooling. Just like the big multinationals, the street trader with a shop just over his head relies on some form of stationery to record their daily business transactions. The costs of course vary from the operational size of one business to the other nevertheless it is a cost every business must incur.

8. Health Cost – Health is wealth as the saying goes which by all standards relates the economic survival of every business to the well being of its sponsors or owners or employees. Business men and women spend billions of Naira annually on health care cost whether through orthodox medicine or alternative ones such as herbal and traditional medicine. Make no mistake about it, just as the Managing Director of one top NSE company relies on one aspirin recommended from a top private hospital (home or abroad) a street hawker also relies on some form of self or outside recommendation from a herbalist or traditional doctor somewhere.  Both incidentally require money to be spent.

9. PR Cost – Every business incurs this at some level of its operations whether they wish to admit it or not. From bribing the local transport authority just to get a transport license to obtaining town planning approvals for a development project, every business must incur this cost one time or the other. It’s one of the seven wonders of doing business in Nigeria. By the way, this is one cost that is not officially recognized by regulatory authorities despite its ubiquitous nature. But we do know it exists and so must include it here.

10. Corruption Cost – Such is the nature of this cost to the economic growth of the country the government had to set up EFCC, ICPC in addition to the police and other anti fraud agencies already in place to fight it. Corruption affects every aspect of business and it knows no relation. Your blood brother whom you’ve entrusted with your commercial housing project is out to make as much money from you by the side as he is making officially. Your employee is also out to game you no matter how well remunerated he his, all he needs is a small outlet of opportunity, a small incentive to steal from you. This is one cost every business must incur, even the  “agege bread” seller.

Hey, wait!

Before you go, let us notify you on our next Post