Evaluating Nigerian industry

Industries in Nigeria and the emerging markets generally, differs quite a lot from the developed world – the fact that there is no infrastructure and massive infrastructure gaps is the most basic sample of this.

What’s also different is the fact that industries that are pushed by the west – usually consumer goods driven, such as eCommerce and FMCG – see a lot of over-capacity built in them.

This is done to prepare for the “mythical African consumer” when the massive demand for these services comes, but also to build high entry barriers into the sectors for other foreigners looking to invest in the continent.

Evaluating industries

Bertrams Lukstins┬ácovers this quite well in the “Investing in Nigeria” report, this is the main framework:

  1. View the whole value chain for it’s efficiency – this is to identify infrastructure gaps.
  2. Evaluate the inefficiencies – are they really unfavorable for the industry?
  3. Opportunities – do the gaps provide opportunities to build entry barriers? To evolve the industry and build new solutions?
  4. The different elements in the chain – are they vulnerable to other elements of the overall Nigerian investment landscape?

evaluating-nigerian-industriesAnother important thing to consider when evaluating Nigerian industries is tariffs.

 

Many industries, such as the domestic rice industry, are based purely on the import tariffs that the federal government of Nigeria have put in place. The question to ask is what drivers are driving the industry growth.

A good industry, such as the cassava industry, will grow naturally due to the domestic landscape and the domestic demand – not the governments imposed tariffs.