LAGOS: NOT BEST NIGERIAN CITY FOR BUSINESS

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Actually, the best cities for business in Nigeria are Enugu, Kaduna, Calabar, Abeokuta and Uyo...



Actually, the best cities for business in Nigeria are Enugu, Kaduna, Calabar, Abeokuta and Uyo, and not the likes of Lagos, Abuja, Port Harcourt, Ibadan, Kano and Aba. Despite the economic and socio-political setbacks that constantly plague Nigeria, the economy continues to post a decent growth annually. This is largely due to economic activities in the private sector. These activities are largely concentrated in Lagos, Kano, Abuja, Port Harcourt, Aba, Ibadan and Onitsha, among a few other cities. As a result, whenever the question as to which cities are the best locations for business in Nigeria comes up, the same suspects are listed. According to Nigerian Bulletin (http://www.nigerianbulletin.com/threads/top-5-cities-to-do-business-in-nigeria.110674/), the top 5 Nigerian cities for business include; LAGOS, ABUJA, KANO, PORT HARCOURT, and IBADAN. Similarly, Homestrings (https://www.homestrings.com/news-and-analysis/2014/june/02/top-5-key-cities-in-nigeria-for-investment/#.Vp0qYfkrLIU) picked ABUJA, KANO, PORT HARCOURT, ABA, and IBADAN.

It is quite interesting that Homestrings left out the economic hub of the nation, Lagos. Obinna Abajue of Stanbic IBTC who collated the list for Homestrings’, HOW I MADE IT IN AFRICA argued that despite the allure of Lagos given its population (market) and improved infrastructure, new business are more likely to be squeezed out of existence by stiff competition in Lagos than elsewhere in the country, hence, the reason he did not include Lagos on his list. On the other hand, Nigerian Bulletin appeared to pick Lagos, Abuja, Kano, Port Harcourt and Ibadan purely on the basis of population. Despite Abajue’s argument, population did play a crucial role in both selections. This is reflected by a similar ranking by the website, nigeriantrend.com that listed Lagos, Abuja, Port Harcourt and Kano as the best destinations for investment in Nigeria, while mentioning Aba and Ibadan as other notable locations (http://nigeriantrend.com.ng/top-4-cities-to-do-business-in-nigeria-2015/).

Of course POPULATION will always be a key factor in selecting an ideal destination for business; however, using population as nearly the singular metric for analysis leaves out other key factors thereby, swaying the odds in favor of the big cities. Moreover, this notion blinds a prospective investor to other opportunities that exist in other parts of Nigeria and in so doing, limits the spread of economic growth to the big cities in the country. For instance, in determining top cities or states for business, Forbes.com takes factors such as BUSINESS COSTS, LABOR SUPPLY (SKILLED/EDUCATED PEOPLE), REGULATORY ENVIRONMENT, ECONOMIC CLIMATE, GROWTH PROPETCS AND QUALITY OF LIFE into account. This is the reason the likes of Denver, Raleigh, Portland, Seattle Atlanta, Salt Lake City and a host of others are ranked the best places for business in the US over New York city, Los Angeles, Chicago, Houston, San Francisco and co.

Looking at this from the Nigerian perspective, Smaller yet well-placed cities like Enugu, Calabar, Uyo, Kaduna and Abeokuta are havens for business that are consistently overlooked. The Calabar and Port Harcourt sea ports are within a decent distance from Calabar, Uyo and Enugu to aid exportation of finished products or importation of raw materials depending on the nature of the business. Abeokuta on the other hand, stands to benefit from the Lagos sea port. Kaduna is not within an earshot of a sea port, and maybe plagued by instabilities. Nonetheless, Kaduna as well as Enugu, Uyo, Calabar and Abeokuta has a decent supply of educated young people with about 2 Universities in each of the respective states. Further, the cost of living is relatively lower in Kaduna, which means that you are likely to attract brilliant, young people wo are looking to escape the chaos and high cost of living in the likes of Lagos and Abuja. In the same vein, establishing a business in Lagos, Abuja, Aba, Ibadan, Port Harcourt and Kano can be extremely expensive for reasons bordering on high cost of property, whether you are leasing, renting or buying. Also, power supply in these bigger cities, perhaps with the exception of Abuja is considerably more erratic, and this translates to a higher operating cost in the form of fuel for running generators.

In smaller less populated cities, erratic power supply is not as pronounced as in their bigger counterparts with staggering power demands due to population sizes that are nearly spilling over. Taxes (regulatory environment) in a place like Lagos, Abuja, Kano and Port Harcourt are significantly higher relative to the above-listed smaller cities. This can have a decent impact on profit margins especially at the crucial early stages. One can argue that with the population sizes in these big cities, sales are likely to make up for the pitfalls highlighted above. Indeed, that makes sense; however, China has become the ‘manufacturing plant’ for the entire world. All kinds of goods are cheaply manufactured in China and then shipped to virtually every nook and cranny of the planet. The same principle can be applied in Nigeria. Businesses, especially those involved in manufacturing can set up shop in smaller cities and then move their products around the country having manufactured them cheaply.

Yes, the road network in Nigeria may hamper this strategy, but importers of goods into the country consistently ship most of their wares into Lagos and move them around the country afterwards, so this strategy is already in practice. The likes of Enugu, Calabar, Abeokuta, Kaduna and Uyo are not perfect by any means, nevertheless, the respective states have managed to improve their road networks to a certain degree over the last 7 – 10 years; hence, they offer easier access to their neighboring states for the transport of goods. Cinemas, amusement parks, ultra-modern shopping malls have sprung up in these cities in recent years. As a result, these cities are no longer the drab and rusty locations they used to be; a major selling point for attracting outstanding talents.

Clearly, the art of blindly selecting the big cities in Nigeria as the best destinations for business is lopsided and fails to take the big picture into account. By critically analyzing less striking, yet ‘fundamentally relevant’ factors that significantly impact businesses, it does appear that the strengths and opportunities in smaller cities (relative to the likes of Lagos, Kano and Port Harcourt) are being grossly overlooked. It has to be stated though that this will be heavily influenced by the nature of business involved. Oil-producing and mining firms for instance will always be influenced by availability of resources (oil/solid minerals) while finance companies will likely always gravitate to the more established big cities where most of their clients are based. This trend will possibly shift over time though, if businesses begin to tap into the potential of smaller cities like ENUGU, ABEOKUTA, UYO, CALABAR and KADUNA.


Written by:
Victor Chinoo

Poster source:www.pinterest.com

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Key words: Nigeria, Business, Investment, Calabar, Enugu, Kaduna, Uyo, Lagos, Abuja, Kano, Manufacturing, Economy, Taxes, Transport
 

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