The macroeconomic outlook in Nigeria is a dire one, with the nation headed for a recession following two sessions of consecutive negative growth, double digit inflation, foreign exchange restrictions and the delay in the implementation of the 2016 budget. In a nation where banks are not prone to lending, startups and experienced entrepreneurs remain pessimistic when it comes to funding. In spite of the funding gap, Nigeria is the land of the side-gig. It is not uncommon to hear of professionals setting up businesses on the side, and many eventually give up their day jobs to chase their dreams.
While it is easy to identify the norms that come with running a business in Nigeria, such as the difficulties in accessing funding, the costs associated with running generators and inverters, and the lack of adequate skill set in staff, other peculiarities have risen. For Nigerian entrepreneurs operating in 2016, access to foreign exchange needed to run their businesses has been a major concern.
Following the Central Bank of Nigeria’s policy which restricted access to forex for the importation of a list of 41 items, many businesses that rely on the importation of products they sell, have been left with no option but the black market in accessing forex. While black market operators have benefited from the increase in demand for dollars, consumers have been left cash strapped.
In a bid to regularise the market and put a stop to round-tripping, the Central Bank has given in to pressure from the international community by igniting a flexible foreign exchange market. However, concerns have risen with experts claiming that the flexible forex market is not floating as expected. This is because of the lack of volatility in the value of the naira against the dollar at the interbank market, in the face of external pressures such as a Brexit vote.
Furthermore, many experts have criticized the Central Bank’s stern hand on importers of the 41 restricted items, claiming that a free and flexible market should in fact be free of restrictions. With the naira trading at N363 per dollar at the black market and at N283 per dollar at the interbank market, the gap continues to widen. This adds extra pressure to entrepreneurs, especially those with businesses not favoured by the Central Bank’s policies.
The challenges of 2016 for businesses do not lie solely on foreign exchange restrictions. For restaurant owners, the increase in the cost of food products has put a strain on profits. With inflation currently at 15.6%, and projected to exceed 16%, food entrepreneurs are feeling the pinch. To stay in profit, businesses are transferring the hike in the price of food products to their consumers, further increasing the cost of living.
The Nigerian event industry is a lucrative one and food is a major part of the festivities that are part and parcel of life in the major cities. Jollof rice is a popular dish in Nigeria, made with rice and tomatoes or tomato paste. It is a staple dish served in the majority of restaurants in the nation, and tomatoes are the key ingredient in the majority of delicacies produced in restaurants.
Tomatoes are big in Nigeria, with the country being the largest producer of the fruit in sub-Saharan Africa. However, food entrepreneurs and restaurants in 2016, have been faced with a scarcity of tomatoes leading to a 400 percent increase in the price of tomatoes. This scarcity is caused by Tuta Absoluta, a pest attacking the tomato fruit in farms in the north. Luckily, there is some hope for entrepreneurs as farmers may have found a substitute to tomatoes in a relatively unknown vegetable known as the snake tomato.
While challenges are part and parcel of life for Nigerian entrepreneurs, they continue to prove in 2016 and beyond, that the African spirit is a resilient one.