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Why Brands Struggle and Depart Nigeria

Why Brands Struggle and Depart Nigeria

The companies with the logos above have one thing in common: they are largely retailers which left southern Africa for a voyage in Nigeria, and have since returned or about returning. Mr. Price left in June. Woolworths had departed in 2013, and Shoprite is packing. Besides them are other pockets of aspirational journey-makers, foreign and indigenous, which have also faded. Yes, more than 80% of NEW companies collapse within five years of formation in Nigeria.

Nigeria has the largest startup ecosystem in Africa coming ahead of Kenya, South Africa & Rwanda. There are plenty of positives however the reality remains that 80% of these new startups and businesses fail within the initial three years of starting

When we push for reforms, people make it seem like Nigeria has time. Our Vice President, Prof Yemi Osinbajo, is working on his excellent engagement with the startup community. But he needs to show more boldness and tackle problems. His recent statement where he is complaining how big people are influencing the appointments of judges is not leadership. He was essentially saying: see, they pressure us, and we do not appoint the best judges because we are pressured. We need to hear: in this government, all your pressures will not reach us; we will appoint the best judges for the nation. Until we can show that leadership, Nigeria will continue to fade.

So, as we see the exodus and death of companies, I remind everyone that Nigeria has about 30 million people who earn income and can pay for anything. Any model built outside that 30 million will disappoint. I have explained how I arrived at this 30 million number here. With the pandemic affecting that 30 million number, which carries the other 170 million citizens, you will then understand the challenge we have in the near future.

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For foreign brands, they come with the model that the market is huge. But when they come, they feel what we have been feeling: Nigerian market is a latent opportunity which is yet to be unlocked. The purchasing power of the citizens remains abysmal and as the years go, Nigerians are getting poorer, as the population rate is growing faster than the economic growth rate. The implication is this: mass poverty is accelerating, and any “luxury product” will struggle. Yes, your superior value proposition has priced many out of range.

In simple English, the number of people in Nigeria is growing faster than the money (goods and services) Nigeria is making; so Nigerians would keep getting poorer until at least 2022. For economic well-being to improve, you need economic growth to be more than population growth. That way, everyone has a little more to share every passing year. When the opposite happens, everyone has a bit less year after year. It’s like you are a bachelor earning say N100,000 monthly and living life. Then let’s say 5 years later, your salary has doubled to N200,000. Are you actually better off? Possibly. But what if during that period, you get married, wifey becomes a career mum to two kids and your hungry brother comes to stay with you? Your per capita income goes from N100k monthly (N100,000 divided by 1 person) to N40k monthly (N200,000 divided by 5 people). In this case, your family population growth (500%) has far exceeded your economic growth (100%) and you’re almost in crisis. If you think it sounds like a terrible situation to be in, you are absolutely right!

When you hear that Bukka food is better than campus canteen, give the guy time to discover a rich uncle. Then, you will understand that winning is about MVQ (Minimum Viable Quality).

The fact is this: any product quality that does not correlate with cost (or value derivable) makes no sense. I have designed accelerometers (motion inertial sensors) where my employer gave me diverging product specification targets: one version was for $0.60, another for $260. The one for $0.60 was made for toys while the $260 was engineered for use in pacemakers (heart monitoring systems). In the cheap one, it was a very crappy product that was built to last for weeks. But in the expensive one, knowing a human life depends on it, it was designed never to fail with many redundancies and checks.

Without the cost context you can think that the cheap one was a poor job. It is indeed not a great quality product but that was by design. That is what the market for toys wants because the kids rarely use them for days before they are discarded. It is a mass market product which has to be affordable to make sense. That does not mean that you cannot make very expensive toys only few can afford. But what is the purpose? Put a $260 XL in a toy which would be dumped within days?

The deal is this: the construct of quality has no meaning until the price of the product is put into considerations. I always ask entrepreneurs to build for the Minimum Viable Quality (MVQ) bounded by the product target price which market will respond. You can build rockets to fly around the world: that is an engineering possibility. But does that make a business sense if no one can afford it? Ask the makers of Concorde for answers.

The Precious 30 Million Nigerians


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6 THOUGHTS ON Why Brands Struggle and Depart Nigeria

  1. Well, in Nigeria, people see what they want to see, only that reality is what it is; it never panders to prejudices or wishes.

    If you question why foreign brands are closing shop, some will tell you it’s because of ‘competition’ from their local counterparts. On the surface, it sounds like a credible answer, but if you understand business, you will know that there’s nothing like competition from any local company here. We do not have supreme performers here, so no one is competing in the real sense of it; what is killing businesses is located elsewhere.

    Like I said some time ago, Nigerians aren’t great when it comes to institutional capability, but very brilliant at individual levels. It is no wonder that those with intimidating academic credentials, who have schooled in virtually all the best schools in the world, but cannot function at institutional level in Nigeria. There’s difference between showing brilliance in a well run system and being tasked with building a functional system; we mistake the former for the latter here.

    Leadership is not building roads, improving power supply, or modernising airports; unfortunately this is what an average Nigerian understands as political leadership.

    Failure is screaming everywhere!

  2. This is something that should actually be echoed more often. Entrepreneurs have a exaggerated view of their products, turning a blind eye to the ability to the purchasing power of the market. Estimating revenues with 170 million people will break your heart.

  3. Bravo, ND.
    The brilliance and accuracy of this article is only masked by the absolute certainty that NOBODY in the country’s leadership will take it serious. The tragedy of being an intelligent Nigerian.

  4. I met you at the NSE annual lecture on Wednesday and I was blown away by your intelligence and insight. Thanks for sharing your wealth of knowledge.

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