Six Routes

The "side business" phenomenon in Nigeria

Nkem Ifejika Feb 19, 2015
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Six Routes

The "side business" phenomenon in Nigeria

Nkem Ifejika Feb 19, 2015
HTML EMBED:
COPY

“You’re supposed to hold something.”

“Hold what?” I reply naively.

“A sample, you’re supposed to hold a sample of what you’re selling.”

Amaka was wondering what a reporter holding a microphone was doing hanging around Onitsha Main Market, neither buying nor selling. She looked at me with pity, as if to say, “if you don’t even know about samples, you have a lot learn.”  I had been at the market for less than five minutes, and someone was already trying to get the measure of what my business was about.

There’s plenty to learn about Nigeria from Onitsha in Anambra State, which sits just on the banks of the River Niger in the southeast. Something like three million people flock here everyday, and some call it the biggest market in the world. They come from across the region, to buy everything from high-end mobile phones to low-tech plastic containers.

Everything is for sale, every price to be haggled, and everyone is involved. Take the market and replicate its buying and selling across millions of homes and offices across Nigeria.

Every Nigerian is familiar with the concept of the side hustle — a business on the side. This is a country where everyone has a start up in their front room, including my mother. I’ll never forget coming home from school to find the entire living and dining area stacked floor to ceiling with cartons of sunflower oil for sale. And it was my grandmother who’d taught my mum that if you were lucky enough to have a salaried job, that was just pocket money. The real money came from your five to nine.

On the surface, Nigeria may not seem like a country that can teach the world much about how to do business. Elections have been postponed because of the insurgency raging in the northeast. Corruption is still a huge problem. Government revenues depend on the oil and gas industry, which benefits the few.

But Onitsha shows that the Nigerian economy is finding other lubricants.

Innocent Chukwuma is a very successful businessman. He owns five different manufacturing companies around the southeast, and is very optimistic about Nigeria’s future. And looking out over his sprawling complex just down the road in Enugu, it’s easy to see why. The government gave him land to expand his business; I reckon he’s the largest private-sector employer in Enugu state. Some 4,300 people work at the plastics plant we visited.

“In Africa today anyone who can invest in manufacturing in a short time you’ll make money as you want,” says Innocent, who’s soft-spoken and understated.

 In the time that we talk, he signs more than twenty checks and bank-transfer orders worth hundreds of thousands of dollars.

Innocent started small. He was a spare-parts trader in his native Nnewi. He turned his brother’s spare-parts side business into his own import venture. As the prices of motorcycles coming in from Japan increased in the 1980s, he noticed something about the way they were shipped. They were coming in by barge in containers. Being a spare-parts trader, he recognized that a motorcycle is made up of individual parts. And so, he thought, if he imported motorcycles in pieces, they would take up a lot less space in the shipping container. And he was right. At the time importers were shipping about 40 pre-assembled motorcycles in a single shipping container. But as individual parts, Innocent could fit more than 200 motorcycles in each container. Innocent now had a significant advantage over his competitors; he could sell his motorcycles for much less.

Another advantage he had over his competitors was the cost of labor in Nigeria. A factory worker in Nigeria would earn around $500 a month. He explains, “when I brought the first one I called the local people, and gave them small training, they assembled it perfectly and the price was cheaper.”

Much cheaper in fact, “When they are selling for about 150,000 [naira] for one motorcycle I sold my own for 80,000.”

Innocent‘s bikes were nearly half the price of his competitors. He sold three containers worth of motorcycles in about three months.

“So I went back and brought about 10 containers, and the 10 containers took me about one month to finish.”

By the time he had the process down he was buying 200 containers. But Innocent‘s advantage didn’t last forever, soon everyone was copying his strategy.

“Back then the price crashed to 60,000 but when I saw that the price had come down and then everybody was doing it. That’s why I build this plastic plant.”

Motorcycles were just the beginning for Innocent. He had another realization, that he could manufacture some of the motorcycle parts himself. Specifically the plastic parts.

Innocent now makes all kinds of products. His motorcycle business has expanded to cars and buses. His plastics plants now manufacture tables, chairs, water drums, plates, boxes for electricity meters, and much more. And he believes anyone can follow his lead in Africa, which he refers to as virgin territory for entrepreneurs.

Innocent‘s optimism is infectious. It’s easy to get swept up in the euphoria of success. But business in Nigeria is not easy.

Back in Onitsha market it’s also a microcosm of the obstacles entrepreneurs face every day. The day I was there the traders were protesting against a new levy. The trade association decided to charge for a video security system, which the traders said the state governor had given them for free. It’s the sort of surprise cost that wrecks a business plan.

But corruption is not even the biggest problem in Nigeria. Other countries have thrived despite corruption, and Nigeria shouldn’t be different.

The lights go out constantly, and nobody bats an eye or feigns surprise. Everyone just carries on. Nigeria may be Africa’s biggest oil exporter. But according to one estimate it generates only enough electricity to power a single toaster for every 44 people.

People make do with diesel generators. Which are costly. And that even applies to big factories. Innocent  showed me his electricity bill for the plastics plant, 40 million naira a month, “I spend 60 million on diesel every month.”

He also proudly showed off his collection of second-hand generators, which he said were built stronger in the past than now.

For Innocent,  the high cost of energy is a necessary part of doing business in Nigeria. But it puts a real brake on what entrepreneurs can achieve. A recent privatization of the national power company offers hope for the future. But for now it takes the shine off Nigeria as a place to do business.

The people I met are not put off by these obstacles. If you walk into some shops in Nigeria, there’s a sign that reads, “no credit today, come back tomorrow.” If you keep waiting for the perfect conditions in which to do business, you’ll never make it.

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