Trade News

Tips for doing business in Nigeria

January 26, 2005

Nigeria holds a wealth of opportunity for the experienced exporter. With a population estimated at some 130 million and as OPEC's fifth-largest oil producer, Nigeria has the potential to be a huge market for Canadian companies.

The most visible sector, and the one that most people think of, is the oil and gas sector. Nigeria currently produces about 2.9 million barrels per day, but is looking to increase this to 4 million both through offshore exploration and through onshore development of existing fields.

Nigeria is also trying to develop its natural gas reserves, currently estimated at 159 trillion cubic feet, making it one of the top ten endowments in the world. Canadian companies currently export a large amount of oil-related equipment and services and exporting opportunities in that sector are expected to increase in the future.

Telecommunications equipment, however, is actually Canada's largest value-added export to Nigeria, and with good reason. The country is going through a boom in wireless telephony. In 1999, there were only 35,000 cell phone lines; that has increased to over 4 million lines today, and the industry expects this to reach 15 to 20 million over the next five years. Since the introduction of pre-paid phone cards, a huge portion of the population can access telecommunications services. Nigeria is one of the fastest growing markets in the world and service providers have not been able to keep up with demand. They are buying billions of dollars worth of equipment and Canadian companies stand to benefit.

On the political side, ever since the return of democracy to Nigeria in 1999, Canada and Nigeria have had a strong and warm relationship. Nigerian companies are always looking to see more participation by Canadian companies in their economy, and this goodwill can be a definite advantage.

Tips for success

Unfortunately, Nigeria suffers from a poor reputation beyond its borders. A relatively small group of people has managed--mostly through fraudulent e-mail schemes of varying degrees of sophistication--to eclipse the large legitimate business community that exists in Nigeria. The challenge for Canadian companies is to determine which business leads are legitimate, and which leads are not. Here are some tips for success in the Nigerian market:

• Make sure you do your due diligence. Get letters of incorporation, bank statements, references and verify their authenticity. Nigerian companies recognize the reputation their country has, and they generally will go out of their way to prove their bona fides.
• Ask your contact to register with the Commercial Section of the Canadian Deputy High Commission in Lagos. Registration involves a credit check performed by a third party, the cost of which is borne by the applicant. The information is then forwarded to you by the Deputy High Commission to help you in your due diligence. Insistence on registering is usually enough to discourage most scam perpetrators from pursuing you or your company.
• If a deal seems too good to be true, it probably is.
• Only accept payment by irrevocable letter of credit drawn on a financial institution that you trust. Never accept credit cards or cheques.
• Do not send any money or product samples and do not disclose any personal or banking information. Refrain from sending letters of invitation to visit Canada until a business relationship has been established.

Although Nigeria can seem daunting--it is a high-risk market--it is also a high-return market that pays well above average dividends to those who do their research and use common sense.

After all, many Canadian firms have been very successful in Nigeria.

For more information, contact the Commercial Section of the Deputy High Commission in Lagos, e-mail: lagos-td@international.gc.ca.