Nigerian small businesses battle high overhead costs, tough environment


Nigerian companies are struggling to stay afloat as operating costs continue to rise.

Africa’s most populous country has been struggling with double-digit annual inflation since 2016, with the consumer price index hitting 20.5 percent in August — a 17-year high, according to the National Bureau of Statistics (NBS).

Countries around the world are facing rising energy and food costs, largely driven by the Russia-Ukraine war. But in addition, worsening insecurity in Nigeria and climate change have combined to reduce food production with a consequent increase in commodity prices.

Fuel prices have risen by over 150 percent from January to date, raising costs for businesses in Nigeria, where businesses depend on diesel-powered generators amid an unstable power grid.

Transportation costs have also doubled, adding to the cost for businesses. BusinessDay spoke to a number of small business owners across the country. Here are their answers:

Yekinni Ayomidamope

Ayomidamope is the Founder of Aviyacollective – a ready-to-wear (RTW) women’s clothing company operating in Lagos State.

How do you deal with the rising input costs?

Inflation is every entrepreneur’s nightmare. Production costs have tripled and this inevitably impacts negatively on a business owner who may lose a loyal customer due to an increase in product prices. So I make sure to find affordable materials but of quality so that when I factor in my profit the prices aren’t outrageously high. So far it’s been helpful.

Are you making more money than you used to?

Not that much money in the form of millions of naira because I’m young in the business. I know I got off to a good start.

Do customers buy your products?

Family, friends and people close to me are the ones who patronize my business.

How does the deteriorating power supply affect your production costs?

To be honest, the electricity supply in my area was very good. I’m surprised but it doesn’t affect my business except when I have to iron. Apart from that everything is good.

What strategy have you followed as a company to weather the COVID-19 pandemic?

I hadn’t started my business at that point. I hadn’t conceived the idea at that point.

Is the Nigerian business environment improving?

Yes, there is a lot of healthy competition. Knowing that there are people willing to put in the hard work to get the results you want. That alone will motivate you to do better and get better.

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Agoro Daniel

Daniel is the founder of The Eleventh

How do you deal with the rising purchase prices?

Our brand has been negatively impacted by the increase in input costs in a number of ways, including higher production costs for materials. However, to remain competitive, brands must either expand their production levels or maintain their current levels. Although the cost of doing business is high, our brand makes additional investments and sources products at extremely competitive prices to provide our customers with the quality they deserve.

Are you making more money than you used to?

Of course we are. In fact, they keep coming back to us for more products because of the distinctive designs and quality materials we offer them. We take the time and care necessary to ensure our customers receive the quality they deserve. So there is no doubt that more money will be made.

Do customers buy your products?

Secure. Let me tell you a little secret: as a brand, we make our clothes with love. We love the joy that comes from customers when they buy clothes from us. This happiness is the result of the love we put into making our clothes. Customers buy our products. We put so much love into our unique designs and the clothes we produce, making sure customers are amazed by what they buy to get more.

How does the deteriorating power supply affect your production costs?

The power supply has a significant impact on our production costs. With the increase in oil prices and the deteriorating power supply, production has declined significantly. We were able to produce more when electricity was a little more reliable, but now that the cost of petroleum has gone up, we’re not producing as much as we used to. As a company, we can only hope that the power supply will finally stabilize enough for production to be ramped up again.

What strategy have you followed as a company to weather the COVID-19 pandemic?

The company was founded in 2020 and what we did to survive the pandemic was market and sell online. As is well known, social media has a significant impact on business, and the pandemic has helped us realize just how significant that impact is. We then used that influence to our advantage by creating a website and allowing our customers to shop there. While it wasn’t always easy, you can now buy clothes online through Shop Eleventh.

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Is the Nigerian business environment improving?

In my opinion, the business climate in Nigeria has improved significantly. Many businesses now know methods they can use to help other businesses and get them on websites to sell on. As I mentioned earlier, social media has a significant impact on businesses. Just as technology has benefited businesses, it has also enhanced businesses in the Nigerian market.

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Adegite Dideoluwakusidede

Dideoluwakusidede is the founder of Beauty Vine.

Tell us a little about your company?

The Beauty Vine is a beauty brand focused on enhancing women’s beauty and self-care by offering services ranging from makeup and semi-permanent makeup to nail enhancement, manicures and pedicures. The Beauty Vine is currently a one-man operation with plans to expand into a one-stop beauty spot, allowing their customers (which will include men) to receive a full pampering service without having to book multiple appointments, to provide a healthy experience.

How do you deal with the rising purchase prices?

To be honest I’m barely getting by and business is suffering, especially as we operate in a nation where beauty and self-care are not priorities for many. It’s seen as a want, not a need, so it’s been really difficult to attract and keep customers. However, it’s not all bad; I have clients who are willing to spend huge sums of money on their self-care and well-being. But when I hear customers like this, I realize that the cost of equipment, tooling, and other overheads like transportation are a big part of business profits. All in all, I love what I do and I will always be an advocate for beauty and self-care no matter what the economy throws my way.

Are you making more money than you used to?

No I’m not. As a service company, I make up to 80 percent profit, but now I’m barely making 40 percent. There’s almost no comparison, it’s not fair, but life itself isn’t. I know they say it’s easy to make money in Nigeria but nowadays it doesn’t feel that way. Some days I want to turn off the light. I spend my days thinking about a million ways I could have done better, and I always end up going back even though I don’t make that much money.

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Do customers buy your products?

Yes they are. When I started my makeup artist business, everyone wanted their face “beaten up” by a professional makeup artist for any event for photo shoots or just at home. I made a lot of money in my first two years as a makeup artist. By third year, there were more makeup artists, and before I knew it, everyone was a makeup artist or even an influencer; So I went back to the drawing board to learn more and acquire new skills. Since then, I feel like I’ve developed a formula to keep customers interested. So my answer is yes, customers (the real customers) are still buying my service.

How does the deteriorating power supply affect your production costs?

Well, for the kind of service I offer, I don’t need a lot of power, so I’m not directly affected. However, my customers who need to spend money on alternative power see my business as a second option and would rather spend money on power than on beauty enhancements.

What strategy have you followed as a company to weather the COVID-19 pandemic?

Honestly, the COVID-19 pandemic took many of us by surprise, and for the first month I had no idea what I was going to do. But as an entrepreneur who’s always thinking, I was able to set up online courses for people who wanted to learn makeup as a new skill. I started a YouTube channel and posted educational beauty content on my social media platforms to stay relevant in the beauty space and direct clients to my paid beauty and makeup classes. This gave me a lot of free time and I was able to brush up on the skills I already had and learn new ones.

Is the Nigerian business environment improving?

Yes it is. More and more people trust online-based businesses that make it easier for them to reach more customers. There is an increase in grants from both government and individuals to businesses, giving more businesses a chance to grow and eventually helping others by creating employment opportunities and contributing to the economy.

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