From cassava to private schools – nine business opportunities

Lagos, Nigeria

From processing cassava to private school chains aimed at the middle class, How we made it in Africa highlights nine business opportunities in Nigeria, the continent’s most populous country with over 200 million people.

1. Adding value to Nigeria’s cassava. Over the years, the supply of cassava derivatives or by-products in Nigeria has fallen short of demand. For instance, the demand for high-quality cassava flour for bread, biscuits and snacks is 500,000 metric tonnes per annum but supply is less than 15,000 metric tonnes. In addition, while demand for cassava starch stands in excess of 300,000 metric tonnes, supply remains below 10,000 metric tonnes, thus giving rise to a gap of over 290,000 metric tonnes. Read more: PwC explains how to harness the economic potential of cassava production in Nigeria

2. Food e-commerce in Lagos. While there are already food delivery services in Lagos, customers often complain about inefficiencies like late and unreliable deliveries, according to Niyi Kolade, founder of Lagos-based payments processing company Seerbit. “Although players like Jumia Food and Gokada’s GShop are already taking on the challenge, there is a massive opportunity to serve Lagos’ huge and growing population of young people, particularly the tech-savvy working class who seek efficient and affordable options for meals,” he says. Read more: Entrepreneur highlights potential for online food platforms

3. Import substitution of fish in Nigeria. An estimated $600 million in fish is imported into Nigeria every year. According to Danladi Verheijen, managing partner of private equity firm Verod Capital Management, there is an opportunity for the local production of fish products. Verod has invested in the Shaldag fish farm, which grows fish at over 40 times the density of other local fish farms by using modern technology in its operations. The company produces processed, smoked catfish under the Shaldag brand. Says Verheijen: “There are villages in Norway where the entire economy is based around growing a particular type of fish (stockfish) that is sold to Nigeria, and used in sauces and soups. Trawlers from Southeast Asia also fish in the waters outside Lagos and Accra, process the fish in their own countries and then sell the same fish back into Africa. Obviously, this is inefficient and creates an opportunity for African businesses.” Read more: Find out why Verheijen is bullish about import substitution in Nigeria

4. Packaged foods and snacks. Roughly 51% of Nigeria’s population is urban and with one of the highest urbanisation rates in the world, consumption patterns here are rapidly changing. “People now look for more convenience and seek out packaged foods, which is different from what they would eat in rural areas. There is a huge opportunity to invest in companies able to produce a packaged food product at the right price point, which is key because many consumers in the region are price sensitive,” says Mezuo Nwuneli, managing partner and co-founder of private equity firm Sahel Capital. “We invested in Polyfilm Packaging in 2019, which produces the packaging material that wraps food and consumer products, to capture value from the growth of companies within this sector. The company has exceeded its business plan in the two years since we invested.” Read more: Agribusiness trends and opportunities in Nigeria

5. Coffee shop franchise. How we made it in Africa recently asked Frank van Asperen, general manager for South African coffee chain Vida e Caffè’s international business, if he is considering expansion to Nigeria. “Absolutely, said Van Asperen, who previously worked for Heineken in Nigeria. “Although the economy is a bit under pressure since the 2016 oil crisis, it is still the largest country in Africa in terms of population with more than 200 million, mostly young, people. The youth is hungry for a western lifestyle experience, including coffee shops, with this market still in the early phase of development.”

“Many quick-service restaurants have tried to enter Nigeria but not many have succeeded. One of the major challenges is the operating expenses, driven by high rentals and pricey solutions to frequent electricity cuts. If we can find the right partner to manage these costs efficiently, we are definitely interested in placing the Vida e Caffè flag in the Nigerian market,” he added. Read more: Interview: South African coffee chain set to enter Côte d’Ivoire; sees potential in Nigeria

6. Co-living spaces for young professionals in Lagos and beyond. Co-living is a residential community living model that usually offers a private bedroom, with shared common areas. Typically, co-living referred to an arrangement where three or more non-related individuals would share a private home, but it has evolved to where large property developers are now creating apartment blocks featuring residential sharing with short-term or flexible leases. Some of the included perks could be stylishly furnished communal areas, top-of-the-range amenities, as well as services such as cleaning and security. Co-living spaces also make it easier to meet new people and make friends.

“We think there is a massive untapped opportunity for co-living in general on the continent, but even more specifically in Lagos,” says Gregoire Schwebig, founder of AfricaWorks – a company that provides co-working spaces across the continent. In Lagos, young people are spending a large portion of their disposable income on rentals. He explains that if this market is presented with quality and relatively affordable accommodation options with a workspace component – either in the apartment itself or in a separate area of the building – it would be a successful business venture. Read more: The co-living spaces opportunity in Nigeria

7. Private school chains. Nigeria has significant demand for private education, which creates a window for a chain of branded schools, according to Adetunji Adegbesan, CEO of Nigerian edtech company Gidi Mobile. “The huge need in Nigeria makes it ripe for the creation of school chains which benefit from economies of scale, including centralised services and management systems software. It is also faster to replicate a model than build it from scratch.” This, says Adegbesan, is a feature of India’s education system where one chain may have up to 40 schools in its network. He explains the potential is for tier-B and -C schools as the tier-A segment (aimed at wealthy families) is saturated. Read more: Education in Nigeria: the next big thing?

8. Maintenance support for agricultural machinery in Nigeria. The maintenance and servicing of agricultural equipment (particularly tractors) remain a concern for Nigerian farmers. According to Mira Mehta, founder and CEO of Tomato Jos – a Nigerian operation farming tomatoes for processing into tomato paste – one of their biggest headaches is the maintenance of equipment. Because of a shortage of parts, tractors are sometimes out of commission for weeks. “If you have a business that can provide an efficient service in fixing tractors or industrial agricultural implements, I think it could be a huge success,” says Mehta. Read more: Learn more about Tomato Jos’ journey of producing tomato paste in Nigeria

9. Value retailers. In an earlier interview with How we made it in Africa, property developer Michael O’Malley said there is an opportunity for value retailers to enter the Nigerian market, which will drive the development of shopping centres. “The retailer base in Nigeria at the moment is not broad enough for even the smaller centres to gain a lot of traction. The types of retailers that are currently present in Nigeria are not offering a discount product to the public. We need value discount retailers to… look at the market opportunity in Nigeria.” Read more: Potential for more value retailers in Nigeria

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