Background
Our client, a leading global technology company, sought to expand its operations into Sub-Saharan Africa, starting with Nigeria—Africa’s largest economy and most populous country. The client saw immense opportunities in Nigeria’s growing demand for digital financial services but recognized the challenges of entering a high-risk frontier market.
Key Challenges
Following a market entry assessment conducted by Balogun Harold, the client had a number of concerns around:
(a) Possible Regulatory Complexity: The client was concerned about navigating, what it considered as the regulatory complexity in Nigeria’s financial services sector, given that the financial services sector in this jurisdiction was overseen by multiple regulators, unlike the more streamlined twin-peaks model they were accustomed to in their home country.
(b) Possible Corruption and Bureaucratic Inefficiencies: The client faced concerns about corruption and slow bureaucratic processes that could delay operations and increase costs.
(c) Currency Volatility and Capital Repatriation Risks: The client faced concerns about currency volatility and its ability to repatriate capital, given Nigeria’s history of currency devaluation and restrictions on foreign currency transfers.
(d) Security and Political Instability: The client had concerns about rising insecurity, including cyber threats and regional unrest, threatened the client’s ability to operate smoothly.
(e) Cultural and Market Adaptation: Noting that the Nigerian market is not homogenous, the client was keen to better understand Nigeria’s consumer behaviour, diverse cultures, and localised business practices as it considered this critical to creating a successful market-entry strategy.
Our Approach
We partnered with the client to design a tailored market entry and expansion strategy. The strategy included:
- Regulatory Risk Management: We conducted an in-depth regulatory landscape assessment to identify licensing requirements and potential compliance risks.Engaged proactively with industry regulators to secure licenses and approvals. We also advised on structuring the client’s operations to comply with local laws, including the Nigerian Data Protection Act (“NDPA”) and anti-money laundering (“AML”) requirements.
- Mitigating Bureaucratic Risks: We implemented a robust government engagement strategy to fast-track approvals and avoid unnecessary delays. We conducted vendor diligence to identify trustworthy local partners and agents to navigate bureaucratic hurdles ethically and efficiently.
- Currency and Capital Risk Mitigation: We structured the client’s financial operations to minimize exposure to currency volatility, including hedging mechanisms and dual-currency accounts. We provided legal guidance on compliance with foreign exchange (FX) regulations, ensuring seamless profit repatriation.
- Security and Operational Risk Management: We advised on a cybersecurity compliance framework to mitigate risks of data breaches, which are a growing concern in Nigeria’s fintech sector. We also collaborated with verified risk management and security experts to create contingency plans for regional unrest or political disruptions.
- Cultural and Market Localization: Based on a market feasibility study conducted by a vendor to identify regional differences in consumer preferences, we helped the client structure a joint venture with a reputable Nigerian partner to ensure local insights and market alignment.
Key Takeaways
Nigeria is undeniably a high-risk frontier market, but it is also a land of unparalleled opportunities. Successfully navigating this environment requires a combination of local knowledge, regulatory expertise, and strategic foresight.
