Nigerian entrepreneurs have been advised to consider viable business ideas that will require little to zero capital to start. The advice was given by Professor Yomi Fawehinmi, a former lecturer at the University of Lagos, who spoke during the Nairametrics 2020 Economic Outlook Hangout in Lagos.
Before outlining the businesses, the former lecturer and MSME expert strongly advised potential business owners to desist from engaging in businesses they know nothing about. According to him, doing this helps to guard against risks in the course of doing such businesses.
Some business ideas for 2020
Fawehinmi said that entrepreneurs should consider starting lending businesses. This is because lending is going to be a big business in 2020 as many people would be needing a lot of money for different things. He, however, stressed the need for secured lending because that is the only way to ensure guaranteed returns and not investing in stocks.
Businesses about baby products: The Professor pointed out that the fact that Nigerians will always give birth to children presents an endless opportunity for entrepreneurs. Therefore, they should consider selling things like pampers, children’s clothes, and even baby foods. People that engage in these sort of businesses never run out of customers.
Start a health-related business: This is important because Nigerians will always have medical needs, he said. Even childbearing requires the services of health professionals. However, Professor Fawehinmi advised those interested in this line of business to consider starting drugstores or maternity homes over starting hospitals. This is because drugstores and maternities are not only more cost-effective to start, they are also easier money makers for their owners.
An education business: Education is also a good business venture potential entrepreneur should really consider in 2020. According to the Professor, this might not necessarily require building classroom blocks. Instead, it might just be all about focusing on businesses that are affiliated to education.
For example, a business that is all about reselling used textbooks will do just well in Lagos, the Professor said. He noted that when children graduate from one class to the other, the textbooks they used in their previous classes typically go to waste even though they are still valuable. It is, therefore, left for astute entrepreneurs to find a way to monetise these textbooks by collecting and reselling them to families who may prefer to buy them at lower prices.
Professional services such as barbershops and hair salons will always make for a good business, Professor Faweyinmi said. The same thing applies to the food business. However, he noted that food transportation is far more profitable in the food value chain; even more profitable than farming itself.
To explain this, he gave the example of poultry farming and egg transportation. To engage in this business, all a businessman needs is to have a car. Visit localities in Ibadan and Ogun State where poultry farming thrives and buy crates of eggs for as low as N300 each. Transport them back to Lagos and sell for N700 per crate.
The professor once again emphasised the importance of knowing a few things about any business you wish to go into. For those who may really be considering the food transportation business, he said it is necessary for them to know that there are times best for transporting certain farm produce. Live chicken is best transported at night for instance. This helps to prevent the heat from killing the animals during the hot afternoon.
The Professor also advised that entrepreneurs should find ways to solve people’s emotional problems and then monetise it. One of the best ways to do this is by starting a church. That’s right, churches are indeed a business, and Nigerians are willing to pay for the services rendered by these pastors.
Still on the need to ensure people’s emotional wellbeing and how to monetise it, Cheta Nwanze (who was also a panelist at the event) recommended that entrepreneurs should consider starting alcohol business. According to him, alcohol sells in a depressed economy because many people like to drink in order to numb their emotions. He also suggested starting viewing centres because Nigerians will always love football. Also, it is high time more entrepreneurs begin to establish alternative power businesses in a bid to solve Nigeria’s electricity challenges.
Start smart businesses
In all these, it is important for entrepreneurs to find ways of starting their businesses without necessarily incurring a lot of costs. According to Professor Fawehinmi, there are lots of smart ways to do this. He gave the example of a young entrepreneur in Palm Groove, Lagos who successfully went into the cinema business with zero CAPEX cost.
According to him, the businessman did not even need to go through the hassle of obtaining a license to operate a cinema because the owners of the cinema he uses already did that. All this entrepreneur had to do was to convince customers to come to watch films late in the night when regular cinema-goers would have gone home.
What should the government do to facilitate SMEs?
While answering this question, Professor Fawehinmi said the government should provide adequate social amenities, especially at the local levels. Focusing specifically on farmers, the Professor explained that one of the reasons foodstuff is expensive in big cities is due to the costs associated with transporting them from the farms.
Note that cost arises mostly because the roads leading from the farms are bad. Take for instance, a crate of eggs is relatively affordable within the localities in Oyo and Ogun States where they are produced.
Unfortunately, the roads there are mostly bad, making it impossible for farmers to transport eggs on bad roads, otherwise, they would spoil. To solve this problem, therefore, farmers resort to paying people to carry the eggs on their heads to the market. This inevitably increases the cost of eggs.
Retail franchise investment next gold mine for Nigerian investors- CIG
Retail franchise investment curbs unemployment and create buffer for people looking for side hustle
The Choice International Group (CIG) has tasked both unemployed and employed Nigerians to embrace retail franchise investment, as the initiative would curb unemployment in the nation and create buffer for people looking for side hustle.
In line with a recent FBDS Study, there are over 450,000 Nigerian career professionals with minimum investible funds of N1 million, looking out for investment opportunities.
In the majority, these funds are looking for franchise type opportunities for ease of venturing and minimal failure risk.
As far as CIG chairperson, Diana Chen, is concerned, such investor should look no further but consider the group’s retail franchise investment opportunity, which offers Nigerian community mouth-watering offer of owning Gree & Lontor retail stores.
According to him, Gree is the world’s residential air-conditioner manufacturer, while Lontor provides high-quality, energy-saving and convenient rechargeable home appliances and lighting products for global consumers.
He said, “Both brands have been built by the CIG into a world-class electronic retail chain in Nigeria opening no less than 20 brand shops in Lagos and Oyo over the last 18 months.
“The sales performance of its existing stores in the country makes Gree & Lontor one of the most profitable businesses in Nigeria with yields of an average return on investment of 50% and above per annum.
“CIG is offering investors the opportunity to own any of six regional logistics centres, or any number of Gree & Lontor brand shops in viable locations across Nigeria.
“It is the decision of the company to open up these opportunities to the investing public through a Franchise Retail partnership.”
He added that the company has mapped out two investment models it says are simple, transparent, and hassle-free.
“The first model involves only six regional logistics centres located across the geopolitical zones in Nigeria.
“Whoever invests in this will require a capital outlay of $1 million, and become a mega distributor partner of the Gree & Lontor brand, and service a network of brand shops.
“The second investment model involves the Gree & Lontor brand shops – retail franchise stores that require an initial capital outlay of N20 million.
“The investor will secure a store size of 120-150sqm at any choice location, shopping mall, plazas, high streets and even residential neighbourhoods.”
What they are saying
Nigeria is a growth market for franchising and franchise development services.
Gbenga Ajayi, an Entrepreneurship analyst, said, “The retail industry comes second to the food industry among sectors with best franchising opportunities.
“As with other emerging markets, one of the challenges of franchising in Nigeria remains the strengthening of intellectual-property regimes so that franchise companies can transmit knowledge and franchise system concepts with the confidence that such know-how will be protected.
Where to invest N500,000 right now
Nairametrics interviewed financial experts on what assets they would invest in if they had N500, 000
Since a full economic recovery this year is off the table, Nairametrics interviewed some investment experts, entrepreneurs, and corporate heads, on the assets they would invest N500,000 in. The responses varied from buying gold to investing in mutual funds or starting a business.
The world economy is projected to fall by 4.4% in 2020, an upward guide from an earlier predicted rate of -4.9% made in June. The IMF projected that social distancing due to the COVID-19 pandemic will linger till 2021, but the transmission of the virus will plunge globally by the end of 2022.
Temitope Busari, CFA
With fixed income yields at the current levels, my N500k in today’s market will go into a dividend-paying stock or alternative investments.
- Depending on whether or not I can afford to risk some capital and barring timing constraints, I would buy a stock that offers periodic cashflow in form of dividends.
- For alternative investments, I would explore high-yielding fixed deposits in the on-lending space.
Michael Nwakalor, Macroeconomist at CardinalStone Research
- The yields in the fixed income markets are currently on the low and producing negative real returns, the equities market provides a viable alternative to earn a total return above inflation.
- I like stocks in the banking sector, as a number of them remain undervalued by fundamental metrics. Several names are on the course to post near double-digit dividend returns by the year-end. A portfolio that includes the following counters – GUARANTY, STANBIC, ETI, FBNH, and ZENITH, should provide adequate exposure to the sector as well.
Adaobi Okonkwo, Currency Trader of a leading Tier 1 Bank
- With a few things to invest in, the most reliable investment that comes to mind is a mutual fund. The fixed income and money markets are currently experiencing a downturn; hence, investing in them could reduce my income spread.
- However, with a mutual fund, my portfolio of investment in the capital markets is determined by the fund managers with a decent return on investments certainly above the risk-free rate. Gold is a commodity that would yield a good ROI within a specified time frame if I wanted to invest by myself.
Silas OZOYA, President/CEO, SUBA Capital
Though quite a small capital, it might not do much if you want to play the long-term investment game. However, it can set the ball rolling.
- I would invest it in a high yield investment platform that pays at least 5% returns monthly to cover running costs.
- Put the money in a fixed deposit and leverage it as collateral to take a debt fund, with a 6 – 12 months moratorium from a commercial bank for a possible expansion of a profitable business. This way, you gain on the debt and still have your N500,000 intact.
Ugonna Thelma Ohiri-Anyanwu, CFA
With a gift of N500,000, my risk appetite and drive for higher returns,
- I would invest 50% of the funds (N250,000) on dollar and Eurobonds. This is mainly because of my future needs for FX and also as the need to hedge my currency risk.
- I would invest 25% of the balance (N125,000) in Ethereum, which would give me a steady cash flow with medium risk.
- The balance of N125,000 would be invested in Value company shares with low P/E and also stable dividend payments.
The overall investment portfolio allows for diversification, stable cash flow in both local and FX currency, and currency hedge. These would provide a solid mix between ownership of materially underpriced assets and high dividend-yielding assets.
Amid the rising COVID-19 caseloads prevailing globally, the financial experts interviewed above showed significant diversity on the assets they would invest in, coupled with their different appetite for taking risk reflected on their preferred choices made amid a blurry global economy era.
Where to invest $10,000 right now
Entrepreneurs, financial experts and investment analysts suggest what sectors or assets to invest in if you have $10,000.
The upsurge in COVID-19 cases around the world has kept global investors flocking the world’s safe-haven currency at an exponential rate, the high demand for the greenback is coming on the high geopolitical uncertainty prevailing in today’s financial market.
Also, it’s important to note at the currency market, the U.S dollar remains king. According to the International Standards Organization, 90% of currency trading done globally involves the U.S. dollar, most crypto assets, virtually the most liquid commodities are priced in the U.S dollar not forgetting about 40% of the world’s debt is dominated in the greenback.
So Nairametrics felt it paramount to ask a hedge fund manager, entrepreneurs, and financial experts, about what sectors or assets they would invest in if they had, say, $10,000.
Their responses were revealing and diverse as they were varied—ranging from; buying global equities, local stocks, real estate holdings to investing in digital assets.
Gavin Smith, veteran trader, and managing partner at Panxora Crypto Hedge Funds.
I would scale into BTC $2,000 now, $2,000 when it comes off to $10,000, then add $2,000 at $9,000 and another $2,000 at the $8,000 level. If BTC then breaks above $13,000 I would buy any of the above orders that had not been filled of the remaining $2,000. I would put $500 into each of these four DeFi protocols: LINK, COMP, KNC, and OMG.”
DeFi is an exceptionally volatile market and these would need active management, but they represent an opportunity with exceptional upside potential. This is a market our analysts are building a profile in, to advance our DeFi hedge fund later in the year.
Debo Adejana – Founder, MD/CEO – Realty Point Limited.
I follow the investment wisdom that says, ‘invest in what you know and understand’. I know and understand real estate probably more than any other investment asset class.
So, the decision as per what I will invest in with $10,000 which should be upwards of N4m is simply; Real Estate. I will either do rental income property as part of a properly organized shared-ownership structure or speculate on land depending on how much time I have with the money. The reasons are very basic, real estate investments have been known to survive and surpass any and every challenge.”
Darlington-Morsi Onyemaka, Co-founder Quba Exchange Forbes Accelerator Cohort ’20.
One of the main pointers to a good investment portfolio is diversified across multiple asset classes which should be according to the investor’s risk appetite. Looking at my long-term investment strategy, real estate fits in perfectly for Ten-thousand dollar investment. My portfolio is already jam-packed with high-risk assets and Real Estate will do a great job at hedging the risk factors without minimizing profitability in any significant way.”
Francis Obasi Cofounder and CEO of Lead Wallet.
If I have a spare $10,000 right now for investment, first, I’ll invest 55% of the funds into new crypto startups being run by professionals and backed by companies like Coinlist; LID Protocol, and Binance. Second, I’ll invest 20% of the funds into Lead Token as there is still potential for massive growth in the coming months/years. Third, looking at the situation of Nigeria, and not knowing where the current protest (uprising) on #EndSARS is headed, I’ll reserve the rest 25% in USDC/USDT to hold against a potential Naira crash. I’m confident that there is every possibility that the Dollar will become scarce again in the coming weeks/months due to the ongoing protest, thereby returning instant gains for immediate spending on basic needs.”
Dapo-Thomas Opeoluwa Global Markets analyst and an Energy Trader.
“There are so many ways to invest $10,000. The real question depends on the investor. His risk appetite, his investment horizon, when does he or she want to liquidate? The answers to these now limit the options of investments. So for safe and long-term investments, I always advise investing in index funds, Eurobonds or the Nigeria International Debt fund. This is with the caveat that says ‘low risk equals low returns’. Also, I usually would say, invest in investments that beat inflation so you won’t suffer negative real turns.”
Victoria Njimanze Investment Analyst at a Nigerian Investment Bank
Well, off my head I’ll go with Bonds, cryptocurrency, Stocks, and then alternatives. I would definitely make my findings first, but I’ll make a larger portion go into Bonds say 40%, 30% in cryptocurrency, 20% in stocks, and 10% in alternatives like commodity market so as to have a diversified portfolio.”
Akinsola Esan, a credit risk analyst at Nigeria’s Tier 1 Bank.
Basically, the goal is to earn substantial returns on investments – dividends, capital appreciation, and secondly, beat inflation in naira which is currently about 12.85%. With $10,000, I’ll spread my investments across foreign equities such as purchasing and holding stocks of companies like Apple, Facebook, Google, Fastly, Nio, Amazon, to list but a few, and also buy some top-performing dollar-denominated Mutual funds such as Vantage dollar funds and some other ones recommended by Nairametrics. Lastly, I will look in the area of cryptocurrencies by investing as much in bitcoin, Ethereum, and other recognized Cryptos. There are some dividend-paying stocks listed on the Nigerian stock exchange as well, I will consider holding a number of them.
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Due to the present fickle nature of global financial markets, most financial experts interviewed above are unsurprisingly keen on mostly U.S dollar-dominated financial assets, thus reflecting the greenback’s dominance in demand amid the COVID-19 infection exploding at an alarming rate.