Tesla Entry into Nigeria

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Tesla Entry into Nigeria

Economic Analysis

The economy of Nigeria has been confirmed to shrink by approximately 1.8% in 2020, following the Covid pandemic. This percentage has been considered the most profound decline in the economy since 1983 (Adebayo & Beton, 2020). The pandemic crisis declined the economy in terms of; low oil prices, shrinking of foreign remittances, and intensified risk aversion. As a result, since 2020, the Nigerian market has indicated an urge to fall the currency ranging from 400 to 420 naira to the USD (Alakwe, 2018). Currently, the currency of a dollar is at 410.31 NGN in Nigeria, which means that the economic statistics of 2020 have been implemented. These falls of dollar value in Nigeria might negatively impact the tesla market in the country.

Similarly, the country's economy is expected to grow by the end of 2022 despite there being a high uncertainty regarding the outlook. The rise of oil exports as well as in domestic demand might contribute to the economic recovery. However, unexpected shocks to oil prices could threaten the modest growth projected since Nigeria's economic growth is expected to underperform those of the other oil producers. Additionally, there are more economic risks associated with high unemployment and high inflation in the country. According to several researchers in Nigeria, the country’s GDP is expected to approach its 2010 level hence guaranteeing an entire phase of economic incline. However, the economy is forecast to expand more slowly compared to the population, thus projecting a continuous decline of GDP per capita.

Tesla company needs a market that is well established with stable economic statistics of the last few years. Despite Nigeria showing efforts to increase the economic growth, tesla could still face some challenges because the company requires a well-established market.

Barriers to Market Entry

While Nigeria provides export potential in a variety of industries, it also presents some significant challenges. These challenges include; elevated cost of operations in Nigeria, the goal to imitate vital infrastructure, the risk of a violent act and the resulting need for safety interventions, corruption, the absence of impactful judicial process, and inconsistently enforced economic, strategic planning, particularly in government contracting in Nigeria. Approval of products at ports can indeed be time-consuming, inconvenient, and bureaucratic. Corruption and overcrowding are still significant challenges at ports that can considerably affect the tesla market in the region.

Corruption

According to a recent poll done by NOI Polls as well as LEAP Africa, 85 percent of senior Nigerians feel that corruption is to blame for the state's business difficulties. Weak government structures and poverty were cited as factors for Nigeria's high level of corruption. In addition, exclusionary behaviors that limit market pressures benefit well-connected entrepreneurs. The economic as well as financial fraud authority, the independent corrupt procedures, and many other related offenses review boards, and the extractive industries transparency initiative have all been established by the GON to combat corruption. 

Foreign Exchange Restrictions

The Central Bank of Nigeria (CBN) has implemented trade restrictions on various product classifications since 2015. However, it has continued to engage in the market to prevent the standard naira rate from weakening (Yagboyaju, 2017). Despite the fact that attempts have been made to harmonize rates, there are still numerous exchange rates available in the market. Inaccessibility to foreign exchange is considered one of the most challenging difficulties for new enterprises entering the market, limiting their ability to purchase required goods and equipment as well as external service loans.

Cultural Analysis

Population and Key Demographics

Nigeria has taken limited efforts in the past to slow population increase. Nigeria's original population policy was introduced in 1988. By 1995, the policy's objective was to restrict the couple’s number of kids (Babatunde, 2018). The strategy, however, fell short of its objectives, which included lowering the birth rates and reducing the number of premature marriages, both of which would limit the rate of population growth. As a result, Nigeria proposed a new population policy in 2005, which was intended to raise the level of living and provide an excellent livelihood for Nigerians. Still, it failed to owe to corruption, a shortage of policy dedication, as well as political will.

The population of Nigeria is considerably expanding at a higher rate per year, confirming a population doubling every twenty years. Despite the ideal population size, it is not evenly dispersed. It is considered high in the urban regions such as Lagos, while lowest in the northern region.  Furthermore, rural-urban mobility is on the rise. The double existence of Nigeria's economy is a crucial explanation for migration from rural areas. Economic development raises living conditions in urban regions, but in remote areas, a subsistence economy prevails. When this is combined with a high population...