Advising Bluebird Telecommunications on Business Transactions in Nigeria Essay

The kernel of this study is to rede the CEO of Bluebird telecommunication on the feasibleness of transporting out successful concern minutess in Nigeria. Bluebird telecommunication is a reputable telecommunication based in the Unites States of America and is meaning to widen its concern dealingss to the Nigerian telecommunication industry. Having analysed the macroeconomic conditions in Nigeria, an over position of the issues to be addressed are ; its national concern system and cultural conditions in the state and how it affects concern dealingss between Nigeria and the United States, Nigeria ‘s trade forms, exchange rate governments, suited entry manner scheme to be adopted by Bluebird and the likely political hazard to be encountered in Nigeria and possible ways of extenuating against them.

FEASIBILTY REPORT ON A SUCCESSFUL BUSINESS VENTURE BY BLUEBIRD COMMUATION IN THE NIGERIAN TELECOMMUNICATION INDUSTRY.

We will write a custom essay sample on
Advising Bluebird Telecommunications on Business Transactions in Nigeria Essay
or any similar topic only for you
Order now

Introduction

Bluebird Telecommunication is a reputable Telecommunication Company based in the United States. It is a ace Telecommunication Company with its central offices in Dallas, Texas. It is a fortune 500 company and is listed in the New York Stock Exchange ( NYSE ) with one-year gross of approximately $ 123 billion. The company ‘s involvement to put in the Nigerian telecommunication industry has been prompted by the turning rate in the usage of communicating engineerings both in public and private sectors. This study seeks to determine whether it is a feasible venture to put in the telecommunication industry in Nigeria by seting into consideration such factors as the national concern environment and cultural conditions in Nigeria, the form and tendencies of trade between the United States and Nigeria. Furthermore, looking into the degree of protection steps against foreign investing in Nigeria ; the possible hazard factors that may be encountered in Nigeria and the entry manner to be adopted in order to make concern in Nigeria.

TELECOMMUNICATIONS INDUSRTY IN NIGERIA

Nigerian Mobile Telecommunication industry has been referred to as the fastest turning market in Africa ( PRLog2009 ) . The industry came into mainstream in 2001 when authorities decided to deregulate the telecommunications market which allowed the private sector to put in the sector. The telecommunication system was opened up with the issue of Global System for nomadic communicating ( GSM ) unified licence in 2001. The licence costs about US $ 285million in Nigeria. Before 2001, Nigerian Telecommunication ( NITEL ) was the lone operator in the market with approximately 500,000 endorsers from a population of 140 million.

The deregulating ushered in cardinal telecom participants like MTN, Globacom Mobile, Zain once Celtel, Etisalat, Visafone, Multilinks, Starcomm and Zoom once Reltel. The telecom regulator in Nigeria is Nigerian Telecommunication Commission ( NCC ) .

Figure 1: Nigeria – Mobile Subscribers and Penetration ( 2002-2011 )

Beginning: Portio Research Ltd

Nigeria presently has Africa ‘s largest telecommunication market with about 65 million active endorsers bumping South Africa to 2nd topographic point with about 45 million endorsers. In 2004, the telecommunication industry grew to over 7 million endorsers and 62.99 million endorsers in December 2008. An add-on of 22.59 million endorsers in 2008 entirely represented 56 % one-year growing rate. The state intelligent study on Nigeria by Pyramid research stated that the market grew by 23 % with entire industry gross of US $ 8.42billion calling the telecommunications market the largest in Africa. ( PRLog, 2009 ) .

NATIONAL BUSINESS SYSTEMS AND CULTURAL CONDITIONS IN NIGERIA

Making concern in Nigeria requires an apprehension of the state environment, including factors act uponing consumer life style picks ( euromonitor.com/Nigeria ) . The construct of national concern system proposed by Whitley ( 1999 ) focuses on the belief that houses do non move in a societal vacuity instead affected by legion influences from the environment and as such houses operate in markets, concern sectors and must follow with Torahs and ordinances normally outlined by the state where the house is runing. The legal, political, economic, cultural, educational, engineering and infrastructural systems of Nigeria are some of these influences to be considered in finding effectual concern pattern between Nigeria and the United States. These are influences that affect international concern pattern bearing in head the difference in national civilization and concern systems that exist between both states. Focus hence, is on the consequence of national concern system on telecommunications industry but with more accent on the scrutiny of its deduction for Bluebird investing in the Nigerian Telecommunication market.

The Political System

Nigeria gained independency from Britain on 1 October 1960 and became a republic three old ages subsequently. The Nigerian political system has 3 weaponries of administration ; the executive arm, the legislative arm and the bench. Nigeria patterns the federal system of authorities which has 3 degrees of authorities: the federal authorities, the province authorities and the local authorities. The state is made up of 36 provinces and a Federal Capital Territory ( FCT ) in Abuja which are grouped into six geo-political zones. There are at least five provinces in each of the zones and major authorities installations are provided to keep the balance among the zones.

The state presently patterns a democratic system of authorities. Elections into assorted offices are held every four old ages. The provinces are semi-autonomous and each has an elected Governor with a State Legislature. The President and State Governors are elected for a upper limit of two footings. The three major political parties in Nigeria are People ‘s Democratic Party ( PDP ) , Action Congress ( AC ) and All Nigeria ‘s People ‘s Party ( ANPP ) .

Nigeria ‘s post-independence history had been mostly politically unstable caused by several old ages of military regulation characterised by economic misdirection and human rights misdemeanor. This tendency led to Nigeria ‘s intervention as a outcast state by the international community. However, the recent return to democratic regulation in 1999 brought about the state ‘s re-admission into the commission of states and has facilitated rapid economic growing. The political clime in recent times has been comparatively unagitated and stable following the return to civilian regulation in 1999.. In 2009, the incumbent president passed on due to a brief unwellness which brought about the so Vice President Goodluck Jonathan going the new Head of State boulder clay day of the month.

Although, this political stableness has been challenged by the recent Niger Delta crisis and the politically motivated bombardment in Jos but it is expected that the 2011 election which is the 3rd civilian to civilian transmittal would farther beef up the additions of democracy and brace the political landscape of Nigeria.

The deduction of Nigeria ‘s political system to Bluebird ‘s investing in its telecommunication industry is non one to be weary of because the political environment has been comparatively stable but a spot of cautiousness should be taken if the concern looks towards enlargement peculiarly in countries where there is political tenseness like in Jos and Niger Delta.

The Economic System

Nigeria has managed to keep a steady growing despite the recession and banking crises in 2009 with mean GDP year-on-year growing rate of about 6.4 % over the last five old ages, the highest in West Africa. The communications sector has recorded the highest growing in GDP part in the last five old ages. Inflation has returned to 11.6 % in 2010 the rate in 2008 from the 2009 high of 12.4 % and unemployment has remained level for the past two old ages at 6.2 % ( Datamonitor 2010 ) .

Harmonizing to the Central Bank of Nigeria, Nigeria ‘s GDP is estimated at US $ 182 billion for 2008, stand foring a existent GDP growing of about 6.4 % for the twelvemonth.

Due to the liberalization of the Telecommunications sector in 2001 and the attendant addition in investings and phone incursion since so, the Communications sector has recorded the highest growing in GDP part in the last five old ages, from 1.3 % in 2004 to 3.0 % in 2008, stand foring a CAGR of 31.6 % over the period.

Bluebird should take advantage of increased investing in the economic system, following the broad-based structural and macro-economic reforms undertaken by the Federal Government to change by reversal the past economic diminution and encouraging foreign direct investings, supplying a platform for sustainable growing and bettering the general concern clime which creates an enabling economic environment which Bluebird can profit from.

Sectoral Contribution to GDP ( N billion )
2004
2005
2006
2007
2008
CAGR
Oil

135.7

136.4

130.2

124.3

118.4

( 3.4 % )

Non-oil

391.9

425.6

465.6

510

556.5

9.2 %

Agribusiness

216.2

231.5

248.6

266.5

283.9

7.1 %

Solid Minerals

1.4

1.5

1.7

1.9

2.1

10.7 %

Manufacturing

19.4

21.3

23.3

25.5

27.9

9.5 %

Building and Construction

7.6

8.5

9.7

10.9

12.3

12.8 %

Sweeping and Retail Trade

68.1

77.3

89.1

102.7

117

14.5 %

Finance and Insurance

21.5

22.1

23.3

24.4

25.6

4.5 %

Communication

6.7

8.6

11.4

14.6

20.1

31.6 %

Hotel and Restaurant

2

2.2

2.4

2.8

3.1

11.6 %

Others

49

52.6

56.1

60.7

64.5

7.1 %

% Contribution to GDP
Oil

25.7 %

24.3 %

21.9 %

19.6 %

17.5 %

21.8 % *

Non-Oil

74.3 %

75.7 %

78.1 %

80.4 %

82.5 %

78.2 % *

Beginning: Central Bank of Nigeria: 2008 Annual Report ; *Represents Average

The Legal System
As a consequence of colonization, the Nigerian legal system in pattern is based on the English common jurisprudence legal tradition. As pointed out by Obilade, ( 1979 ) English jurisprudence has a enormous influence on the Nigerian legal system, and “ English jurisprudence forms a significant portion of Nigerian jurisprudence ( in Dina, Akintayo and Ekundayo, 2005 ) . In add-on, it is of import to advert that the Supreme Court of Nigeria is the vertex of the Court System ( Babalakin & A ; Co, 2005 ) .

The Nigerian authorities has renewed its attempts toward development of the Nigerian telecommunications sector in line with international criterions ( Kingsley Ohiri, 1999 ) . The Nigerian Communications Commission ( NCC, 2003 ) set out to set up a regulative model for the Nigerian communications industry that will be effectual, impartial and an independent regulative authorization, promote local and foreign investings in the Nigerian communications industry and protect the rights and involvement of service suppliers and consumers within Nigeria. Since there are Torahs in topographic point that are impartial and promote foreign investings in Nigeria, it would look to be feasible and profitable for Bluebird to puting in the telecommunications industry.

Cultural System

Hofstede, ( 1980 ) described civilization as a “ corporate scheduling of the head, which distinguishes the members of one class of people from another ” . With mention to Hofstede ‘s culturally-based values system, Nigeria can be said to be a collectivized state where group involvement precedes over single involvement ( life-in- Africa, 2010 ) . Communication is normally direct with no trouble go throughing across existent feelings. Therefore, because entrepreneurs mature within a social context, their attitudes toward co-operation are likely to be influenced by the underlying values of their society ( Weaver, 2000 ) .

Nigeria, presently with an estimated population of about 146 million people, is blessed with immense societal, cultural and spiritual diverseness which provides for a mix of people and traditions in assorted parts of the state. It is estimated to hold 500 linguistic communication idioms spoken throughout the state but the official linguistic communication is English ; other major linguistic communications, which are the local linguistic communications of the major cultural groups, include Hausa, Yoruba and Ibo. Besides, it is estimated to hold 250 cultural groups. The most thickly settled cultural groups include ; Hausa and Fulani 29 % , chiefly in the North ; Yoruba 21 % , chiefly in the West ; Igbo 18 % , chiefly in the E ; Ijaw 10 % , Kanuri 4 % , Ibibio 3.5 % and Tiv 2.5 % .

With an mean one-year population growing rate of about 3.2 % , Nigeria has the largest population in Africa. Nigeria will offer Bluebird investors Africa ‘s largest domestic market every bit good as the extra attractive force of a low-priced labor pool. It hence becomes imperative for Bluebird to be good attuned with the diverseness in civilizations and life styles as it seeks to develop concern ties to assist beef up concern operations.

Educational System

Nigeria operates the 9-3-4 system of instruction with a literacy rate of 73 % . In the 9-3-4 system the pupil spends nine old ages: six in primary school and 3 in junior secondary school to achieve the Universal basic Scheme certification which is the lowest degree of instruction required for employability. The following 3 old ages is spent in the secondary school. The senior secondary school is certified by senior school certification scrutiny ( SSCE ) after which university instruction begins.. It is estimated that there is one instructor for every 37 pupils in the state. Harmonizing to the World Bank, the gross registration ratio in primary instruction stood at 99 % and 87 % for males and females in 2008 severally ( Datamonitor, 2010 ) .

Technology and Infrastructural System

The gait at which engineering has been embraced in Nigeria has been the fastest in the Telecommunications Industry in Africa. The engineering in Nigeria has moved from 2nd coevals ( 2G ) engineering which is the GSM criterion to 2.5G and presently to 3G ; a third-generation engineering that enables internet entree, nomadic Television, picture calls and other signifiers of content and value-added services ( Pyramid, 2010 ) .

Beginning: Nigerian Communications Commission

Niobium: Microwave and Fiber-optic Cables are represented in kilometers while BTS is represented in Numberss

However Nigeria is plagued by undependable power supply as most concerns run on spontaneous power. Other issues include hapless transit web and challenges around security of life and belongings. However, there has been knowing authorities focal point on these issues. Government has deregulated the power sector with the hope of increasing power generated. Increased authorities disbursement on security and authorities ‘s partnership with other states ( China ) to assist develop its transit web should assist increase Bluebird ‘s assurance in the Nigerian sector.

Trade Patterns between the United States and Nigeria

In June 2006, the United States met with Nigeria under the bing Trade and Investment Framework Agreement ( TIFA ) to work together on investing issues and to develop a scheme for Nigeria to diversify its export base, peculiarly in manufactured goods. The United States and Nigeria vowed to work together on pertinent issues such as World Trade Organization ( WTO ) Doha Development, rational belongings rights, and trade capacity edifice.

The U.S foreign direct investing ( FDI ) in Nigeria is concentrated mostly in the excavation and sweeping trade sectors. The stock of U.S. foreign direct investing ( FDI ) in Nigeria in 2005 was $ 874 million, down from $ 2.0 billion in 2004. USA trade shortage with Nigeria was $ 25.7 billion in 2006, an addition of $ 3 billion from $ 22.6 billion in 2005. In the same twelvemonth, U.S. goods exports to Nigeria were $ 2.2 billion, up 38 % from the old twelvemonth and its imports from Nigeria were $ 27.9 billion, up from 15 % from 2005. Nigeria is presently the 50th-largest export market for U.S. goods ( U.S. section of province, 2010 ) . However, the lag of the planetary economic system and the failing security of the state restricted investing in 2009. Nevertheless, Nigeria maintains advantages like a partly privatized economic system, a good revenue enhancement system, important natural resources and low-priced labor but on the other manus, prevailing corruptness, political instability, non-transparency and the hapless quality of substructure shackle FDI ( Global trade, 2010 ) .

Nigeria carried on with implementing the Economic Community of West African States ( ECOWAS ) Common External Tariff. The execution of non-tariff barriers has been arbitrary and uneven and continues to go against WTO trade stoppage on trade prohibitions. The enforcement of condemnable punishments against Intellectual belongings rights ( IPR ) misdemeanor is weak, but houses that successfully counter IPR buccaneering do so through civil tribunal instances. The authorities is seeking difficult to battle this and has late created an rational belongings committee ( U.S. section of province, 2010 ) .

Although Nigeria must undertake its decaying substructure and a hapless regulative environment, it still possesses many positive properties for carefully targeted investing and will spread out as both a regional and international market participant. Profitable niche markets outside besides the energy sector, such as specialised telecommunication suppliers, developed under the authorities ‘s reform programme. A mounting Nigerian consensus is originating in support of the importance of foreign investing to gaining Nigeria ‘s tremendous potency ( U.S. section of province, 2010 )

For a company like Bluebird interested in puting in the telecommunication industry in Nigeria, opportunities around the big national market exist due to its entree to available natural stuffs and inexpensive labor. However, to calculate a high success rate it is necessary to be extremely knowing on concern patterns and local conditions of the state, and besides carefully choice concern spouses and work towards set uping a local presence. The Nigerian authorities is ardently cognizant that prolonging democratic rules, heightening security for life and belongings, reconstructing and keeping substructure are necessary for the state to pull foreign investing ( U.S. section of province, 2010 ) .

Exchange RATE REGIMES

For over 30 old ages, the United States has operated under two different exchange rate governments. The first was the Bretton Woods system of fixed exchange rates and it lasted from December 1958 to March 1973, the 2nd one started in March 1973 and has been sustained till day of the month but the exchange rates have been capable to pull off natation.

For Nigeria, the exchange rate governments have undergone singular alterations over the past four decennaries. It foremost moved from a fixed government in the 1960s so moved to a pegged agreement between the 1970s and mid 1980s and so to the assorted types of drifting government since 1986, subsequent to the acceptance of the structural acceptance programme ( SAP ) . A government of managed float with no strong committedness to supporting any peculiar para has been the chief feature of the natation government in Nigeria since 1986. These alterations are non merely untypical to Nigeria as the US dollar was besides fixed in gold footings until 1971 when it was de-linked and since so been floated ( Sanusi, 2004 ) .

The deduction of Nigeria ‘s exchange rate for Bluebird is that the company has to utilize hedge and guess to sure-up their place against fluctuations in the exchange rate. it would be of import for Nigeria to achieve a realistic exchange rate which would ensue in coincident accomplishment of internal and external balances and ease the accomplishment of sustainable economic growing and development but most significantly would be the issue of increasing the productiveness of the place economic system as this would assist in the decrease of naira exchange every bit good as its volatility ( Sanusi, 2004 ) .

METHOD OF ENTRY INTO NIGERIA

Harmonizing to OECD ( 2001 ) , foreign direct investing is a category of international investing that reveals the aim of set uping a long-run relationship of a resident entity in one economic system to an endeavor occupant in another economic system. The preferred manner of entry for Bluebird to make effectual concern in Nigeria would be through foreign direct investing as Governments in Nigeria have taken stairss to make an environment that Fosters FDI. Just as the Foreign Exchange ( Monitoring and Miscellaneous Provisions ) Act of 1955 allows unconstrained repatriation of foreign currency, the Nigerian Investment Promotion Commission ( NIPC ) Act of 1955 to a big extent eliminates favoritism against foreign investors.This proviso allows 100 % foreign ownership in Nigerian entities and lets bing investors build up commanding bets ( Country commercialism, 2006 ) .

The relevant statute laws protect foreign investors against expropriation and forceful coup d’etat by authorities. Therefore, there is no hazard to the proposed manner of investing.

Likely POLITICAL RISK TO BE ENCOUNTERED

Political hazard can be said to be the hazard of losing money brought approximately by alterations in a state ‘s authorities or regulative environment

The Restoration of peace to the disruptive Niger-Delta part appears to be a major political program of the current disposal, as this is critical to guaranting a permanent solution to the on-going energy crisis in the state.

Corruptness still remains a cardinal issue within Nigeria ‘s political system. The successful prosecution of high profile instances, including the on-going instances against the direction of the five major Bankss arrested on charges of corruptness will ease the Government ‘s anti-corruption war.

One manner of

Extenuating political hazard is variegation ; bluebird demands to distribute their international investings around in a assortment of states and parts so that they do n’t acquire ache excessively severely even if political hazard computations turn out to be off the grade.

The future mentality on Nigeria ‘s economic system remains strong in position of the immense potencies of the state and the African continent.

Present societal, political, legal, substructure and economic reforms in Africa, particularly Nigeria will go on to take to altering investors attitudes about uncertainness and hazard.

The Nigerian authorities programs to go on to liberalize the investing clime by extinguishing assorted bottle cervixs to the free flow of FDI. Some of these programs include revoking restrictive Torahs, bettering security, subscribing investment-protection pacts and many others. However, hapless substructure, political force and communal and spiritual perturbations in different parts of the state continue to deter foreign investing.

CONCLUSION AND RECOMMENDATION

In clip yesteryear, the array of macroeconomic issues linked with Nigeria such as the state ‘s political instability, corruptness, hapless substructure, societal crisis made many investors disbelieving about making concern in Nigeria. However, this may non be the instance as many researches have shown in recent times the extent to which foreign investors are get downing to put to a great extent in Africa ; peculiarly Nigeria. The deregulating of the telecommunication industry in Nigeria has increased foreign direct investing and made investors more active particularly in the telecommunication market and this has added to the state ‘s ( Nigeria ) GDP. Nigeria appears to be a feasible state to make concern in owing to the state ‘s rich homo and natural resources such as its big population and market size. For Bluebird, it would be appropriate to diversify its concern investings in different locations or states so that if the concern in Nigeria fails, it would non lose all investings.

×

Hi there, would you like to get such a paper? How about receiving a customized one? Check it out