Tomato Jos is focussed on providing tomato products for the domestic West African market. The opportunities are substantial. According to the World Bank, Nigeria’s population is 173.6 million, 21 million of whom live in Lagos, the country’s largest city. The Tomato Jos team recently travelled to Lagos and we thought it worthwhile to share our insights on this fascinating and dynamic city.
Lagos is truly a mega-city – it is the only state in Nigeria that is completely urbanized, and could perhaps more aptly be called a city-state. A recent McKinsey report has declared it “more than four times that of the next largest city, Ibadan,” but in addition to its vast size, the city is also known for its entrepreneurial spirit, with street vendors common on roadsides peddling everything from newspapers to kitchen appliances to beauty products.
Lagos state Governor Babatunde Fashola and his staff have been largely credited with improving the city’s reputation and reforming its civil service to deliver better public services to the citizens. For example, upon entering office, Fashola completely overhauled the tax collection system, introducing a smaller internal revenue service staffed by no-contract employees governed by performance incentives rather than state civil-service workers. The new service better enforced existing tax requirements and expanded the taxpayer base by introducing a simplified, single-page tax form for informal businesses.
The Lagos State Government has also handled the recent Eblola outbreak remarkably well. All of the confirmed cases had contact with the “index case” for the country: Patrick Sawyer, the Liberian-American who brought Ebola to Lagos. Five patients have been discharged after recovering and four are currently being treated in Lagos.
However Lagos, still suffers from many developing world problems. Its exploding population has caused a severe housing shortage leaving people crowded into shantytowns, and even into floating slums in some cases. Crime rates are also high with the threat of violence, kidnapping and petty theft a constant threat.
Public transport services for a city the size of Lagos are particularly poor. A rail network exists although it is primarily utilized to connect the South and the North of the country and not for commuters. Beyond shared bus services similar to the tro tro system in Accra (see our previous blog post on transportation here), mass transit systems do not exist. Commuters living in the less central “Mainland” area of Lagos can send up to 5 hours commuting to the downtown “Island” area that houses the financial district and head offices for other major companies. Thankfully, the road network is well maintained and in some cases very impressive.
For example, connecting Lekki to Ikoyi is the Lekki-Ikoyi Link Bridge, known by locals as the New Lekki Bridge. On May 29, 2013 Governor Fashola opened this beautiful cable-stay bridge to a warm reception. This bridge has significantly eased traffic and reduced the commute time for workers in the area – provided they are willing to pay the 200 naira bridge toll, of course.
The Lagos State Government has also played an ongoing role in supporting the arts – a recent public-private partnership saw the conversion of an old prison on Lagos Island into Freedom Park, a beautiful venue with three stages for performance art, a gallery that can be rented out for private events, and many small restaurants selling food, beer, and even kombucha! The city has mandated an affordable entrance fee for Freedom Park, ensuring that it will remain accessible to all Lagotians, not just the ultra-wealthy citizens who live on the Island.
The same positive story cannot be said about the power grid. Residential consumers find it frustrating to live with almost constant power outages, but those who can’t afford to supplement the grid with diesel and generators simply live without them. However, industrial manufacturers need a reliable power source to do business. While in Lagos, the Tomato Jos team visited a number of commercial facilities, all running on diesel-powered generators. The lack of reliable electricity supply is one of the country’s biggest weaknesses. McKinsey reports Nigeria’s installed generation capacity at 10,000 megawatts (MW), “but but current output is only 3,500–4,500 MW…Unreliable electricity forces many businesses and households to install their own generators, at significant cost, and reduces Nigeria’s attractiveness as an investment destination. Some 83 percent of firms surveyed by the World Bank found electricity to be a major or very severe problem for their business. For manufacturing firms, outages cost an average of 4.3 percent of sales, rising to 8.5 percent for the country’s microbusinesses.”
Nonetheless, entrepreneurship is thriving in Lagos. According to the 2013 Global Entrepreneurship Monitor, 41 percent of working-age Nigerians were involved in an early-stage business in the preceding three and a half years, and 81 percent of Nigerians surveyed see entrepreneurship as a desirable career choice. Even the Lagos airport is full of conversations amongst Nigerians coming in from abroad, looking to return home to found a new business or join a company in the IT, financial services or oil & gas industries. When the Tomato Jos team met with the CEO of Konga.com, one of the hottest startups in Lagos, he confirmed that many of his senior managers are Nigerian “repats” who see great opportunities for the future of Nigeria. Konga itself is a testament to the growing consumer class in Nigeria – the company provides an online shopping platform similar to Amazon in the US, and is growing its business by 20% month-on-month. The company recently raised a $25 million investment Series B investment round, speaking volumes for investor confidence both in the management team and more generally in the strength of the Nigerian consumer.
For Tomato Jos, Lagos represents our largest market. Of all the cities in Nigeria, Lagos has the most developed supply chain with wholesalers, distributers and retailers all participating to get the final product to the consumer. Given the continued population growth and the increasing trend toward urbanization, the market opportunities in Lagos look positive. For these opportunities to materialize continued investment is required to alleviate the challenges that exist in housing, transportation, crime and most importantly infrastructure.
We highly recommend that readers interested in learning more about Lagos watch the BBC documentary series, “Welcome to Lagos”. These videos, though now a few years old, tell a fascinating story about urbanization and the ability of Lagotians to adapt and even thrive in the face of major changes to their city. And if you are feeling particularly bold, perhaps you may even decide to visit this incredible urban jungle!