Edited by: Omotosho Ayotomiwa
Politics and business have unique features that affect each other. However, business is more influenced by politics than politics is by business. Government activities can have an impact on a company in several ways. It can affect how a company interacts with its clients, vendors, and rival businesses. Government creates laws, and every business must abide by the rules.
In addition to their direct effects, political factors have indirect effects that can significantly impact the company and its working environment. This article focuses on the impact of political activities on businesses in Nigeria. Let’s get to it!
Top 5 Political Activities affecting Businesses in Nigeria
Political movements resulting from changes in government policies and programs influence the ability of businesses to accomplish their goals. These activities can impact how these businesses operate and what they do. Below is a list of political activities affecting Nigerian businesses:
- Bureaucracy: ‘Bureaucracy’ is a word used to describe a complex government with multilayered systems and procedures. Decision-making is slowed down by the methods and procedures that have been successfully implemented. Bureaucratic structures frequently identify previous successful practices and have a tendency to look backward. This retro outlook puts innovators and entrepreneurs at odds because they prefer concepts that are forward-looking and search for ways to make processes better.
- Restrictions on the import and export of goods: There are complaints about the inconsistent implementation of customs laws, the drawn-out clearance process, and expensive berthing and unloading fees. Ships sometimes wait days, weeks or months to berth and unload at ports. Due to business delays, this makes operations at Nigerian ports are among the priciest in the world.
- Tax structures and policies: An excellent illustration of a political element is an increase or a decrease in tax rates. The tax structure is crucial for businesses in Nigeria. Due to specific factors, government regulations may result in higher tax rates for some industries and reduced tax rates for others. This choice will immediately affect companies. Businesses use incentives to create more and expand if a government balances taxes and budgets.
- Foreign Trade Laws: Every company must extend its operations to other nations. However, the political events within a country affect the desire for a company to expand its functions. Regarding international companies’ competitiveness in a foreign region, government initiatives created to help local businesses may work against them.
- Employment Laws: Employment laws cover every facet of the employer-employee relationship, and the government designs these laws to safeguard the rights of employees. Employees make up nearly 98% of a contemporary corporation’s success or failure. So any changes to employment law will significantly affect how the company conducts business.
Other political activities include tariffs, legal discrimination, the law on data security, the law relating to the environment, health and safety, regulations on intellectual property (Copyright, patents), eCommerce and consumer safety.
Top Influence of Political Activities on Nigerian Businesses
Politics can have various effects on businesses through the events performed. These political activities have four primary effects on business organisations. These are:
Political Stability
The impending rules and policies of the government can create unstable political environments. An aggressive takeover is an illustration. This aggressive takeover might result in increased levels of crime and terrorism, kidnapping, bomb blasts, riots, theft, and general unrest.
This hinders business support and scares away foreign investors from the nation. There will always be interruptions and unequal work schedules if political stability is absent. Companies should prepare for political inconsistencies to keep stable business operations.
Economic Changes
Political variables can affect a company by altering or boosting how friendly the market is to that business. A nation’s political climate affects its economy. By affecting the economy, it impacts on the performance of businesses. Therefore, the ability of companies to make a profit and keep their clients depends on how the political climate affects the business environment.
For instance, printing and media companies experience a boom during election seasons as there is an enormous demand for their services to print campaign memorabilia. Likewise, the construction industry flourishes as most lawmakers want to display their physical accomplishments to the electorate.
Regulatory Changes
Frequent changes to government policies and initiatives characterised the political environment in Nigeria. These frequent changes have a detrimental impact on long-term planning for businesses. The government still places restrictions on several industries, which impacts big companies. These regulations have the power to favourably or negatively affect how businesses operate.
In Nigeria, there is a cyclical political climate. This is because democratic governments must run for reelection every four years. The effects of pressure on organisations are part of the external aspect of the business. Regulatory adjustments may increase or decrease market competition. The government establishes various rules and regulations for the company to function internationally and keep its competitiveness in the global market e.g. the Forex policy.
Risk Mitigation
Political activities are most times beyond the control of business owners, making it challenging to specify, foresee, and coordinate. The risk emanating from the political environment of a company measures the probability that political activities pose difficulty for the company. There could be difficulty in pursuing profits because of direct effects (like taxes or fees) or indirect effects (like opportunity costs foregone).
The area of employment law is very complicated and fraught with dangers. Businesses that keep up with the newest developments in this law can better steer their operations in the right direction. However, those who make mistakes must be fully prepared for the costly consequences they will cause. These political variables can further increase the risk factor, resulting in a significant loss for the company. Given the complexity of these problems, businesses frequently fail to mitigate political and environmental issues methodically.
Conclusion
The political environment is one of the least predictable aspects of the business climate. How and how much a government intervenes in the business depends on many political factors, and frequently, there is little businesses can do about it. This article implores business owners to consider the country’s political activities before making business decisions. To a large extent, political activities will directly or indirectly determine whether a market is viable.
