Types of Businesses In Nigeria

The types of businesses In Nigeria are centered around four categories. Perhaps we should start this article by explaining exactly what a business is. A business is a venture that provides a service or product for customers or the general public in exchange for money. The objective of this venture is to make a profit, and that is the major defining attribute of a business venture- it is what differentiates a business from a non-profit organization, or a government institution. Businesses can come in different types and can come in different forms of ownership. That is what we want to look at in this article.

Types of Businesses In Nigeria

There are three major types of businesses that you can find in Nigeria:

1. Service Business

A service type of business does not provide tangible products (that you can feel and touch and take home physically) Service businesses do something for their customers instead.

Examples of service businesses are:

  • Salons and the services they render are to beautify their clients.
  • Repair shops: These take care of their client electronics such as phones and television sets and other such gadgets.  The client is serviced because their appliances which were not working then come back to life.
  • Schools are a type of service business because they build and grow young minds. Their clients are the children or rather their parents.
  • Banks are service businesses because they do not give you anything. the money you walk out of the bank with is the same money you took down there for safekeeping.
  • Accounting firms are also service businesses because they help businesses keep their books, so as to avoid leakages and wasting of money. This service is intangible but at the same time invaluable. Without it many businesses would go under.
  • Law firms may look like a place where all they do is speak high sounding grammar, but they offer an important service to clients; legal defense. Without this service, many innocent people would go to prison, and many businesses would pay heavy fines, such that many would have to close down.
Types Of Businesses In Nigeria

2. Merchandising Business

Merchants are traders, and traders are merchants, but the keyword here is the size of the venture. This type of business buys products at wholesale prices (probably directly from the manufacturers) and sells the same products at retail prices. They are known as “buy and sell” businesses. They make their profit by selling the same products at prices higher than their purchase costs. A merchandising business sells the products without changing the form. However, they may transport and store the goods as a part of their operations

Examples are:

  • Grocery stores: Some upscale grocery stores go to the farmers and buy fruits and vegetables and then package them in attractive packaging. Next, they sell these products at expensive prices.
  • Distributors: some fast-moving consumer goods such as provisions, drinks, beverages, biscuits, cornflakes, and even detergents are bought in large quantities by the major distributors, and are then sold to other smaller sellers who will now sell directly to the consumers.
  • Consumer Goods and Raw Food Items: These also qualify for mention because they are an important player in the merchandising business model. These are those that buy food items like rice, beans, and Garri in large quantities, then transport them to their warehouses for distribution to smaller retail sellers.

3. Manufacturing Business

Manufacturers by raw materials and then spend considerable time and expertise in turning those raw materials into finished products. Unlike a merchandising business, a manufacturing business actually creates something new from the products it buys. Thus, there is a transformation of the products purchased. A manufacturing business puts a lot of work into its business. It needs raw materials, labor, and expertise, not to mention a factory overhead in order to do its business. For the manufacturing business to succeed it has to buy the raw materials at a cheaper rate and then sell the finished goods at a profit.


  • Soap making businesses: they buy raw materials like soda, palm kernel oil, fragrance, and so on and after a special process, the end product which is the soap bars are produced. These can now be sold to the distributors and sellers.

4. Hybrid Business

A Hybrid business is an establishment that does more than one type of business, i.e combines companies that may be classified in more than one type of business.

A stellar example is a hotel: A hotel combines ingredients to produce a fine delicious meal. That makes them manufacturers, but then they also sell cold bottles of wine and other assorted drinks without changing their forms so that makes them merchandising businesses as well. After a stay in a good hotel, the customer feels refreshed and relaxed. This makes the hotel a service business as well.

Different Forms That Types of Businesses In Nigeria Can Take:

Businesses are usually classified according to their sizes and ownership structure. These are the basic forms of business ownership that you can find in Nigeria.

  • 1. Sole Proprietorship

A sole proprietorship is a business owned by only one person. That does not affect the size of the business, however, many businesses in Nigeria are owned by only one person. These kinds of businesses ranging from small shops operated by one person to schools, hotels, agricultural businesses, and restaurant chains.

A drawback to this type of business is the fact that the owner faces unlimited liability; meaning, the creditors who have lent money to him for the purpose of running or expanding the business may go after the personal assets of the owner of the business does not make enough profit so as to service or pay off the debt in a timely manner.
The sole proprietorship form is usually adopted by people who prefer to keep their businesses small.

  • 2. Partnership

If a sole proprietorship business goes far then a partnership business is usually equipped to go much farther. This is because a partnership is a business owned by two or more persons who contribute financial resources and managerial ability to the business. The partners then proceed to divide the profits of the business among themselves after a given time.
Partnerships are broken down into general and limited partnerships but the only major distinction is that in general partnerships, all partners have unlimited liability. while in limited partnerships the creditors cannot go after the personal assets of the limited partners.

  • 3. Limited Liability Companies (LTD)

A company is usually a big business organization that has a separate legal personality from its owners. According to law, the business is treated as a person and as such the owners of the business cannot be held liable for any fault by the business. Ownership in a stock company is represented by shares of stock which are usually determined by the amount of money invested by each stockholder.

The owners of the business agree about the roles to be handled by each individual person involved in the business.
In Nigeria businesses of this nature usually attach the suffix Nigeria Limited to their company name, thus announcing their business structure both as a caveat and as an advertisement, showing that they are big business.

  • 4. Public Liability Companies (PLC)

In Nigeria, it is usually LTDs that graduate to become PLCs- publicly owned companies. The general public is invited to buy shares in the companies and then share in the fortunes of the venture: receive a dividend payout if the company is profitable, or lose their monies if the company is poorly managed and goes under. A major drawback is that the general public has little or no say in the running of the business.

  • 5. Cooperative

A cooperative is a business organization owned by a group of people and that operates solely for their benefit. In Nigeria this mostly Thrift and Credit Unions. They collect contributions from one another and then use it to issue loans and lines of credit to members to expand their businesses.

That’s all about the types of businesses in Nigeria.


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