Nigeria is building a more positive image as an investment destination with potentially great rewards. Richard Branson’s Virgin Atlantic is among the latest to take advantage
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recent launch of Nigeria's new flag carrier, Virgin Nigeria, has raised
hopes that other high-flying international companies will take a closer
look at what the country has to offer as a destination for foreign investment.
The airline, a joint venture by Nigerian institutional investors and
Sir Richard Branson’s Virgin Atlantic, commenced operations with
its inaugural flight to London in June. “They intend to make Nigeria
one of the control centres, so we are looking at billions of US dollars
in terms of how the investment is going to benefit Nigeria,” says
Mustafa Bello, Executive Secretary and Chief Executive
Officer of the Nigerian Investment Promotion Commission (NIPC).
With its abundant human and mineral resources, sound macroeconomic climate, vast domestic market, and excellent trade links with the rest of West Africa, Nigeria offers one of the highest rates of investment returns in the emerging markets, presently estimated at 30 per cent. The other side of the coin is that Nigeria has been perceived abroad as a high-risk country with a challenging business environment, but that perception has been changing. Oil and mining have placed Nigeria among Africa’s leading recipients of FDI and opportunities still exist in these sectors. However, the authorities are eager to encourage the spread of foreign capital to other areas of the economy, ranging from agriculture, energy, infrastructure and manufacturing to telecommunications, tourism and transport.
Against a background of deregulation, liberalisation and privatisation of state enterprises, determined efforts are being made to make Nigeria more investor-friendly, reduce bureaucracy and combat corruption. And the evidence is that Nigeria’s image is changing. In July, for example, another British company, Globe Commodities, concluded a deal to begin an integrated large-scale production of palm oil in the country with an immediate investment of $150 million (£83 million), which is expected to rise to $1.5 billion (£835 million) over the next ten years. Major investments of this kind make it easier for the NIPC to put across the message that Nigeria offers an opportunity for investors to target a brand new, untapped and highly lucrative market. “We have a population of 140 million, so if you are looking for the market, we have it,” says Engr Bello. “Why squeeze yourself into a competitive market where the margin is 4 to 5 per cent? Why not come to an environment where the margin is between 40 to 50 per cent, even though the cost of production is a bit high? In addition to the incentives that the government offers, perhaps you’ll find that the operating environment is even friendlier than where you are.”
As head of the NIPC, Mustafa Bello is carrying out a policy aimed at decentralising the flow of investment directly to the federal states. “I have visited 13 states and met the governors, the commissioners of commerce and industry as well as the investment agencies. We have designed a training programme for the staff of these agencies to build their capacity. Our objective is that they become our representatives throughout the country.”
The UK is among the largest investors in its one-time colony, with assets totalling more than £1 billion. British companies already present in Nigeria include Shell in the oil and gas sector, British-American Tobacco, British Airways, Cadbury, GlaxoSmithKline, Guinness and Unilever. Julius Bala, former Director General of the Bureau of Public Enterprises (BPE), is optimistic that the high profile given to Africa by Tony Blair will encourage new interest from British firms as Nigeria steps up the pace of privatisation. “We hope that with the new posture of Prime Minister Blair on relationships with Africa, we will see major efforts by British companies to invest in Nigeria,” he says. “We hope British companies participate in the major privatisation initiative in the next months ahead.”
Together with the World Bank the British government has given financial support to Nigeria’s privatisation programme through the Department for International Development (DFID). Over the last six years Nigeria has realised a net income of about N39 billion (£163 million) from the sale of public enterprises. Major elements of the privatisation programme scheduled for this year include the unbundling of the national electric power authority, Nepa, and the sale of the state’s 51 per cent share in the national telephone company, Nitel.
Other enterprises on the list include National Insurance Corporation, the Federal Airports Authority and motor vehicle manufacturers Volkswagen and Leyland, in addition to hotels, palm oil companies, paper mills and ports.
Reasons to invest
• Second largest economy
in sub-Saharan Africa
• Sound and stable macroeconomic climate
• Improved governance
• Consumer market of 140 million
• Potentially the hub of West Africa
• Good trade links with the rest of West Africa, providing access
to a regional market of 250 million
• Wealth of unexploited natural resources
• Well-educated workforce
• Ongoing deregulation and liberalization
Sectors offering opportunities
• Oil and gas
• Agriculture
• Energy
• Financial Services
• Infrastructure
• Manufacturing
• Telecoms
• Tourism
• Transport
Website: www.nipc-nigeria.org
Tel: +44 20 76296213, Fax: +44 20 74953707 - [email protected]