Interview: James Duddridge
What is the most common misconception of Nigeria as a destination for investment?
JAMES DUDDRIDGE: There is a general conception that the risks in Nigeria are often too high to do business. Yet Diageo, PwC, GlaxoSmithKline, Unilever and PZ Cussons are all examples of well-established UK blue-chip firms in Nigeria. We should therefore be clear on the opportunities it presents. Nigeria is the world’s 23rdlargest economy and predicted to be in the top 20 by 2050. Lagos alone is the fourth-biggest economy in Africa and a booming commercial hub. People are looking at the market in a new way after the GDP rebasing.
It is important to be realistic and demonstrate to businesses that the challenges are being addressed. Nigeria has made progress in the World Bank’s ease of doing business rankings, rising to 170th – albeit out of 189 countries. The Nigerian government and agencies must continue to implement the necessary reforms.
The UK government will carry on working with UK business and our Nigerian counterparts to help mitigate market risks and attract greater investment. My time as chair of the British Parliament’s Africa All Party Parliamentary Group showed me that these are challenges not just in Nigeria, but for the whole continent.
Where are the most promising areas for increased economic ties between the two countries?
DUDDRIDGE: Prosperity is key to my vision of the UK’s relationship to Africa, and Nigeria is vital to this. It is the UK’s second-largest trading partner in sub-Saharan Africa. Businesses I meet frequently tell me they want to do more. I believe it is important that we broaden our trade relationship, building on our successes in energy and expanding into new growth sectors. This will leave bilateral trade less exposed to oil price fluctuations and help Nigeria make the necessary move towards a more diversified economy.
Oil and gas currently accounts for 70-80% of government revenue and 90% of foreign exchange earnings. However, as a former banker who worked in Africa, I am always keen to see opportunities and growth in the financial sector. This is fertile ground in Nigeria. Analysts predict that the Nigerian Stock Exchange (NSE) has the potential to reach $1trn capitalisation by 2016 – an enormous expansion. Other openings lie in insurance, bonds and establishing a derivatives market.
The UK government’s Emerging Capital Markets Taskforce, headed by the former lord mayor of London, Sir Roger Gifford, is taking action to make the most of these opportunities and help develop Nigeria’s capital markets. Late in 2014 Sir Roger was in Lagos to witness the signing of an agreement between the NSE and the London Stock Exchange to support African companies seeking dual listings in London and Lagos.
Led by David Heath, MP and the prime minister’s trade envoy to Nigeria, we are targeting three other key sectors: energy, agriculture and education. Retail is another important area. I believe more big-name UK retail firms should consider the opportunities presented by the boom of the middle class in Africa’s largest economy, which has expanded by 600% since 2000.
What tangible steps could Nigeria take in order to best manage its economic growth inclusively?
DUDDRIDGE: Predictions suggest that by 2050 Nigeria’s population will be the fourth largest in the world. It is therefore vital for its long-term prospects that economic growth be inclusive. Diversification is important, not only to sustain growth but to spread its dividends. Almost 100m Nigerians live on less than $1.25 a day and the country remains predominantly rural. The agricultural sector accounts for 26.8% of GDP and around two-thirds of employment, yet it has suffered from years of neglect. Further investment in infrastructure and power is also needed, and I know the Nigerian government is taking action on these points. Reform to the business environment should continue – not least by passing the Petroleum Industries Bill to ensure that oil wealth is equitably shared and properly invested – on terms that remain attractive to international investors.
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