The Report: Nigeria 2012
The Nigerian government continues to implement its liberalisation programme, reducing spending on subsidies, increasing investments in key infrastructure and opening the door to the privatisation of the power sector. Foreign direct investment surged in 2011, reaching $8.7bn, up from $6.1bn for the previous year. The economy grew by 7.69% in 2011, a slight decline from the 7.87% recorded the previous year. Industry, retail and telecommunications in particular are all seeing increasing amounts of FDI. The country is working on meeting several challenges to continued growth, including the unreliable transmission and distribution of power and the ageing transport and infrastructure network.
Country Profile
Nigeria is the 14th-largest African country and possesses a rich and varied landscape, biodiversity and climate. While it is known for its oil and natural gas, Nigeria also has substantial reserves of coal, iron ore, zinc, tin, limestone, lead and niobium. The capital, Abuja, is located in the geographic centre and has a registered population of an estimated 1.6m. Nigeria has a varied assortment of ethnic groups, with the largest three – the Yoruba, Igbo and Hausa-Fulani – accounting for a collective 68% of the total population. The country holds significant political power in the region and on the international stage. This chapter contains interviews with President Goodluck Ebele Jonathan; Stephen Green, UK Minister of State for Trade and Investment; and Jim O’Neill, Chairman, Goldman Sachs Asset Management. It also includes a viewpoint with Ron Kirk, US Trade Representative.
Explore chapterEconomy
As one of the fastest-growing economies in the world, according to the Federal Ministry of Finance (FMF), Nigeria is certainly appealing to foreign investors. Growth has averaged 6.7% since 2006 and has been relatively uninterrupted by the global financial crisis. An emerging middle class is beginning to fuel growth in domestic consumption. Income per capita has increased almost four-fold since 2001, from $357 to $1541 in 2011. Foreign investment surged in 2011, with the country attracting $8.7bn in FDI, up from $6.1bn in 2010. Investment broadened beyond the oil and gas sector, with deals in industry, agro-processing, retail and telecommunications. To achieve its vision of becoming a top 20-economy with a GDP of $900bn by 2020, the country must sustain annual growth rates of around 13.5%. This chapter contains interviews with Ngozi Okonjo-Iweala, Coordinating Minister for the Economy and Minister of Finance; Frank Nweke Jr, Director-General, Nigerian Economic Summit Group; and Mustafa Bello, Executive Secretary and CEO, Nigerian Investment Promotion Commission (NIPC). It also includes a viewpoint from Elizabeth Littlefield, President and CEO, Overseas Private Investment Corporation (OPIC).
Explore chapterBanking
Nigeria had seven banks with total assets in excess of N1trn ($6.4bn) as of end-2011, with the top four accounting for 55.62% of the sector’s net profits. Yet although the continent’s most populous nation boasts some of its largest banks by assets, just 21% of Nigeria’s population of about 165m people is banked, according to a 2011 study by the Central Bank of Nigeria (CBN). Bank credit remains skewed towards corporate borrowers, with about 80% of the top 14 banks’ income coming from corporate banking in 2011. The mortgage market remains small, with total lending in this segment equivalent to less than 1% of GDP. While the sector fell short of expectations of a full turnaround in 2011, first-half results for 2012 marked a turnaround in the industry’s profitability. This chapter contains interviews with Lamido Sanusi, Governor, Central Bank of Nigeria; and Razia Khan, Head of Research for Africa, Standard Chartered.
Explore chapterCapital Markets
The stock market is the continent’s third largest by capitalisation after Johannesburg and Cairo. The Nigerian Stock Exchange (NSE) includes a main board with 186 equities, a board dedicated to SMEs with 12 listings, and a single exchange-traded fund. While investors welcomed what they saw in 2010 as a fleeting recovery in markets, 2011 was more challenging, as it came on the back of sustained volatility in global markets and fallout from the 2008 margin lending crisis. However, regulators have seized on the crisis as an opportunity to restructure exchange fundamentals by improving transparency and governance, while a pipeline of new issues and instruments is being built. These could translate to significant opportunities for value investors. This chapter contains interviews with Oscar Onyema, CEO, Nigeria Stock Exchange; and Wale Agbeyangi, Managing Director, Cordros Capital. It also includes share analyses on six local firms, with information provided by Cordos Capital.
Explore chapterEnergy
Nigeria’s 2011 output level was around 2.45m bpd of oil and condensate, about 2.9% of global production, making it the world’s 12th-largest supplier that year. Estimates of proven reserves for natural gas vary from 180.5 tcf to 187 tcf, but these figures may well underestimate the country’s potential. Indeed Nigeria’s natural gas is even more abundant than its oil, but the country has so far failed to realise more than a fraction of its gas potential. Natural gas exports accounted for 67% of total production, excluding flaring, in 2011. Although an undeniable giant in the energy world, Nigeria faces some challenges in terms of performance and progress of its hydrocarbons sector. These include broad issues like politics and insurgency, in addition to the specifics of regulating a large energy sector. This chapter contains a viewpoint from Diezani Alison Madueke, Minister of Petroleum; and an interview with Ernest Nwapa, Executive Secretary and CEO, Nigerian Content Development and Monitoring Board (NCDMB).
Explore chapterUtilities
This chapter looks at Nigeria’s power output and generating capacity, both of which currently sit well below those of neighbouring countries, although work to address this is proceeding. According to figures from a World Bank study, Nigeria produced 124 KWh per year in 2010. Much of Nigeria’s power generation, transmission and distribution capacity is ageing and poorly maintained. At present, around 70% of national capacity, which works on natural gas, has either failed or is proven to be insufficient. Therefore, President Goodluck Jonathan has made the power sector a top priority, initiating a detailed road map for its development. The sector has already attracted interest: Germany-based Siemens recently built the 414-MW Geregu power plant and is engaging in the development of other projects in partnership with international investors. This chapter contains interviews with Sam Amadi, Chairman, Nigeria Energy Regulatory Commission; and John Rice, Vice-Chairman, General Electric.
Explore chapterInsurance
While demographics alone should mean there is plenty of room for growth, the insurance sector’s recent performance has not been sufficient for it to reach the critical mass necessary to improve its image with clients and enhance its capacity to underwrite large risks. According to the Nigerian Insurance Association (NIA), insurance penetration reached 0.6% in 2011, far lower than other African countries, such as Kenya (2.5%) or South Africa (16%). The market at its current size is certainly crowded: there are 30 general firms, 16 life insurers and nine composite underwriters. However, recent divestment and consolidation efforts have already pared the industry down, with further mergers expected to decrease its size even further. This chapter contains an interview with Dave Uduanu, Chairman, Pension Fund Operators Association of Nigeria.
Explore chapterTransport
There is no single answer for bringing the transport sector up to speed to meet the needs of the economy and population, and any approach to overhauling it must be comprehensive. The government, through its National Transport Policy (NTP), recognises that lifting barriers to private enterprise is a vital element of any comprehensive plan for the sector. The NTP calls for initiatives to modernise roads, bridges, rails, ports, urban transport and other areas vital to commercial activity. Where the government has chosen not to undertake transport projects, it has entered into public-private partnerships (PPPs). For instance, the completion of a port at Lekki, in Lagos State, in 2015 is expected to take some pressure off Lagos Port Complex and Tin Can Island Port. This chapter contains an interview with Martin Wittig, CEO, Roland Berger Strategy Consultants.
Explore chapterConstruction & Real Estate
Buoyed by demographic and economic growth, Nigeria’s construction sector has the potential to become the largest and most competitive on the continent. Between 2006 and 2010 the industry expanded at a rate of 12.58%. This positive growth is expected to continue in the near future as the government rolls out a number of infrastructure projects. Overall strong economic growth in Nigeria has also driven expansion of the real estate sector, which is expected to continue on its upward trend in coming years in line with the country’s rising GDP. However, whilst its growth prospects are positive, the sector faces a number of serious challenges, including limited funding to address a shortage in affordable housing and the task of providing formal homes for some 80% of the population who currently live in informal housing structures. This chapter contains an interview with Ogunbusola Solomon, President, Federation of Construction Industry.
Explore chapterIT & Telecoms
Transforming Nigeria into a knowledge-based economy is the central goal of the government’s policy on ICT. Mobile use is the main means of access, with around 92m users, and numbers could grow significantly as other devices become available. While there are a number of opportunities to develop the Nigerian IT sector, the field is not without some challenges, including those arising from the lack of connected terrestrial infrastructure. These could be solved, however, thanks to significant investments being made in satellite technology and by telecoms operators in fibre-optic networks and base stations. Significant investments by all operators in their terrestrial infrastructure should bring about better coverage and quality of service, but these firms still face challenges in terms of power costs and security issues. This chapter contains an interview with Ernest Ndukwe, Chairman, Openmedia Group, and Director, Centre for Infrastructure, Policy, Regulation and Advancement, Lagos Business School.
Explore chapterIndustry & Retail
Nigeria’s industrial sector is quite small overall, accounting for less than 1% of GDP, but some fields are expanding rapidly. The cement segment, for example, has grown rapidly in recent years, and in 2012, the country produced enough cement to meet local market demand for the first time. Authorities are also planning to use the country’s rising natural gas output as industrial feedstock, positioning Nigeria to become a regional centre for petrochemicals manufacturing. In retail, local press reported in August 2012 that a record $1.3bn in foreign investment had come into the sector over the preceding two years. A prime example of foreign investment in the sector is the South African supermarket champion Shoprite, Africa’s largest retailer. In the clothing arena, French lingerie and swimwear firm Etam opened an outlet at The Palms in April 2011, while Spain’s Zara set up shop at Lagos’ Silverbird Galleria in February 2012. With its population of about 164.8m, Nigeria is a potentially lucrative market. This chapter contains interviews with Olusegun Aganga, Minister of Trade and Investment; Kola Jamodu, President, Manufacturers Association of Nigeria; and Oba Otudeko, Chairman, Honeywell Group.
Explore chapterAgriculture
Agriculture makes a significant contribution to the economy, accounting for 40% of GDP at the end of the fourth quarter of 2011 and employing 60% of the population. Sector policy is guided by the Agricultural Transformation Action Plan (ATAP), which aims to diversify the economy and support rural areas while also reducing the cost of food imports. Some $8.3bn is spent on importing staple foodstuffs annually, a figure that is rising by 11% a year. Under the ATAP strategy, the government wants to boost domestic production for staple crops such as rice and cassava, as well as cash crops like palm oil, cocoa and cotton. Yet significant obstacles remain in the form of finance, infrastructure and land availability. This chapter contains an interview with Akinwumi Adesina, Minister of Agriculture and Rural Development.
Explore chapterAnambra
Anambra State has a population of 4.7m, making it the eighth most populated state in the country and the second most densely populated. In a region known for dominant oil operations and related security challenges, Anambra State has kept on a steady course towards economic diversification in the last few years. The conclusion of sizeable deals with various companies in agriculture, manufacturing, production and petrochemicals bodes well for those hoping to tap into the state’s investment potential. With clear development goals and a number of industries on the rise, Anambra’s economic growth model is likely to attract considerable interest from local and foreign business communities.
Explore chapterMedia & Advertising
With a population of some 160m, Nigeria has one of the most active media sectors of any emerging market. Excluding satellite networks, 147 television stations and 100 radio stations fill the airwaves. The dramatic rise of Nollywood in the past decade has spurred global interest from viewing audiences and investors alike, and the industry is poised to be a major force both domestically and internationally. Despite the encouraging signs, challenges to expansion remain. Among these are the high costs associated with unreliable infrastructure, including electricity outages and unrefined distribution networks, which hamper circulation. An overdependence on advertising revenues may also prove problematic, and, there remains a degree of uncertainty concerning Nigeria’s regulatory environment with respect to broadcast and online media. This chapter contains an interview with Jason Njoku, Founder and CEO, iROKO Partners.
Explore chapterTourism
Tourism is among those sectors with significant potential to support efforts to diversify away from oil in a sustainable and inclusive manner. According to the Federal Airport Authority of Nigeria, the inflow of passengers rose in 2011, with more than 1.9m arrivals recorded at the international airports of Lagos, Abuja and Port Harcourt, up by about 10% year-on-year. Traffic at domestic terminals was much higher, with 5.5m incoming and 5.4m outgoing passengers. Roughly 98% of visits by foreigners are for business reasons. This has resulted in an increase in demand for international hotels, which have been opening their doors in growing numbers, particularly in Lagos. A N5bn ($32m) fund was set up at the beginning of 2012 that will be used to support the development of the industry, providing financing and facilitating capacity building. Estimates put the sector’s direct contribution to GDP at 1.6% in 2011. This is expected to increase by 11% in 2012 and an average of 6.3% a year between 2012 and 2022. This chapter contains an interview with Taleb Rifai, Secretary-General, World Tourism Organisation (UNWTO).
Explore chapterHealth & Education
Overall indicators in Nigeria paint a picture of a country in need of developing its health sector, but prospects for growth and further modernisation are bright, as the industry has been improving gradually. Funding for health care in Nigeria tends to be low, at approximately $13 per capita annually. The 2012 federal budget allocated some $1.81bn for the sector, amounting to 5.9% of the total. Rural areas lag far behind urban centres in terms of the number of medical services and professionals available. The introduction of a number of new programmes will serve to help bridge this divide. In education, the rapid growth of the economy has meant an equally rapid increase in the need for a skilled and educated workforce. Federal and state governments are increasingly looking to the private sector and non-state actors’ participation through partnership and collaboration. A number of partnerships have recently been formed between universities and private sector companies to increase the number of research and development initiatives. Funding for the sector, however, remains low, making up just 8.4% of the budget, well below the 26% recommended by UNESCO for developing countries. This chapter contains an interview with Paul Orhii, Director-General, National Agency for Food and Drug Administration and Control (NAFDAC).
Explore chapterTax
In conjunction with PwC, OBG explores the taxation system, examining Nigeria’s investor-friendly environment. OBG talks to Ken Igbokwe, Country Leader at PwC Nigeria.
Explore chapterLegal Framework
OBG introduces the reader to the different aspects of the legal system in Nigeria, in partnership with Ajumogobia & Okeke. Ovie Ukiri, Managing Partner at Ajumogobia & Okeke, talks to OBG.
Explore chapterThe Guide
This section includes an article about Naija music in Nigeria, as well as information on hotels, government and other listings, alongside useful tips for visitors on topics including currency, visas, language, communications, dress, business hours and electricity.
Explore chapterTable of Contents
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President Muhammadu Buhari
Helen Grant, Member of Parliament and UK Trade Envoy to Nigeria
Yewande Sadiku, Former CEO, Nigerian Investment Promotion Commission (NIPC)
Jumoke Oduwole, Special Adviser to the President on Ease of Doing Business, and Secretary to the Presidential Enabling Business Environment Council
Samaila Zubairu, CEO, Africa Finance Corporation
Nasir Ahmad El-Rufai, Governor, Kaduna State
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Daily Times Nigeria: Boss Mustapha’s unforced error
