Nigeria

To an average Australian, Nigeria brings forth mixed thoughts and feelings. To some, Nigeria is viewed with reservations, but to many; Nigeria represents the largest market and fastest developing economy in Africa. Historically, Nigeria is not in the bracket of Australia’s traditional trading partners; as such, the trade volume between the two resource-rich countries remains low. Having said that, globalisation and information technology have practically made it possible for organisations and entrepreneurs to do business anywhere in the world where there are viable opportunities.

Nigeria has many such investment opportunities for Australians to explore. Moreover, Australian businesses stand to do better in Nigeria than most Asian and Middle East investors because both countries have English as official language, belong to the Commonwealth, are governed by democratically elected leaders, and share the same values of human rights and rule of law under the British judicial system.

Recent economic reform initiatives have opened Government-backed business opportunities in agribusiness, telecommunications and ICT, energy generation and distribution, oil and gas exploration, construction and infrastructure development among others. For example, in 2001, only 150,000 Nigerians were connected to mobile phones; today, more than 70 million Nigerians are active mobile phones subscribers courtesy of the rapid flow of foreign direct investment. With a population of more than 150 million people, Nigeria stands as an investor’s delight in Africa.

New exporters

Nigeria’s economy is currently experiencing the resurgence in the middle class as a result of strong economic activities in the oil and gas, telecommunications, entertainment and commerce sectors. Nigerians in this economic bracket indulge in acquiring luxuries such as furnished new homes, brand new cars, designer labels, electronic gadgets, and choice wines. These acquisitions are considered necessary to announce the change of social and economic status. The growing appetite for luxury goods in Nigeria provides viable opportunities for Australian businesses to enter the supply chain or develop shopping malls in partnership with state governments or local companies.

According to the latest 10-year forecast from Global Construction Perspectives and Oxford Economics, China will overtake the US as the world’s biggest construction market by 2018, and the fastest growth will happen in Nigeria. The forecast is already coming true with the Federal and State governments’ new policy of developing the nation’s infrastructure through public private partnerships (PPP). The new PPP initiatives have resulted in the concession of airports, roads, bridges and public buildings. Australians can be part of this new approach for infrastructure development in Nigeria.

Existing exporters

Nigeria’s primary economic strength comes from the export of natural resources. Despite huge deposits of oil and gas in the country, steady supply of electricity remains a major source of worry and burden to every Nigerian and business in the country. Nigeria’s unreliable power situation offers Australians great opportunities in energy generation, distribution, consultancy and equipment supply. Australians are guaranteed opportunities because of the Nigerian Government’s vision 2020 target to generate 60,000MW electricity from less than 7,000MW obtainable today.

Visiting Nigeria in December 2009, I observed that Nigeria’s Federal Government is truly working hard to improve the power situation in the country with a flurry of activities taking place in the power sector. My advice for intending Australian investors is to ensure they partner with either the Federal or State Government in a PPP for any power project as a sure berth into the market.

In the 1960s, Nigeria experienced a massive economic boom because its economy was based on agribusiness, coupled with high global demand for oil. The present Nigerian Government has thus launched major economic reform initiatives that are expected to switch the country from oil and gas dependence to an agribusiness and technology-driven economy. Australians can explore the Nigerian Government’s 40:30:30 co-financing formula for the agribusiness sector. This unprecedented system enables foreign investors to come up with the initial 40 percent of take-off capital, while the Government brings 30 percent to the table and guarantees a local bank loan for the remaining 30 percent. It is a win-win outcome for both investor and Nigeria.

The Federal Government of Nigeria provided more than US$8 billion in early 2009 as low interest loans to local farmers and foreign investors who intend to start commercial farming and processing of produce in the country. Australians with an interest in agribusiness could seek partnership with Nigerian state governments.

President Yar Adau implied that their World Trade Organisation (WTO) connection was behind the move. “We must realise the fact that as WTO member we are a signatory to the World Trade Organisation treaty and the trend is towards free market access which means we cannot sustain these bans for too long,” he said.

Adau added there was growing global pressure to remove the bans as well: “The trend all over the world is to allow goods to flow freely which means in the long run Nigeria will be forced to lift the ban on all commodities except those that are globally prohibited.”

Included in the 40 items is crude palm oil, which will attract a 35 percent duty. The ban on the importation of refined vegetable oil will remain. The government is now looking to improve areas of deficiency within the country’s capabilities.

Some years ago, industry experts predicted the growth of telecommunication and ICT in Africa but never reckoned that Nigeria could grow astronomically from teledensity figures of 0.4 lines per 100 inhabitants in year 2000, to teledensity figures of 42 lines per 100 inhabitants in October 2008.

Nigeria’s mobile market gained more than 11.3 million new customers in the first half of 2008, expanding by 28 percent to reach 51.7 million mobile users. Nearly 4 million customers were added in the first quarter of 2008, while an impressive 7.3 million were added in the second quarter of 2008.

Instead of slowing down, the growth of Nigeria’s mobile market appears to have accelerated in previous quarters; by the end of June 2008, mobile penetration in Nigeria had exceeded 33 percent. In addition to strong second quarter performances from market leaders, a strong growth stimulus has come from the increasing number of service providers offering GSM and CDMA-based services.

The African Development Bank (ADB) recently provided $66 million for the development of a submarine fibre optic cable connection project along the West African coast. The project, totalling about US$240 million, will involve the laying of 7,000 kilometres of submarine fibre optic cable between Lisbon in Portugal, Accra in Ghana, and Lagos in Nigeria. The 1.92 terabytes per seconds of available bandwidth will be leased wholesale to telecom operators and internet service providers on an open access basis.

In spite of the achievements recorded so far in mobile phone penetration, there are still millions of Nigerians with limited or no access to ICT services due to the paucity in network infrastructure. Efforts by government agencies, universities, and local and international ICT companies to develop the sector appear to be paying off through ADB and other private initiatives.

Since 2001, the Nigeria Communication Commission has licensed various digital mobile operators, fixed wireless access operators, long distance operators, internet service providers, a second national carrier and more recently, launched the unified access service license, to promote competition in all segments of the market.

A good investment

From the paltry sum of US$50 million invested by 1999, private sector investments in Nigeria today stand at more than US$12 billion. The country now boasts six mobile networks with all 36 state capitals covered by both voice and data services through GSM and CDMA technologies.

Out of Nigeria’s 59 million active phones, only about 13 million are in rural areas, where 80 percent of the population resides. To narrow this gap, the Nigeria Communication Commission plans to offer fixed wireless access telephony licences for populations in areas not serviced at the moment including underserved urban and rural areas in Nigeria.

In the ICT sector, Nigeria had 117 internet service providers with 1.52 subscribers and 6.75 users per 100 inhabitants at the end of 2007. The growth of ICT has transformed business practices, making business more cost effective, developing financial markets and e-learning including open and distance learning. The Nigeria Communication Commission’s strategic focus is to actively pursue the provision of ICT access to all Nigerians within a five-kilometre radius by 2010.

The explosion in telecommunications and mobile technology not only gives Australian businesses opportunities in hardware, software and services, but also investment.

To find out more about the sector, visit October First and request more information.

—Frank Aneke is the principal of OctoberFirst Consulting, an investment communication firm specialising in business opportunities in Africa. OctoberFirst is a member of the NSW Business Chamber.

For most individuals, it can be hard to comprehend why a group of individuals could take it upon themselves to unleash wanton destruction of human lives and properties in a quest to actualise religious or political objectives.

In Indonesia, terror groups have taken to suicide bombings targeted at Westerners in that country because of their belief that Western powers are at war with Islam in Afghanistan, Palestine and Iraq.

In India, there has been spate of bomb attacks and hotel shootings across major cities; the Southern Thais are still having an on-and-off battle with the Thai Government in their quest for self-determination, while the Uighurs recently had violent run-ins with Chinese authorities.

Recently, an Islamic sect in Nigeria took on the law enforcement agency in that country in a failed bid to impose Sharia law in a country populated evenly by Christians and Muslims.

Politics and violence

One may ask why violence is the preferred option for sectarian groups against other legitimate alternatives readily available. Here’s an insight into the recent sectarian crisis in Nigeria, which was orchestrated by the ‘Boko Haram’ sect in parts of northern Nigeria.

The sect launched an attack in Bauchi on a police station with the motive of securing more arms to eradicate perceived Western influences in Nigeria, and replace same with Sharia law. The group attacked security agencies, churches, Christians and Muslims in their bid to reverse the Nigerian Constitution and impose Sharia law across the country.

Information made available by the Nigerian President in a nationwide broadcast indicated that the sect has been in existence for more than two years and had been stock-piling arms and ammunition, including bomb-making materials for quite sometime. Despite this knowledge held by Nigeria security operatives, it took an attack on a police station for the government to clamp down heavily on the sect members.

Former Nigerian President Chief Obasanjo was in power when the sect started and could have nipped the insurgents in the bud. The former President simply ignored the sect because of concerns that religious zealots could brand any action by a Christian President against the group as an attack on Islam.

Current President of Nigeria Mallam Umaru Yar’ Dua is a Muslim; he responded as soon as the violence erupted and ordered military action against the sect, which may have permanently quelled the flaming ambition for violent constitutional change.

The suspected financier of the renegade Islamic group, a former State Government Commissioner, claimed the sect’s version of Islam is superior to others and that Western values and education are haram (forbidden). Interestingly, the leaders of the sect drove around in SUVs and coordinated their attacks through GSM mobile phones, all part of the Western influences against which they are fighting. This confirms the often ignored disconnect between ideological beliefs of sectarian groups and realities of the 21st century that confront them daily.

The governors of northern states in Nigeria have resolved to monitor the activities of all religious groups in the region to forestall recurrence of unrest. The northern Governors joined with Nigeria’s Immigration Department to become more vigilant about the influx of foreign nationals into the northern states with the aim of propelling the activities of militant Islamic groups.

Leaders across Nigeria have observed that the security of lives and property remains a primary constitutional responsibility of government and challenged political leaders at various levels to come out of religious sentiments and provide citizens with the dividends of democracy, which includes principles of good governance, employment opportunities, power, good roads, qualitative education and transparent electoral system.

Emerging economies at risk

Lack of these basic amenities in developing nations is what propels self-destruction; these unfortunate conditions makes exploitation of less-privileged youth by wealthy and fanatical few in emerging economies a recurring tragedy.

Travellers to cities or countries prone to sectarian violence should endeavour to seek informed advice from the Department of Foreign Affairs or the High Commission of the destination in Australia. It is important to know the sectarian group key targets and avoid such places or individuals as much as possible. Having credible intelligence could make the difference between life and death in a foreign land.

—Frank Aneke is the principal of OctoberFirst Consulting, an investment communication firm specialising in business opportunities in Africa. OctoberFirst is a member of the NSW Business Chamber.

These commercial farmers were given farming lands, subsidised loans and ongoing upgrade of farming infrastructure, such as irrigation. They have since started commercial farming in several parts of Kwara State in Nigeria.

The success story of these farmers is one of the key factors that have encouraged the Government of Nigeria to announce plans to revive agriculture as the bedrock of its economy. Nigeria’s new agricultural initiative comes as it tinkers with its Vision 20: 2020 project: to join the top 20 economies in the globe by 2020.

The recent global push towards a switch to renewable sources of energy means oil-dependent economies like Nigeria are searching for an alternative economic base considering the volatility of oil revenue. Hence, the government’s recent announcement came with approval of almost US$9 billion to be distributed to established local commercial farmers, state governments and foreign commercial farmers ready to set up in the country.

Today, more than 100 Zimbabwean farmers displaced by Mugabe regime are now actively engaged in commercial farming in Nigeria. Their success has inspired most state governments to seek for foreign expertise in agribusiness.

Incentives for agribusiness

The agribusiness experts are expected to replicate their technical expertise and make profits from their roles in the revolution of agriculture in Nigeria. The incentives on offer include five-year tax holidays, full ownership, co-financing and land acquisition among other infrastructures.

Co-financing options include the 40:30:30 funding formula: new foreign investors provide 40 percent of the total take-off capital needed for investment, the Nigerian government is mandated to provide
30 percent of the capital, while the remaining 30 percent will be sourced from a government-nominated commercial bank in Nigeria. This new co-financing format is designed to minimise capital outlay and encourage foreign investors for a limited time.

The World Bank, through the International Donor Agency, will commit an additional US$150 million to the development of commercial agriculture in the states of Cross Rivers, Enugu, Kaduna, Kano and Lagos. The project is expected to spread within five years.

Nigeria is the biggest English-speaking consumer market in Africa and the Middle East with a population of more than 150 million people. Of the 910,000 square kilometre land mass, about one-third of the land is arable.

This presents Australia, with its expertise in agribusiness, with plenty of opportunities including  investing in a Nigerian presence, down to exporting farming equipment and services. Interested Australian commercial farmers could explore partnership opportunities with nominated state governments.

For more information about Nigerian agribusiness opportunities, see www.octoberfirst.com.au.

—Frank Aneke is the principal of OctoberFirst Consulting, an investment communication firm specialising in business opportunities in Africa. OctoberFirst is a member of the NSW Business Chamber.