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Nigeria’s Lucrative Investment Climate Luring More SA Companies by ducii: 12:24pm On Nov 21, 2014
Does Nigeria, Africa’s biggest economy, present a great investment opportunity for many South African investors?

The answer to this question is a resounding yes, considering that South Africa’s economy has not made great progress since 2011. This is coupled with the fact that measures by the government to rectify this state of affairs have been lacklustre. This means investors in the country, which is Africa’s most advanced economy, are getting less value for their investments in South Africa. In further confirmation of the negative progress made by South Africa, Nhlanhla Nene, the country’s finance minister, recently revised the country’s economic growth prospects downwards to 1.4 percent this year from 3.5 percent in 2011.

South Africa’s economic growth has been stymied by widespread and nationwide strikes that have hit the country this year, hitting the business confidence. This makes it all the more necessary for South African companies to invest in a country like Nigeria, whose GDP has grown at a rate of 7.3 percent, holds one of the continent’s largest middle class, and has a population of more than 160 million people. The downside according to law firm Webber Wentzel, which held a panel discussion about investment prospects in Nigeria, is that there are genuine concerns about Nigeria’s 2015 general elections being violent and causing further security instability.

But historically, these factors have never posed that much of a threat to the country’s economic stability, according to Webber Wentzel. “While the elections and politics in Nigeria do not necessarily lead to economic instability, there was a shared concern amongst attendees and panellists that it remains a major obstacle to Nigeria reaching its full potential,” the law firm said in a report.

“This is a result of what some see as vested interests of particular groups and communities where singular interests prevent a collective solution. An example of this observation is the national energy deficit and the booming backup generator businesses,” it added.

Financial attractions

But that aside, there are plenty of opportunities in Nigeria that South African investors can tap into and one sector that has potential for greater returns is Nigeria’s financial services sector.

Many South African financial services firms already have operations in Nigeria. These include Standard Bank, FirstRand, Nedbank, Old Mutual, Sanlam and MMI Holdings. And by the looks of things these companies are happy they opted to launch in Africa’s most populous country. I have personally not heard any complaint from them.

“The Nigerian federal government has already proven its ability to untangle frenzied and problematic areas in Nigeria with the success of the changes made in the financial sector,” according to the law firm.

“This has led to tremendous growth in the Nigerian banking sector with 13 Nigerian institutions being included on The Banker’s Top 1000 Banks index in 2014. The second theme in our discussion addressed these improvements,” it continued.

It is understood that Nigeria has become one of the most important destinations for banking investors looking for growth and great returns. It emerged during the panel discussions that companies currently preparing their strategies for African expansion will be making a mistake if they excluded a Nigerian consideration. Webber Wentzel reckons it will be good for Nigeria to be at the heart of any African strategy for any company.

Another opportunity for financial services firms emerges when one considers that only 32.5 percent of Nigeria’s adult people are banked.

But it has emerged that South African businesses are not doing enough to understand the Nigerian market and the opportunities it offers. This is also the problem in South Africa, with government and businesses on a collision course as the government accuses business of failing to invest in the country.

http://www.ventures-africa.com/2014/11/nigerias-lucrative-investment-climate-luring-more-sa-companies/

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