May 3rd, 2006
Why are Nigerian companies doing poorly in Africa?


A recent survey by African Business shows that no Nigerian company made top 40 in Africa.

This poor showing has triggered a spate of concerns by Nigerians reports Adedapo Olawunmi

The African business landscape is expanding and thriving. However it seems a handful of companies are dominating the scene. The curious thing is where Nigerian companies stand in the scheme of business on the continent. Many would expect that with Nigeria´s human and natural endowment companies in Nigeria will be at the forefront of business around the continent.

This unfortunately is not the case. According to a survey published in the African business magazine, a continental business magazine, the largest Nigerian company going by stock market capitalisation, is not up in the best 40

in Africa. South African companies accounted for about 15 of Africa´s top 20 companies by stock market capitalisation, spanning across the finance, industrial, extractive, and retail sectors. Other countries with companies on the top 20 list are Egypt and Morocco.

According to the survey by the magazine Nigerian Breweries Plc is Nigeria´s top company and the 44

the largest company in Africa in terms of stock market capitalisation.

Other Nigerian companies on the list in are First Bank of Nigeria Plc is at 75

th position, with $1,226,480,646 in market capitalization, Union Bank Nigeria at 81st position with $1,164,829,732 9, Guinness Nigeria at 97t,h $868,002,114. At 103rd position is Intercontinental Bank $760,109,510, then Zenith Bank Nigeria at 104 $758,620,690. Nestle Nigeria occupies the 105th position $757,224,617, followed by UBA Nigeria at $109 [/b]703,295,019, [b]Nigerian Bottling Nigeria at $119 [/b]650,733,923, and G[b]uaranty Trust Bank Nigeria at $126 570,114,925.

In another survey of top African banks by assets in US dollars, contained in Jeune Afrique, Africa Report for March 2006, the largest Nigerian bank by assets is Union Bank Plc with $3.23 billion in asset-base placed 23rd in Africa.

Following Union Bank in the top 50 list are First Bank at 31

st position $2.28 billion, Zenith Bank at 47 $1.49 billion, and Guaranty Trust Bank at 49th position with $1.42 billion.

Again South Africa dominated the top ten with four banks. Other countries with banks featuring on the top ten list were Libya, Morocco, Egypt and Algeria.

T[b]he top ten banks are Standard Bank South Africa, $108,5 billion, ABSA Bank South Africa $61,4 billion, Nedcor Bank South Africa $57,7 billion, FirstRand Banking Group South Africa $57,0 billion, Investec Group South Africa $34,1 billion, National Bank of Egypt $21,4 billion, Libyan Arab Foreign Bank Libya $15,9 billion, Banque Misr Egypt $14,8 billion, Banque Exterieure D’Algerie $12,5 billion, Attijariwafa Bank Morocco $12,5 billion.
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Viewing Nigerian companies on the top companies, list, it is clear that the bulk of Nigerian companies with continental presence are in the finance sector. This indicates the weak position of the industrial sector in the Nigerian economy.

Feelers are that this survey aptly describes the state of things in the organised private sector in Nigeria, but there seems to be positive indications towards change.

According to Abunwanne, a businessman and member of the Nigerian business forum (NBF), an internet based forum for Nigerian professionals home and abroad, these listings more than anything highlight the full-extent of corruption, inefficiency of public sector enterprise and most of all the scale of capital flight from Nigeria.

South Africa with similar natural resource wealth and one-third Nigeria’s population not only used that advantage to build world-leading local companies in those sectors but also channeled all that capital into building other sectors as well. Even countries with much less natural resource advantages, Egypt and Morocco show what happens when you manage your economy properly by encouraging capital accumulation, building infrastructure, investing in skills and nurturing a real entrepreneurial private sector that actually adds value and does not live off crony, overpriced government contracts or foreign exchange trading.

However, he believes the Nigerian government seems to have woken up to these facts in the last few years, saying with more people of the calibre of Okonjo-Iweala, Soludo, Okereke-Onyiuke in government positions, there will be more Nigerian companies like Zenith Bank, UBA, Oando actually appearing not just as major African companies but major global corporations as well. Nonetheless, he opined that this of course depends on the sustainability of economic reform in light of political problems such as the third term uncertainty surrounding the current president, the general lack of resolve in prosecuting corruption, eliminating electoral manipulation and creating a more legitimate political system at all levels.

To Nkem Ifejika, also of the NBF, the picture will appear even more dismal when one considers that most of these companies on list are not even of full Nigerian origin. She says on closer observation, the companies are actually colonial throw-back companies (Union Bank etc) or franchises (Guinness etc), hence she says that there is even more work to be done than first anticipated.

Chris another member of the NBF, though aligns with Nkem’s reasoning, however sticks to the optimistic viewpoint and, says the actual positive movement towards economic independence will have Nigerians singing a different tune about Nigeria in the next ten years.

Adamu Ibrahim, a Nigerian in diaspora and member of the NBF is also optimistic. He says ‘Nigeria had a late start but we are back in it, it isn’t a sprint it’s a marathon and the wave of change and momentum of economic reform and transition is developing a much needed force.

He adds that things are changing, it might not be at the pace we all would like, but they are changing. All things being equal, in another ten years we would be having a different type of conversation where the issues will be of how Nigerian companies are these behemoths that African countries have to now think of adopting protectionist type policies against Nigeria. That, he sumises, will certainly be a better dialogue and a sign of improvement.

Source: http://www.businessdayonline.com/news/53/ARTICLE/6239/2006-05-03.html

Thanx man

Constantin

You always post very interesting things, that keep me thinking. Great post and great analysis. When you think that we are the most populated country in Africa, you would think that we would be doing much better. I think Corruption and Safeguards. We had the Home Loans and Savings Fraud, Many Banks went under with Billions of Naira in Capital, Government Fraud, ETC

It is such a shame. Sometimes i just sit and think "What If"?

The Nigerian economy is relatively small .Think of it our GDP for a country of 120m is abou the same as that of Isreal of about 6m.
The SoUth African Stock Market has a market capitalisation of about $400bn while ours is about $20bn.Our companies are having a tough time operating in our economy so there isn't the resources to embark on expansion throughout the continent.

@ 4 Play, So are you saying that the current state of the GDP is the cause of the poor performance of the Nigerian companies?

MTN Nigeria and other foreign companies in Nigeria, would not agree to that you know

MTN and other foreign coys already have access to capital because of where they originate from which puts them at an advantage when they invest in Nigeria.They also have better managerial talent

And the greatest companies like Guiness dont have? Man lets be realistic, the problem is not capital oriented, but rather company structure and business models.

Guiness is an Irish coy with subsidiaryies in every part of the world.What we have in Nigeria is just the Nigerian branch of an international conglommerate

its a franchise if I am not mistaken, just like NBC, but still the performance is poor, the managers are Nigerians, and the business model is Nigerian related for that which was reviewed, and thats exactly what I am driven at !!

Or rather you might want me to pick other companies like Dangote plc, the so called role players?

It is majority owned by the parent coy in Ireland .You mentioned coy structure and biz models but it is with a good managerial team that these can be created.The bizs in Nigeria don't have the capital or the personnel to expand succesfully

There you go again

I insist, the problem at stake is not related to fundings but rather competency . We Nigerians are too used to the conventional way of buying and selling for example, I am sorry to say that anything beyond that, its too complex for them to explore or even comprehend. A good question would be:- How many Multinational Nigerian owned companies do we have?

Or don't say they don't have money for expansion, If Dangote wants too for example, he can, That guy has the dough, and thats only an example out of many we have there, but the question is, does he or many out there have that kind of zeal, to go beyound the borders? I really doubt so.

GDP has nothing to do with how succesful a company becomes, not in Nigerian case atleast, and capital is not the problem.

One company that needs to be on the watch is globacom, I heared they are expanding to India, thats after how many years of evolving? Or the fundings is from a foreign company?

Globacom and Dangote all have capital because they are avenues for ex politicians to invest their loot.Adenuga and Dangote are all fronts for ex military men.It is a shame that the biggest coys in Nigeria are money laundering enterprises.Bocs of lack of mgt expertise they have failed to expand throughout the continent to match their South African counterparts

In regards to the fundings, you dont have your proof to support your facts, besides you are deviating from the topic at hand. So lets let that rest.

4 Play:

Bocs of lack of mgt expertise they have failed to expand throughout the continent to match their South African counterparts.

Thank goodness you agree, so how do we work on the current managerial skills, besides mentality and role playing?

My point about Globacom is that there is such a lack of capital in Nigeria that the biggest coys owe their existence to shady military men.

Improving mangerial expertise can be acheived through world class educational instituitions.Our own Harvard Biz school.With good education Nigerians can obtain senior mgt positions with reputable international coys and gain practical experience which they can transfer to Nigerian coys

Things can only get better.Let the new generation of Nigerians work towards building a brand that will be the toast of the 3rd world in the next couple of years.

@4_play

My point about Globacom is that there is such a lack of capital in Nigeria that the biggest coys owe their existence to shady military men.

The Problem with Nigeria is the People. Many countries around the world have Natural disasters. In Nigeria, the people are the disaster.

On the GLO issue, Adenuga has a lot of backers, thats why he can do and undo in Globacom. If they dont perform, their backers will leave them alone, and for them to perform, they have to do some bad things, and since there is no law to stop them, they become gods on their own, coz if you talk to much, they'll turn their dogs on you.

I wonder how the government should allow Glo to be treating its staff so shabily, considering its owned by a Nigerian. The guy Adenuga would even go as far as threaten his staff that he isnt bound under any law to employ Nigerians, that he is just doing Nigeria "a favor" by employing Nigerians to work for him, that his responsibility is just to mobile telecom service. The above came from someone who heard him utter such nonsense.

Because they 2 focused on europe,asia and america, the best way of becoming a global player in the business is my best dominating ur region and spreading gradually like a virus.Make other companies in ur sectors in other countries in africa depend on u,