[size=13pt]Going bullish on Nigeria[/size]
By Stanley Oronsaye
May 21, 2011 11:55PM
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Despite inherent difficulties in the Nigerian business environment, investment-savvy international financial players are taking up position in order to reap from the immense growth the economy is projected to experience over the next five years.

While Nigerians seem to be overwhelmed by the intricacies of the operating environment, international fund managers are seeking areas of opportunities. To this end, many portfolio and fund managers, who seem to have uncommon faith in the economy, are lining up for action.

The prevailing enthusiasm is further buoyed by the recently concluded elections which many see as an indication that Nigeria would always get its act together when it mattered most.

Explaining his firm's bullish outlook on Nigeria, Stephen Jennings, the chief executive officer of Renaissance Capital (RenCap), an international investment bank with a focus on emerging markets, said Nigeria has incredible attributes for emerging market investment banking and consumer finance.

"Nigeria recorded over seven per cent growth in GDP (Gross Domestic Product). This is despite all the problems with the power sector. Think of what will happen when that sector is up and running," Mr Jennings said.

According to him, while developed economies in Europe and the United States are offering about three per cent returns on investment, emerging economies, of which Nigeria occupies a prominent position, offer far more.

He said his firm was optimistic about prospects in Nigeria for all the right reasons.

"When you look at the foreign debts of this country, it is one of the lowest in the world, thanks to the debt forgiveness some years ago. Government debt is low and even the private sector debt is low. This makes it a much safer place for global investors," he added.

Nigeria's debt is currently around 18 per cent of GDP, much lower than the 40 per cent international benchmark.

Positive demographic indices

Beyond the issue of debt are all the other demographic indices that stand the country out as a worthwhile investment destination. According to Mr Jennings, Nigeria's population places it in a position to attract foreign capital.

"Nigeria is home to one out of every five Africans. Its population of 155 million is largely youthful and increasingly urbanising, which presents significant opportunities in the consumer goods, real estate, construction, and services industries."

He explained that there were still untapped sectors in the economy. "Nigeria's small mortgage is growing, which is positive for the financial services sector. The construction industry will benefit from this growing demand for real estate, and is expected to get further support from infrastructure development."

Mr Jennings said the growing pace of democracy in Africa could provide a platform for attracting more investment away from other emerging markets.

"Russia is not a fully democratic country. China is not a democratic country. We have seen the fear and instability in North Africa. In comparison with other big emerging markets, Africa may not have some of the political risks that others have to face," he further said.

He alluded to the recent elections in Nigeria as relatively successful, which would form a basis for international fund managers to want to do business in Nigeria. "The recent election cycle has, on balance, been positive, and the market focus will start to shift away from political risk," he said.

Impetus to economic growth

Analysts at Afrinvest, a Lagos-based financial and investment advisory firm, also believe that the success of the elections would drive investment into the country and improve the country's investment attractiveness.

"In our view, the most important priority will be to ensure that ongoing reforms in Nigeria's financial services and energy sectors are sustained and, perhaps, fast-tracked so as to deliver the much needed impetus to economic growth," stated the firm in its post-election prognosis released last week.

The firm believes tackling the problem of the power sector, achieving reforms in the petroleum industry, and addressing the inflationary tendency of the budget would go a long way to put the economy on a better pedestal.

"According to Mr Jennings, the deficit in the power sector provides immense opportunities for investors. "Nigeria's notorious power shortages actually represent a massive commercial opportunity which the forthcoming privatisation of generating capacity will hopefully address. There is infrastructure opportunities because the capital is available globally today for large-scale complex infrastructure projects.

With Nigerian banks still playing safe, international funds may just be the catalyst needed to boost the confidence of local investors. The bullish outlook by RenCap may be the positive approach necessary to put the Nigerian economy on the right track.

No wonder Goldman Sachs, the international investment bank, listed Nigeria as one of 11 countries with promising outlooks for investment and future growth to propel global economic recovery.

http://234next.com/csp/cms/sites/Next/Home/5702856-146/going_bullish_on_nigeria__.csp

The vultures are getting ready to swoop in on their prey - loads of cheap labour, non existent labour unions, corrupt puppet govt, deregulated financial sector - perfect recipe for massive exploitation of the nigerian masses.

by the way when was nigeria's debt forgiven? I thought OBJ handed over $18 billion dollars to the Paris Club in PART payment of our supposed debt?

cap28:

The vultures are getting ready to swoop in on their prey - loads of cheap labour, non existent labour unions, corrupt puppet govt, deregulated financial sector - perfect recipe for massive exploitation of the nigerian masses.

by the way when was nigeria's debt forgiven? I thought OBJ handed over $18 billion dollars to the Paris Club in PART payment of our supposed debt?

The vultures would scoop only on a dead prey!! If Nigerians can't wake up and see the immense opportunities existent within the country then let these guys come in and teach us the way! Sometimes you wonder why Nigerians overseas are not coming back in droves to come and start up new ventures with the knowledge they have learned from outside. The Foreigners would keep coming and they would keep getting all the fat ROIs until we wake up and see the light like the likes of Dangote, Adenuga and the likes have done!
There is immense opportunities in Nigeria. In my opinion, Nigeria should be the most attractive country in the world for any investor as every existent problem presents in itself immense opportunities.

we are no 1 in deceiving ourselves. who is coming here and for what business? in truth, nobody is coming. nigerians are indirectly re-investing the looted funds into the system now that they have seen how easy it is to loose their deposits to foreign countries.
we are corruption oriented. i have used like five different internet connections here in nigeria including mtn and zoom which turned out to be fraud. i tell u what, it is only in nigeria that you can pay for services and get nothing at the end of the month. i have been in like 7 different countries and i used internet connection in all, and non can collect monthly charges without delivering the services and whenever there is a problem, the company will call u to apologize and then add up the missed days but in nigeria, we have CO-OPERATE FRAUD. where companies organize themselves to steal from the masses.
apart from the big market we have here in nigeria, what other reasons will warrant a normal person to invest in an economy where imported goods are cheaper than locally manufactured goods.
Michelin tyre company was in nigeria but had to leave for ghana for cost of production. when it comes to cheap labour, nigeria is not because other african countries are ready to work for food alone.
let us tell ourselves the truth. we are criminals and corruption takes the place of blood in our systems.

PapaBrowne:

The vultures would scoop only on a dead prey!! If Nigerians can't wake up and see the immense opportunities existent within the country then let these guys come in and teach us the way! Sometimes you wonder why Nigerians overseas are not coming back in droves to come and start up new ventures with the knowledge they have learned from outside. The Foreigners would keep coming and they would keep getting all the fat ROIs until we wake up and see the light like the likes of Dangote, Adenuga and the likes have done!
There is immense opportunities in Nigeria. In my opinion, Nigeria should be the most attractive country in the world for any investor as every existent problem presents in itself immense opportunities.

As you know, you cant get anywhere in nigeria unless you are willing to "grease palms" - a jamaican  friend of mine wanted to start up a business in nigeria but when he got to nigeria - the amount of money that he was asked to pay by nigerian govt officials in order to "facilitate" the start up was so much that he had to pull out of the deal, the only people who can afford to pay these huge bribes are the big players like the multinationals and other private business men (mainly israelis, lebanese, british and americans) - dont forget that companies like KBR (owned by former US vice president richard Cheney were paying bribes of up to $100 million dollars to OBJ and his clique!!) in order to secure oil and gas contracts,  which small time business man can compete with that?  this is just how rotten nigeria is - the nigerian govt collude with foreign business men to loot and exploit their own resources - what you have in nigeria is a lootocracy -there is nothign legitimate about it. 

the foreign corporations will not teach us the way - they are there to loot and plunder and when they have finished they will leave nigeria in such a sorry state that most people will wonder how it was allowed to happen - take a look at all the multinationals operating in places like DRC - the looting of mineral resources in that country is going on on a humungous level to the extent that these multinationals are even arming militias to keep the country in a permanent state of chaos because its easier for them to steal from country weakened by war, the people behind this are mainly israelis, americans, belgians and british corporations, the only blacks involved in this rap.e are govt officials who allow themselves to be used by these people as pawns.

I see cap28 and other deluded "anti-imperialist"vultures are already here. . . . . . . there goes the afternoon. bye **steps out***

kodewrita:

I see cap28 and other deluded "anti-imperialist"vultures are already here. . . . . . . there goes the afternoon. bye **steps out***

why use an ad hominem attack on cap28 rather than debating on the content of their arguments.

logic101:

why use an ad hominem attack on cap28 rather than debating on the content of their arguments.

because that's his weak way of contributing to the debate

Good but lets not celebrate yet.

@Cap28,

You are very right in you analysis. It is not as easy as people make it to invest in Nigeria. The start up cost can be high, something evern wealthy returnees cannot afford. the Nigerian system is not setup to encourage the honest investor. Most blue chip companies with stringent moral coprorate policies would find Nigeria hostile

monkeyleg:

@Cap28,

You are very right in you analysis. It is not as easy as people make it to invest in Nigeria. The start up cost can be high, something evern wealthy returnees cannot afford. the Nigerian system is not setup to encourage the honest investor. Most blue chip companies with stringent moral coprorate policies would find Nigeria hostile

True, startup cost can be ridiculously high, but same goes for the return on investment. Nigeria has one of the highest rates of return on investments in the world.
Ask yourself why despite the high costs, Lebanese, Indians and Chinese are opening factories nonetheless. And they are doing ridiculously well.
MTN, Nestle, Chi and the likes can complain all they like about the cost of doing business, but they also know the profits that come with it.
Or ask yourself  why all the international hotel brands like Four Seasons, Intercontinental, Radisson, etc are all rushing to take position in VI and its environs despite the cost of real estate??
KFC is looking to open 300 branches in Nigeria over the next 8 years and thats because they've seen immense opportunity in the midst of inefficiencies.

Nigerians pay good money for any goods and services no matter the quality provided. Any good entrepreneur would do anything to be in a market like this.
A market where you can dump anything and the people would buy is definitely a good place to stake your investment.

Investors think differently. Where the common man sees problems, they see opportunities.

logic101:

why use an ad hominem attack on cap28 rather than debating on the content of their arguments.

because its hard to debate with people who only see through rose colored glasses. its hard to discuss intellectually with pple who always see the world in terms of imperialist vs anti-imperialist. life's way more complex. i would rather go where I can be helpful than spend an afternoon on that.

Any good entrepreneur would do anything to be in a market like this.
A market where you can dump anything and the people would buy is definitely a good place to stake your investment.

Investors think differently. Where the common man sees problems, they see opportunities.

Yes a good entrepreneur will set aside huge amount to bribe, bulldoze and cut the silly locals who just complain
they'll even ignore those costly health and safety issues that eat away funds in developed markets- i mean the people wont mind $300 compensation
The labourers can be paid below minimum wage and when they complain just get one of the local politician to take a picture with your brown oyinbo partner; providing jobs for his constituency and giving him mileage and if still dont ocmply just sack them for 'protesting'


Certainly you fake drugs, fake electrical cables, fake hair, fake baby milk, international cement

You'll make a killing i tell you, forget the problems- see the profits you can even hire pastor to buy your sins

A man with integrity cannot do business. While should i sacrifice this for an excessive ROI . Mr Poster look away from what you read in the papers what really matters is the reality on the ground. The truth is our environment does not encourage entrepreneurship. I once ran a printing company in Lagos not only was i contending with an excessive business environment, my staff were so corrupt that it was a better option to wind down the business or would have lost millions of Naira in machinery cost if i were to continue running the business at a loss.

blacksta:

A man with integrity cannot do business. While should i sacrifice this for an excessive ROI . Mr Poster look away from what you read in the papers what really matters is the reality on the ground. The truth is our environment does not encourage entrepreneurship. I once ran a printing company in Lagos not only was i contending with an excessive business environment, my staff were so corrupt that it was a better option to wind down the business or would have lost millions of Naira in machinery cost if i were to continue running the business at a loss.

I agree with you. The business environment is crazy. However the opportunities are immense. Winners think differently, where others see problems they see opportunities.
Let me use your post as an example. As you have rightly stated, one of the biggest problems in the country is the quality of the workforce. Corruption has eaten deep into the psyche of the average Nigerian mind that you can hardly take your eyes off your business venture even for a moment.

Now in that, a good entrepreneur would see a business opportunity. An opportunity to start up a training facility that would produce high quality workforce that companies like yours would employ for a good fee. Thats the thinking of an bullish investor. Investors that enter markets when everything is perfect make only marginal profits. It is those that come in at the onset in the time of chaos that reap the humongous benefits!!

PapaBrowne:

True, startup cost can be ridiculously high, but same goes for the return on investment. Nigeria has one of the highest rates of return on investments in the world.
Ask yourself why despite the high costs, Lebanese, Indians and Chinese are opening factories nonetheless. And they are doing ridiculously well.

The bulk of these  "start up" costs are actually bribes - are you condoning the use of bribes to secure contracts in nigeria? if yes, then  stop complaining about the rotteness of the nigerian system as a whole,  if you live in a soiciety where there is no law then dont expect anythign from that system including  security - what happens when your business is  attacked by armed robbers adn there are no police willing to protect you becuae they have been bribed to turn a blind eye to criminal activity in the area that  your business is located?

MTN, Nestle, Chi and the likes can complain all they like about the cost of doing business, but they also know the profits that come with it.
Or ask yourself  why all the international hotel brands like Four Seasons, Intercontinental, Radisson, etc are all rushing to take position in VI and its environs despite the cost of real estate??
KFC is looking to open 300 branches in Nigeria over the next 8 years and thats because they've seen immense opportunity in the midst of inefficiencies.

well the hotel businesses are there to provide luxury accommodation to rich nigerians (mainly politicians) and expatriates who want to feel as if they are still in their own countries despite being in the third world.

the majority of ordinary nigerians can not afford to stay in any of those hotels.
those companies are all taking advantage of the high unemployment, cheap labour, and non existent labour laws  - they treat their nigerian staff like cattle and pay them next to nothing - and they can get away with it because the govt does not provide any protection for its workers , you may see this as not affectign you but it does indirectly, you can never feel safe living in a country where the majority of the nigerian workforce are reduced to this kind of treatment - all it does is engender feeligns of anger and desperation in many of these people - and these type of people can become volatile very easily - dont forget that nigeria is already experiencing such volatitility from disenfranchised northerners who are stuck in a vicious cycle of poverty.

Nigerians pay good money for any goods and services no matter the quality provided. Any good entrepreneur would do anything to be in a market like this.
A market where you can dump anything and the people would buy is definitely a good place to stake your investment.

everyone is affected by this - this is why we have people in nigeria selling imitation drugs, dont forget that at some point you may have to buy these sub standard goods, unless you have no intention of ever living in nigeria, will you be happy to pay good money to buy imitation drugs, or substandard mobile phones ?

Investors think differently. Where the common man sees problems, they see opportunities.

the investors who think like that are the foreigners who dont have to live in nigeria, they are there merely to exploit, make money and get out.
then they go back to their comfortable lifestyles in the west and leave africans to wallow in poverty.

@Papabrowne,
Yes, Nigeria is virgin ground for brave investors, but the risks are high. There are mulit-nationals who have very strict corporate policy which do not condone bribery, these companies would struggle in the nigerian market. Funny enough, yes ago I used to work for one them. these guys were good at what they do, infact their reputation and quality meant that 95% of those in thier sector used some sort of service from them, but they lost 90% of thier business to a competitor in the market, who was well known to play the Nigerian game.

If you ask the blue chips companies, they would state issues like these as factors. and like one rightfully said, those who somehow venture in take advantage of the conditions there to the disadvantage of the masses.
I know people who pay in excess of 50,000 Naira a month on mobile phone calls. funny enough, even the busiest business man in the Uk will struggle to spend £200 a month on calls.

PapaBrowne:

There is immense opportunities in Nigeria. In my opinion, Nigeria should be the most attractive country in the world for any investor as every existent problem presents in itself immense opportunities.

Who is that child that has said that his mother's soup is not the best?
Which area of the economy will this too eager investors be pumping their money into? Will it be areas like- Palm produce, Cocoa production, Modern Timber Processing, Tourism, Hide/Skin, Food/Drink prodution, Textile?
Or will be the usual Oil/gas and some banking in Lagos? The usual vulture investors, that don't even need a structural physical presence on the groud at all to operate and their employees are mostly their Nigerian partners that will help or show them how to do business without paying any tax.
I will join the league of I will never learn Nigerians, the day Big Giants like Ikea will arrive and build their furniture factories in my town and yours using locally sourced timber bought direct from local people and export the finish product to all their shops all of the world, employing thousands of normal skilled/unskilled locals at the same time.
Nigerians!!!! How many times will you be beaten by the same stick before you realised that this stick is a weapon?

PapaBrowne:

True, startup cost can be ridiculously high, but same goes for the return on investment. Nigeria has one of the highest rates of return on investments in the world.
Ask yourself why despite the high costs, Lebanese, Indians and Chinese are opening factories nonetheless. And they are doing ridiculously well.
MTN, Nestle, Chi and the likes can complain all they like about the cost of doing business, but they also know the profits that come with it.
Or ask yourself  why all the international hotel brands like Four Seasons, Intercontinental, Radisson, etc are all rushing to take position in VI and its environs despite the cost of real estate??
[b]KFC is looking to open 300 branches in Nigeria over the next 8 years and thats because they've seen immense opportunity in the midst of inefficiencies.[/b]Nigerians pay good money for any goods and services no matter the quality provided. Any good entrepreneur would do anything to be in a market like this.
A market where you can dump anything and the people would buy is definitely a good place to stake your investment.

Investors think differently. Where the common man sees problems, they see opportunities.

KFC investment of 300 shops in 8 years, to produce 3 million more already obese Nigerians per years that will cost the non existing Healthcare system billion to handle in future. .
Already, at least 70 percent of Nigerian elite/middle class and their children are either overweight or obesed.
Will KFC source any of their stuff from the local market? Nay! That means more dead battery caged refrigirated chicken from America and more coca cola/ Pepsi down the system, more diabetes, heart diseases etc.

time for me to go get a piece of that pie. *dusts my passport** naija here i come ;Di think i am well suited for the oyel business

PapaBrowne:

I agree with you. The business environment is crazy. However the opportunities are immense. Winners think differently, where others see problems they see opportunities.
Let me use your post as an example. As you have rightly stated, one of the biggest problems in the country is the quality of the workforce. Corruption has eaten deep into the psyche of the average Nigerian mind that you can hardly take your eyes off your business venture even for a moment.

Now in that, a good entrepreneur would see a business opportunity. An opportunity to start up a training facility that would produce high quality workforce that companies like yours would employ for a good fee. Thats the thinking of an bullish investor. Investors that enter markets when everything is perfect make only marginal profits. It is those that come in at the onset in the time of chaos that reap the humongous benefits!!

It appears that you don't really understand how a good economy should operate. The mainstay of a good economy should be in promoting small business rather than big business. The more an economy is reliant on big business the more it is susceptible to failing. In the US and Germany for instance, small business is big and sustains the local economies while big business is used more for exporting goods and services.

Nigeria may be a good place for investors with huge sums to invest in but Nigeria does not encourage small scale investments due to a number of reasons such as poor infrastructure, lack of capital, inconsistent energy supply, brown envelope syndrome, etc. Apart from Dangote and Adenuga, how many other big businessmen are from Nigeria? Most of the other big businesses in Nigeria are owned by foreigners. That means Nigeria is always vulnerable to economic risks in other countries.

Unless you are a Nigerian investor who has looted in the past or a foreign conglomerate, Nigeria is not such a good place to invest in. Cap28 has done a good job in responding to your earlier posts. Do you honestly believe that Nigerians can't see excellent opportunities in Nigeria?

IF FDI is not part of the mix in terms of funding government projects and building private enterprise then where is the country supposed to generate this income from. The oil sector accounts for roughly 80-90% of revenue for the government and we pretty much spend all that money on  running the government, importing back finished products, corruption and the likes.

Other sectors in the country are practically zero producing/underdeveloped. Nigeria is a net importer of everything. No viable manufacturing, minning, Petrochemical, agricultural industry

Who is going to fund state government projects, create enviroments for the creation of employment.  Private-Public partnerships inclusive of FDI is essential is building industries and necessary for transfering knowledge base into the country. We've been doing it with the Chinese and the South Africans are head on our heels to surpass us as service providers within the continent.

No time for that Knuckle head old way thinking of Imperialist this,  Imperialist that. What is needed are better negotiated terms that benefit the African nations in play. This doesn't have to be a Zero-sum game.

Eziachi:

Who is that child that has said that his mother's soup is not the best?
Which area of the economy will this too eager investors be pumping their money into? Will it be areas like- Palm produce, Cocoa production, Modern Timber Processing, Tourism, Hide/Skin, Food/Drink prodution, Textile?
Or will be the usual Oil/gas and some banking in Lagos? The usual vulture investors, that don't even need a structural physical presence on the groud at all to operate and their employees are mostly their Nigerian partners that will help or show them how to do business without  paying any tax.
I will join the league of I will never learn Nigerians, the day Big Giants like Ikea will arrive and build their furniture factories in my town and yours using locally sourced timber bought direct from local people and export the finish product to all their shops all of the world, employing thousands of normal skilled/unskilled locals at the same time.
Nigerians!!!! How many times will you be beaten by the same stick before you realised that this stick is a weapon?

I've always swallowed PapaBrowne's economic optimism with a grain of salt and your brilliant post has just encapsulated why.

A country like Nigeria cannot skip over the industrialisation process on it's road to greatness. A few hot money flows do not create a strong economy and stable society. The fact remains that the manufacturing industry, agriculture industry and other "small business" and mass employment friendly industries continue deteriorating at an alarming rate.

hmm