Nigeria’s government appears determined to tackle a number of major issues that have hampered economic development in recent decades. Nigeria’s huge resources of oil and gas are a case in point. The country is a global player in terms of oil and gas production, but corruption, inefficiency and widespread theft have stunted output, while subsidised prices for fuel have so distorted incentives for refining and marketing oil that Nigeria is among the largest importers of refined petroleum products in Africa. From our perspective as investors, the biggest challenge for Nigeria is to develop a government leadership that will be intent on economic development, and intent on utilising the country’s resources to develop infrastructure: roads, railroads, electric power, sewerage, water and so on. We believe this would establish a platform for growth of new enterprises and would lead to more employment.
Of course, Nigeria has its issues, including social unrest, corruption and religious intolerance. Social inequality has been fuelling instability all over the world, but we believe a primary problem in Nigeria is a lack of public services and a bureaucracy which inhibits development. With mobile phones prevalent throughout the country, Nigerians are becoming more aware of government inefficiencies and corruption. This has stirred resentment and strife, which unfortunately, can lead to the type of violence we saw flare up in Abuja recently. While tragic, this increased transparency can also inspire positive change, and Nigeria’s leaders seem to be getting the message. Technology has also allowed the people fed up with the violence to organise and protest for peace. We are hopeful that the country and its people can come together to resolve their differences and move forward towards a more positive future.
Looking for Nigerian values
In our view, valuations have been getting stretched in some areas in Nigeria and other frontier markets which have been attracting more investor interest. However, we are still finding plenty of potential opportunities not only in Nigeria, but in the Ivory Coast, Ghana, Kenya and other frontier markets. We are selective stock pickers and spend a lot of time researching and visiting as many companies as we can to determine what we feel the true value and potential is, with a long-term time horizon in mind.
In terms of particular sectors or themes, we find consumer-oriented companies in Nigeria (and other areas of Africa) are most interesting to us right now, since overall per capita incomes have been rising and the growth potential appears to be quite good not only in Nigeria but in other places in Africa. We are focused on anything relating to consumer goods and services, including consumer banking. One incident struck me when I was interviewing the manager of a soft drink company in Nigeria. When I asked him who his biggest competitor was, he said: “My biggest competitors are not the other soft drink companies but the cellphone companies, because when a customer has some extra money he has to decide whether to buy a bottle of my soft drink or more time on his cellphone.”
I hope that the positive news surrounding Nigeria’s economic standing and the nod it has been given as host of the WEF on Africa this year will help spur even more positive change there and help advance the movement for peace. As an investor, I think it’s my job to remain optimistic about the countries and companies in which I invest, and I think other emerging and frontier market investors would be remiss to ignore the potential that we see in Africa’s giant.
Mark Mobius is executive chairman at Templeton Emerging Markets Group. This article first appeared on his blog.