Should you invest in Nigeria?

Over the past few weeks I visited Nigeria and specifically Lagos and Abuja. I know the country well, having spent the better part of an academic year there shortly after independence in the early 60s. The purpose then was to complete research for a PhD at an American university on Nigeria’s constitution. I was based at the University of Ibadan but travelled extensively also in the North.

Abuja, Nigeria

Abuja, Nigeria

As a young man, footloose and fancy free, it was a marvellous and very enjoyable experience. In fact, I have very happy memories of the country and over the years I have maintained strong connections with Nigerians.

My graduate student days in the country also featured in an amusing way much later in my career. I was South African ambassador in London at the time of the Commonwealth Eminent Persons Group, a prominent member of which was Nigerian General Olusegun Obasanjo. And at the first meeting of the Group, under the chairmanship of the Commonwealth Secretary-General Sonny Ramphal, Obasanjo suddenly said, looking directly at me: “Ambassador, I understand that you were at the University of Ibadan? I also understand that you were the Nigerian one-mile champion?” He was of course correct on the first point but not on the second: I was Nigerian Universities’ one-mile champion. But George Dove-Edwin, my Nigerian counterpart in London, had done his homework.

So much by way of background. The purpose of the recent visit was business and at the invitation of a Nigerian company, which has participated in Omega’s Euro-African investment activities and wishes to see these extended – in a joint venture arrangement – into Nigeria and other countries in West Africa. The proposal is attractive. But do we want to invest in Nigeria?

What are some of the negatives and some of the positives of getting involved in Nigeria right now?

The negatives:

  • Malaysia, Singapore, Taiwan and Indonesia were roughly at the same level of development as Nigeria in 1960. All of them have dramatically managed to break through the constraints of under-development. The vast majority of Nigerians are at the same level of development as they were in 1960.
  • Given the role of religion and ethnicity, particularly on a north-south basis, Nigeria is subject to ethnic and religious tensions – sometimes very severe. These have to some extent been muted by the expansion of the federation from three big regions to 36 small states, which largely correspond with different ethnic groups.
  • Oil. The discovery of vast reserves of oil in Nigeria could be both a positive and a negative – depending on how the wealth it generates is used. The point is made by John Campbell, a former American ambassador to Nigeria, who writes: “Nigeria’s enormous oil and gas reserves have the theoretical potential to transform Nigeria’s economy. That opportunity, so far, has been lost.” Instead the oil has led to corruption on a vast scale and the development of a tiny class of extraordinarily rich Nigerians, with the majority of the population still in poverty. Dependence on that oil for national revenue has also stunted growth in other sectors of the economy.
  • Corruption. Nigeria is notorious for its corruption. In terms of its corruption index, International Transparency says Nigeria is one of the fifth most corrupt countries in the world. I was assured that President Jonathan’s government, which was elected in April, would do more than has been done in the past to counter this. In fact, while I was there the Speaker of Parliament was arrested on a charge of having stolen a small fortune. And there are people like Father Matthew Kukah – described as “Nigeria’s spiritual guide and confessor” – who very actively promote anti-corruption. (Incidentally, on this visit my luggage was broken into at Oliver Tambo and not Lagos airport!)

But what are the positives?

  • With a population of around 150 million, Nigeria is Africa’s most populous state. It is therefore potentially an enormous market – something foreign companies are quietly discovering.
  • The Nigerians have one of the highest literacy rates in Africa; and they include some naturally very enterprising people.
  • From a political point of view the country has had an unpromising past. It has suffered a civil war (the Biafran War from 1967 – 1970) and various periods of military rule – some more brutal than others. With the return of civilian rule, Nigerian political parties and the party system are quite conventional. Although substantial cross-voting occurs, most Nigerian political parties have ethnic–religious cores. But what gives stability is that most share the same basic socio-economic approaches – unlike South Africa with its profound “unsettledness”, its unbalancing “liberation and struggle” tradition and its lack of a shared political and economic vision. By contrast, I think the Nigerian political party system may be likened to the German political system with its regional, cultural and religious foundations.
  • What distinguishes the South African economy from all other African economies is its highly-diversified nature. One senses that Nigerian business is consciously beginning to diversify. This means space for entrepreneurs, and all the signs are that Nigeria’s very big and talented diaspora is beginning – as Europe slows down – increasingly to come home with new ideas and new business values. President Jonathan’s election may just be the turning point in this regard.
  • Nigeria also has a very high agricultural potential. John Campbell, whom I quoted earlier, makes the point that Nigeria was once the bread basket of the rest of West Africa. There clearly is a role here for South African skills.
  • And the country has a vigorous and diverse print media.

So does one invest in Nigeria? I think yes. While I was in Abuja the United Kingdom High Commissioner held a reception to welcome several dozen British businesses who were looking for deals. And the general response of the several South African business people I talked to on the question of doing business in Nigeria was: “It’s a difficult place to do business” – where in Africa, I might ask, is it easy? – “but the margins are good. And if you can put up with the power failures and traffic congestion, it is a fun place to be.” An opinion shared by the South African High Commissioner – Mr J N K Mamabolo, a portly gentleman with I think a matching temperament who looks very comfortable in his position. And, incidentally, those South Africans – most of whom happened to be white – if asked will tell you Nigerians really are non-racialist. There are no racial hang-ups in Nigeria.

I was greatly encouraged by accounts of the recent elections, which although not flawless, were welcomed by democratic countries and the promise under newly-elected President Goodluck Jonathan. Although the military continues obviously to be a critical factor in decision-making, this former zoological graduate, school inspector and environmental officer seems to have the confidence of some very sensible people in Nigeria. And if at the end of the visit I needed someone to persuade me to take a positive view of Nigeria, it was a two-hour discussion with the remarkable Father Matthew Hassan Kukah. A hugely impressive person and one of Africa’s real clear-thinkers.

Denis Worrall is the chairman of Omega Investment Research. He can be contacted at: [email protected]