Radiant at its golden jubilee, Nigeria fortifies base for investment inflows

One of these is Mels Oganesyan — the chairman of the board of directors of Zarubezhstroimontazh, a gigantic Russia-based, overseas-focused construction company specializing in capital-intensive infrastructure developments with several years of working experience in the West African country. One of the company’s contracts in Nigeria was the construction of the Ajaokuta Steel Complex Ltd (ASCL). “The relations that developed between us, our Nigerian partners and employees, during the ASCL construction, were excellent. Therefore, I would say that my impression of working in the country was very good,” Oganesyan told the TRCW editor-in-chief in his company’s sprawling headquarters in central Moscow. “Nigeria has huge investment potential. For instance, the country’s infrastructure developments sector is ‘like a fertile and uncultivated land’ with abundance of opportunities. In short, there are lots of capital-intensive investment projects in that country.” 

Airing similar views, other Russian investors, notably, UC RUSAL, the Moscow-based, world’s largest aluminium company currently operating in Nigeria, have conceded that everything is not rosy, but the ‘good moments’ far outweighs the ‘bad ones,’ stressing that the types of problems encountered in today’s Nigeria are not much different from those existing on other emerging markets. Thus, commenting on his company’s operations in the country, UC RUSAL’s First Deputy CEO Vladislav Soloviev noted that while Nigeria is still suffering from some economic instability and unpredictable fluctuations, it has shown resilience in creating a more secure domestic business environment, enforcing reforms and attracting foreign investors. “The country has also brought down inflation, started a privatization process and consolidated its banking sector. These have helped boost regulation and increase predictability for investors.” 

These personal, hands-on field and mostly positive experiences from these Russian business executives, along with the array of official investment-stimulating policies put in place by Nigeria’s current leadership, should serve as powerful antidotes to the largely negative recounts and rumors of perennial problems traditionally associated with African countries. It must be mentioned here that most of these ‘stories’ are often borne from archaic stereotypes, outdated mindsets and negative conclusions drawn by people that have never seen the continent or any of its more vibrant countries, except on television news programs. 

“Nigeria today is on the threshold of a new political and economic era, an era that beckons for a new kind of leadership uncontaminated by the prejudices of the past, committed to change and reinvention of the government.”

Indeed, the view of Zarubezhstroimontazh and RUSAL executives on Nigeria’s abundant, but-yet-to-be-fully-tapped investment potential rhymes fully with those of the country’s top government officials, including the head of the Embassy’s economic department in Moscow, who all believe that their country’s currently robust economy is poised for fast-track growth that will make it one of the most attractive default destinations for strategic investors in the post-crisis era. 

Thus, outlying his future vision for Nigeria in his declaration speech to run for the 2011 presidential election, the incumbent president, Goodluck Jonathan, told his supporters that Nigeria is on the threshold of a new political and economic era. “This an era that beckons for a new kind of leadership uncontaminated by the prejudices of the past, that is committed to change and reinvention of the government to solve the everyday problems that confront an average Nigerian,” he said. And to the international community, he said, “I have offered myself to lead a country that will engage it in mutual respect and cooperation for the achievement of international peace and understanding.”

Brighter future ahead

The Nigerian leadership’s optimism is not founded on ungrounded rhetoric, but on hard statistical facts that have unambiguously underscored the soundness of the country’s economic fundamentals as it exits the current global meltdown with a clear national development agenda for the post-crisis world. 

Commenting on his country’s economic performance in an interview to the TRCW editor-in-chief, Nigerian Ambassador to Russia Timothy M. Shelpidi noted that his country has experienced a period of sustainable economic expansion over the past decade, a fact collaborated by IMF data, which put the country’s real average GDP growth rate at robust 8.8% from 2001 to 2008.

As a sign that the Nigerian economy has exited the current crisis almost unscathed, Finance Minister Olusegun Aganga noted that the economy grew by over 7% in H1’2010 with a momentum to significantly increase this performance by yearend. And, going forward, the economy has all the prerequisites to hit a double-digit growth rate of, at least, 10% by the end of 2011 or early 2012. “This robust growth rate is expected to be fueled by the government’s ambitious program to build new infrastructure projects and privatize its power sector.” 

The same optimism is shared by the country’s chief banker, who earlier this year had forecast growth of 7% in 2010. Thus, commenting on the country’s economic performance in 2009, seen as the peak of the receding crisis, Central Bank Gov. Lamido Sanusi noted that the country’s GDP, despite the seriousness of the challenges faced in 2009, was still able to grow by 6.9%, fueled by the agricultural and energy sectors, which accounted for the lion’s share of the positive performance in a rather disastrous year. All these data correlated with the figures released by the National Bureau of Statistics, which shows that the Nigerian economy, when measured by the real GDP, grew by 7.23% in Q1’10 as against 4.50% in the corresponding period of 2009, with the non-oil sectors rising 8.15% in 2010. 

The credence to this ‘effervescent optimism’ is rooted in the fact that it is not only top Nigerian government financial gurus that are ‘sing praising’ their country’s economic achievements in the past several years. An independent observer that can hardly be accused and/or suspected of being ‘bias and/or white brushing’ Nigeria’s overall economic and investment profile is Goldman Sachs. 

Specifically, the authoritative U.S. investment bank, in its report on the Next Eleven — a term used to denote a group of 11 countries with a high potential of becoming the world's largest economies in the 21st century along with the BRIC states — unequivocally noted in its May 2010 projections that Nigeria’s future is bright as the country, expected to be aggressively propelled forward by its rapidly-growing population, has the required potential to overtake Italy, Canada and South Korea in economic size by 2050. “The ‘demographic dividend’ is potentially a huge tailwind for Nigeria, where the working age population is set to rise from the current level of 53% of the total population to over 65% over the next three decades, when the country’s overall population is expected to double. And if this potential can be harnessed successfully, Nigeria’s growth prospects could be very bright indeed.”

In the report, Goldman Sachs quoted Aganga as saying that fast-tracking Nigeria’s economic development process is currently the most important task for his country. “Macro-stabilization has generally been delivered and the higher oil price environment has benefited our country in terms of its foreign and public debt profiles.” All these positive developments, according to the Nigerian finance minister, by the way a former managing director of Goldman Sachs, have already caught the attention of global investors, who he said are now regularly ‘pounding’ on his door with unprecedented enthusiasm, as they seek new lucrative avenues for their investments in the post-crisis era. “There is no week that I don't see two, three, four major investors from other parts of the world. Brazil, Germany even China, all these other countries. All of them bringing or wanting to come and invest in the country.” 

Apart from private foreign strategic investors, major industrial powers such as the United States, Russia and other G8 and G20 members are also watching the revitalized Nigeria with a new interest, as the most populous nation in sub-Saharan Africa, bolstered by its status as the continent’s largest oil exporter and growth engine, wants to leverage its huge economic might to play much bigger geopolitical roles on the global arena. One of these is its aspiration to get a seat in the G20 club, an ambition that got the support of the United States, when State Secretary Hillary Clinton noted during her visit to Abuja last year that Nigeria has the chance of becoming the second African member of the elite group, contingent on its successfully tackling corruption, one of the nation’s worst problems. It is worth noting that a special anticorruption program has been adopted to solve this issue. 

An array of unparalleled investment incentives

Nigeria, according to Onisimus Atanze, the minister in charge of investment, economic and trade affairs at the embassy in Moscow, has outlined a myriad of business incentives and other investment-boosting measures put in place by Abuja to attract more forward-looking strategic investors to its economy. The task of implementation of these investment-boosting policies is entrusted to the Nigerian Investment Promotion Commission, established with a mandate to proactively position and promote the country as an attractive investment destination haven.

Nigeria, Atanze noted, offers both general sector and industry specific incentives to strategic investors. The general incentives include, for instance, the granting of a ‘pioneer status’ to an investor, a privilege that entitles him/her to a five-year tax holiday on corporate tax. “The grant of the pioneer status to an investor aimed at enabling him/her to make a reasonable level of profit within company’s formative years.” 

In the oil and gas sector, in view of the enormous potential of this sector and its strategic importance to the country, some special fiscal incentives have been put in place by the government for strategic investors. Tax and business stimulation incentives for companies operating in export oriented industries, defined as exportation of not less than 60% of production outputs, include a 10% tax concession for five years. Besides, Nigerian legislation provides an additional annual depreciation allowance of 50% on plant and machinery to manufacturing exporters, who exports at least 50% of their annual turnover, provided that the product has at least 40% local raw materials content or up to 35% of value are added locally.

Companies operating in Nigeria’s Free Trade Zones automatically receive certain locational advantages as well as very generous incentives, which are among the most attractive in Africa and compare favorably with those in other parts of the world. These include the right to repatriate invested foreign capital anytime, possibility of 100% foreign ownership of businesses and one-stop approvals, etc. Investors are welcome in almost segments of the economy, except those involving production of defense-related equipment and gadgets, narcotic drugs and psychotropic substances.

Nigeria’s bilateral economic ties with Russia

The position of the likes of the Zarubezhstroimontazh and RUSAL executives should serve as a reference point for Russian investors eyeing Nigeria as their ‘next port of call’ in their ongoing searches for attractive and lucrative destinations for investment outlets in the new post-crisis global economy.   

For one, such investors could count on Oganesyan’s generosity as he and his company’s other top executives with international experience often provide valuable consultations to Russian companies eyeing the Nigerian market as a possible overseas destination for their investment outlets. “At times, Russian companies contemplating on investing or working in Nigeria come to us for advice and guidelines on how to behave in the country. We usually tell them that it is possible to work normally and efficiently in the country as the general population relates to Russians very well, without any signs of antagonism from the local population or the government towards Russians. On the whole, our overall recommendation has always been positive.”

Besides, the political landscape is more than ripe for much more aggressive investment expansion policies by representatives of businesses in both countries. As noted by the ambassador in his interview, and other top Embassy staffs in conversations with TRCW, the affinity between Nigerian and Russian leaderships and their common visions on geopolitical issues have created the required favorable conditions for boosting cooperation in all spheres of bilateral diplomacy, notably, in the economic sector. 

All these positive achievements have led to signing the Declaration on the Principle of Friendly Relations and Partnership, an agreement that laid down fertile grounds for the penning of other vital bilateral agreements. Amongst these are the Program on Cultural and Scientific Cooperation; Protocol on the Meeting of Chairmen of Nigeria and Russian parties of Intergovernmental Joint Commission on Economic Scientific and Technical Cooperation; Protocol on Bilateral Cooperation in the Steel Industry; Memorandum of Understanding on Cooperation in the Oil and Gas sector and Military Cooperation.  For instance, Russia has agreed to undertake high-tech projects in Nigeria, including the launching of three satellites.

However, both Russian and Nigerian governments have conceded that most of these positive trends and achievements have yet to really ‘rub off’ on mutual trade and investment activities between the two nations as practical economic cooperation has continued to remain the weakest aspect in the bilateral interactions between the two countries. Indeed, the available official statistics on mutual trade and investments, totaling ‘some paltry millions of dollars per year’ have only helped to underscore the unacceptably low level of economic interactions that is far below the existing economic potential of Africa’s largest nation and one of the world’s economic powerhouses. They also pale much conspicuously in comparison with the more robust political contacts at the highest leadership levels.  

“The Nigerian leadership’s optimism is not founded on ungrounded rhetoric, but on hard facts that have unambiguously underscored the soundness of the country’s economic fundamentals.”

Serious joint efforts, according to the Nigerian ambassador and other top Embassy staff in Moscow, are now being put in place to rectify this negative and bring the economic component of the bilateral cooperation on a par with the robust political component. Some of these measures include a series of strategic agreements penned by Abuja and Moscow during the recent historic visit of President Dmitry Medvedev to Nigeria. Notable among them are the Investment, Promotion and Protection Agreement; the Agreement on Cooperation Nuclear Energy for Peaceful Purposes; Memorandum of Understanding on Cooperation on Exploration of Space for Peaceful purposes; Memorandum on Joint Venture between Nigerian National Petroleum Corporation and Gazprom. 

For instance, the cooperation agreement with Gazprom will enable the Russian gas monopolist to explore and exploit Nigerian gas reserves as well as developing and constructing gas pipelines from Nigeria through North African countries to link up with the Russian gas pipelines in Europe. Other key Russian corporations such as Rusal and Renaissance Capital are among the new corporate investors to enter the Nigerian economy in recent years, joining the likes of Zarubezhstroimontazh, Tyazpromexport and other Soviet-era enterprises that have had decades of on-and-off relations with the ‘African giant.’ 

The Embassy’s economic experts in Moscow expect more Russian companies to follow the footsteps of fellow Russian investors already in Nigeria to tap the country’s new tide of business opportunities and boost Moscow’s economic presence in their country. Otherwise, Russia, they forecast, stands a real chance of being ‘perpetually condemned’ to a second fiddle status in comparison with the other major global economic powerhouses, notably, China and other emerging economies, which are currently and aggressively expanding their already extensive positions in Africa’s largest country’s economy.