|
Investments abound in Nigeria - Africa's new economic powerhouse
Date published 1 January 2009
Flicking through a rather old copy of Fortune magazine in my dentist's rooms, I was interested to learn that the trade relationship between Nigeria and South Africa hit R11 billion last year. That's about 11 times what went down in 1999.
This piqued my interest and I decided to take a closer look at the relationship and opportunities that exist between the continent's two leading economies. They're obviously good from this side of the fence. Apparently hundreds of South African companies are currently doing business in nearly all sectors in Nigeria.
Although the biggest investment has been in telecommunications, thanks to MTN and Telkom, 50% of Nigeria's fast food industry is South African owned. In fact, SA expats should feel quite at home in the Palms shopping centre in Lagos. The largest mall in sub-saharan Africa, it is managed by South African company, Broll, and most of its stores are SA brands, including Game, Shoprite, NuMetro and Nandos. They'll also feel at home in Protea Hotel at Victoria Island.
Broll, by the way, has secured valuable fuel station rights across the country as well.
MTN has nearly half of the mobile phone market. Entech, a Stellenbosch based engineering firm, is leading a US$3 billion redevelopment of Lagos's Bar Beach and Victoria Island waterfront. Group Five has been awarded a second contract for the design, supply and installation of a major power station.
Meanwhile, Standard Bank, which absorbed Nigeria's IBTC Bank, is in partnership with Southern Sun and Broll on a massive tourism project.
DSTV is a major force in the television industry and arivia.kom assists with running the country's lottery.
In short, South Africans are digging in to Nigeria and, according to Dr Kolade Arogundade who is the General Secretary of the Nigerians in Diaspora Organisation's Cape Town branch, there is still plenty of potential. He says, "It is pretty much an untapped territory, even though things are looking up for the economy."
Nigerian external reserves now exceed US$50 billion and oil revenues have resulted in budget surpluses. This, he adds, will enable the government to invest in infrastructure projects such as the much - needed modernisation of Nigeria's railway system, roads, electricity and the education system.
The inflation rate is dropping fast and this has brought greater stability to the currency, which is gaining against major world currencies.
Currently, Nigeria's major export is oil, and Arogundade suggests a need to urgently develop manufacturing, africulture and other natural resource sectors, but warns that growth possibilities in the country's economy rest on the maintenance of high oil prices and government utilising this windfell judiciously.
"Nigeria could potentially earn over US$300 billion from oil reserves over the coming decade, as oil output is expected to increase by more than 70% over the next three years. The economic prospects for Nigeria are good, as companies and government look to invest billions of dollars into developing its resources."
Interestingly, the national housing stock is much lower than required, especially in the big cities such as Lagos, Warri, Port Harcout, Ibadan, Enugu, Jos and Abuja. It is a sector waiting to explode.
As the culture of mall shopping rather than at open markets catches on fast among urban dwellers, he points to the success of Shoprite and sees gyms and sports recreation and bowling halls as opportunities and niches waiting to be explored.
"With a population as huge and ubiquitous (sic) as Nigeria's, it seems there is a market for almost anything." The country's banking sector has had a major overhaul with, for instance, Zenith Bank winning global awards. But there is a need to invest more technology, safe cheque transaction systems, credit, and other forms of virtual banking systems, and he concedes that there are risks.
"Nigeria is the fifth - largest source of US imported oil, but the unrest in the Niger Delta presents a potential risk to oil revenues. Attacks by militants claiming the region does not get a fair share of the country's oil wealth have cut a sizable portion of Nigeria's oil production in the past years."
One of the biggest problems is the energy sector, which is arguably more potent than the oil sector.
Nigeria has a large English - speaking quality labour force, and because of the weakness of the Nigerian Naira, labour is very cheap. But Arogundade says there is no better time to get into Nigeria than now.
Of course, the South African Department of Trade and Industry's director - general Tshediso Matona would like to see growing trade and investment from Nigeria in South Africa, and he has appealed to that country to look at the issues of protectionism, high levels of tarrifs and trade barriers. He believes Nigeria could open up its trade to benefit its economy further.
Obviously it's not a cakewalk, but Nigeria is tipped to be one of the world's top 20 economies by 2020. Against the backdrop of latest global economic developments, it will be interesting to see if the pundits are right.
Author: Loraine Tulleken - Sawubona
|
