By Henry S. D’Auria and Christine Phillpotts, AllianceBernstein
Nigeria is Africa’s biggest economy and one of the world’s largest oil and gas producers. Resolving its electricity generation gaps could significantly boost the country’s economic growth and provide opportunities for equity investors.
Most global investors pay insufficient attention to Nigeria, which is not included in traditional emerging market equity indices. Yet in this country of 174m people, a policy-driven change to infrastructure could transform the economy and create new opportunities for equity investors.
By Timi Soleye of CRYO Gas
Seated on the dais at an investment conference in one of Lagos’s posher hotels are the luminaries of the Nigerian power sector: the minister of power, the head of the national electricity regulator, the chairman of the presidential task-force on power and chief executives of the newly privatised electricity generation companies and distribution companies. They are desperate for the money of the reluctant foreign private equity managers and local investors who mill about the room.
It is a tough call. On November 1 a year will have passed since the effective privatisation of electricity generation and distribution in Nigeria and it must now be acknowledged that the privatisation is on the brink of collapse. Yet this is a good thing for Nigerians and for future investors.
Nigeria has become the first country to completely stop selling oil to the US due to the impact of the shale revolution – an astounding reversal as the African nation was only four years ago one of the top-5 oil suppliers to America.
According to the US Department of Energy, Nigeria did not export a single barrel of crude to US-based refiners in July for the first time since records start in 1973. Preliminary data suggest the trend continued in August and September.
Late at night during a power blackout in Ghana’s capital Accra is neither the time nor the place you’d expect pop diva Celine Dion to come to your rescue. But when a rider from restaurant delivery service Hellofood Ghana lost his bearings with a customer’s dinner on the back of his motorbike, he turned to Celine for help.
Unable to find his customer’s home in the gloom, he arranged for the client to come onto the street playing “My heart will go on” on her phone. The driver, also a Dion fan, played the same music on his phone, allowing the two of them to locate each other by siren song.
“Luckily, he still had a mobile phone signal so he could phone the client,” says Yolanda Lee, a 26 year-old Canadian who runs Hellofood Ghana, a subsidiary of Hellofood Africa which manages a meal delivery service in 10 countries and 14 cities in West, East and North Africa.
By Sara Menker, CEO and Founder, Gro Intelligence
Last week, at a “Solve for X” gathering in Nairobi, I opened my presentation with a pop quiz. There were only two questions, and yet everyone got both wrong.
The first question: What was Nigeria’s GDP in 2013 — $270bn, $460bn, or $510bn? The second question: How much corn did Kenya produce in 2013 — 3.3m, 2.8m or 3.6m tonnes?
In both cases the crowd was evenly split amongst the choices.
After a deal-making spree in Africa in 2013 that included investments in Ghana, Cote d’Ivoire and Kenya, private equity group Abraaj is on track for an equally active 2014.
Abraaj, which has $7.5bn in assets under management and is based in Dubai, expects to complete four transactions in the region by the end of the year, including in South Africa, Nigeria and Kenya, partner Sev Vettivetpillai told beyondbrics.
The Nigerian economy has enough resilience to ride out the wave of Boko Haram terror attacks, the country’s finance minister said in an attempt to persuade foreign investors to keep their holdings in local bonds and stocks.
Nigeria is Africa’s largest economy and a magnet for international investors, which have poured billions of dollars into factories, oil fields and its local securities market.
“We are sticking to our growth forecast of 6.75 per cent [for 2014]. It is realistic. Any losses in the northeast [where Boko Haram is more active] will be made up by activity elsewhere,” Ngozi Okonjo-Iweala told the Financial Times in an interview.
By Melissa Cook, Africa Sunrise Partners
The headlines about Boko Haram’s deadly and vicious attacks in Nigeria threaten to overshadow what we see as considerable progress on one of the country’s top priorities: power reform and privatization. Despite ongoing challenges ranging from inadequate gas supply to funding shortfalls and antiquated wiring and transformers, the Nigerian power sector is moving full-steam ahead.
Access to electricity could be a game-changer for Africa’s largest economy. We realize that it may take years to get Nigeria’s power capacity up to the 40GW target from today’s 4-5GW (see chart). But step by step, we see barriers to business, household activity, and entrepreneurial activity dropping as power generation and distribution companies—and the government-owned transmission company—refurbish or repair assets.
Nigeria’s insurance sector is growing rapidly and has low levels of penetration in a young society inhabiting Africa’s largest economy. Add to this what a recent Fitch Rating report calls an environment “ripe for consolidation” and it becomes easy to see why foreign insurance groups are eyeing the market keenly.
The March 2014 Fitch report says “foreign investors in the Nigerian insurance market have shown a preference for acquisition or partnership above setting up new insurance operations”. This preference is down to a need for local knowledge, a good distribution footprint and the ability to achieve scale quickly.
Nigeria has overtaken South Africa to become Africa’s largest economy after the government released updated figures that raised the country’s gross domestic product by 89 per cent to $509bn.
The re-calculation rightly put most Nigerian officials in celebratory mood. But Ngozi Okonjo-Iweala, the country’s finance minister (pictured), offered also a cautious note: the new figures do highlight some acute problems.
In a world of shrinking liquidity, sub-Sahara African governments are finding little room to manoeuvre in stimulating their cooling economies as investors and ratings agencies take a much harder line on state excesses.
With growth prospects improving in developed markets and questions being raised about the fate of emerging markets – especially with growing evidence of a bigger than expected Chinese slowdown – investors have started to write off large swathes of the developing world.
From an economic viewpoint, Africa’s most populous country, with about 173m people, is moving in the right direction, as the FT’s bumper Investing in Nigeria special report shows. Growth remains strong, at more than 6 per cent. Nigeria is set to overhaul its ways of calculating GDP, for the first time since 1990, to reflect more recent developments, which should bring it closer to overtaking South Africa as Africa’s biggest economy. Inflation is down to single-digits and government debt remains modest.
It’s well known that Nigeria’s oil industry is going through a rough patch – and one that’s likely to get rougher as a US shale boom revolutionises the global energy market. The government has noticed too and is setting its sights on other sectors as future sources of economic growth. Mining is high on the list.
Nigeria’s central bank has held its policy interest rate at 12 per cent for the 12th consecutive month. Can anything make it budge?
Analysts seem to think not. There are three factors that will keep rates locked: inflation, the naira and reserves.
It’s a busy time for Nigerian finance ministry officials. This week they celebrated the launch of eurobonds worth $1bn. On Monday they’re off to China to sign off on $3bn of loans from the government in Beijing.
What’s with all the borrowing? In a word: infrastructure.