President Muhammadu Buhari can hardly be blamed for all of Nigeria’s woes. He inherited a difficult situation when he was elected a year ago but you have to question how he has responded to the reality of low oil prices.
Pilfering and incompetent politicians have, in large part, accounted for why normal Nigerians haven’t enjoyed the spoils of its vast oil reserves. Around 61 per cent of Nigerians lived on less than a $1 a day in 2010 according to Nigeria’s own statistics agency. The CIA World Factbook put unemployment at nearly 24 per cent in 2011. That’s a problem in any country but particularly in one with such a large, young population looking for a living. Read more
By Matthew Page, Council on Foreign Relations
Africa’s largest economy is struggling to find its feet. Sliding oil prices threaten to derail President Muhammadu Buhari’s efforts to put Nigeria’s public finances back in order, fund planned infrastructure spending, and field much-needed social programs. Until global crude prices rebound or he undertakes more ambitious reforms, Mr Buhari almost certainly will need to borrow just to make ends meet.
The good news for Mr Buhari is federal government debt is relatively low as a percentage of GDP, which was estimated at $488bn in 2013. In 2005, Nigeria struck a deal with Paris Club lenders to write off over half of the country’s $30bn debt. Since then, however, Nigeria’s debt profile has steadily grown. As of the end of last year, Abuja owed domestic and international creditors roughly $55bn. Read more
FirstPower has a most perplexing problem for a Nigerian business: too much electricity. In a country with an enormous power deficit, where grid power is only available for a few hours each day, its 14 megawatt power plant in Ijora, an industrial hub in Lagos, has been ready since early 2015. It cannot be brought online because the local Distribution Company (Disco) – the regional government granted monopoly – has no incentive to “play ball”.
Despite the recent privatisation of Nigeria’s power sector, the electricity industry has not been deregulated. Rather, the old state distribution behemoth was carved into “Nigeria’s 11 primary Discos [which] are monopolies,” as the Nigeria Electricity Regulatory Commission (NERC) admits. As a result, competing private plants are routinely denied permission to distribute by the NERC. Read more
From hairdressers to film companies, the vast majority of companies in Nigeria are micro, small and medium-sized enterprises (SMEs). They account for the livelihoods of most of the country’s 173m people, and are engines of diversification for a country long reliant on oil.
But so little is known about this universe of entrepreneurs: the enablers helping them grow, or the obstacles holding them back. To address this knowledge gap, this month the Economist Intelligence Unit is publishing a new report, commissioned by IHS Towers, that shines a light on this all-important segment of Nigeria, now the largest economy in Africa. Read more
On the African continent, peaceful transitions of power through free and fair elections are a true rarity. Despite the odds, General Muhammadu Buhari delivered an impressive victory over incumbent president Goodluck Jonathan in last month’s presidential election in Nigeria and is set to take office next month.
While Buhari’s coalition party, All Progressives Congress (APC), won a majority of the seats in the National Assembly, last month’s elections are certainly not the final word in Nigeria’s electoral process.
On Saturday, April 11, Nigerians returned to the polls to vote for both State governors and State Houses of Assembly. These were local elections, and the saying that “all politics is local” certainly holds true in Nigeria. During the country’s local elections, the APC once again defied the odds, and gained control of a majority of the country’s governorships. Read more
The All Progressives Congress (APC), led by former military leader General Muhammadu Buhari, has won Nigeria’s presidential election, unseating the People’s Democratic Party (PDP) that has dominated the country since its 1999 transition to civilian rule.
The election symbolises the institutional change that made the PDP’s election upset possible. Against considerable odds, INEC, Nigeria’s independent electoral commission, played a key role in delivering credible elections. The implications run deep. This glimpse of institutional strength speaks powerfully about Nigeria’s future as the African economic powerhouse that might yet emerge with continued, sustained reforms. Read more
By Charles Okeahalam, AGH Capital
Nigeria is facing a number of difficulties, most notably the absence of security in the north-east of the country where Boko Haram has killed thousands of people. Linked to this atrocity is the equally atrocious low level of civil, social and economic governance. Poor governance is correlated with social instability. It is also influenced by economic inefficiency. Therefore, only a simple or naïve analysis could attempt to wish away cause and effect.
Presidential and state governorship elections which were scheduled to take place in February have now been postponed to March and April respectively. As the elections approach we need to ask: what is the state of the Nigerian economy and what do we have to do to improve it? These are important questions that need to be addressed following the presidential election. Read more
By Kevin Daly, Aberdeen Asset Management
If you are a young Nigerian, life was already hard enough before the price of oil collapsed and Boko Haram established themselves as a real threat to Africa’s largest oil producer. The country’s now delayed elections are unlikely to improve their lot or that of weary investors.
For years Nigeria’s 170m people have laboured to overcome endemic power shortages, a lack of jobs, crippling corruption and institutions which have persistently failed to serve them. Nigeria’s own statistics agency found that 61 per cent of Nigerians lived on less than a dollar a day in 2010.
Electricity consumption per head of population is around 149 kw-hour (Mexico’s, by comparison, is over 2,000 kw-hours). Former central bank Governor Lamido Sanussi was sacked last year after exposing a multi-billion dollar subsidy racket involving the state oil company. Read more
By Peter Leger, Coronation Fund Managers
So you thought a six-month break on a desert island looked appealing and spent long hours in silent meditation, reflecting on self-actualisation, harmony and humanity’s ceaseless race to consume the planet. Now you’ve just made the return journey to find that the oil price collapsed from over $110/barrel to less than $50. Peak theorists having turned into piqued theorists. You didn’t see that coming. And, frankly, neither did we. Nor did we expect to see the Swiss franc jump 28 per cent in a single day – as it did recently.
The lesson being that extreme volatility has to be an assumption when building portfolios, and doubly so when investing in frontier markets, where volatility is often amplified. Read more
By David Humphrey, Standard Bank Group
Sitting around a fire in the middle of the Namib Desert, western tourists can sample the twin delights of African cuisine and its staggeringly beautiful night sky. The Milky Way is a vibrant arc of white, the stars five times brighter than in Europe. It is one of the few places in the world where light pollution does not exist, which is another way of saying most of Africa lacks power.
Africa’s population of roughly 1bn people accounts for over a sixth of the world’s population, yet it generates just 4 per cent of global electricity supply. Excluding South Africa, the continent’s most advanced economy, the entire installed generation capacity of sub-Saharan Africa (SSA) is only 28 gigawatts, roughly equivalent to that of Argentina. The result is that just 24 per cent of the population of SSA has access to electricity compared to 40 per cent for other low income regions. Read more
Source: Thomson Reuters
Nigeria’s central bank on Friday tried to drawn a line under the naira – but the market continues to increasingly bet on a devaluation after the elections set for early 2015. Read more
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. Read more
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. Read more
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. Read more
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. Read more
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. Read more
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. Read more
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. Read more
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. Read more
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. Read more