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Nigeria’s Promise Turns to Peril as Investors Head for the Exits – Bloomberg

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The promise of Africa’s biggest economy has turned to peril.

Companies drawn to Nigeria by the prospect of a population bigger than Germany and Turkey’s combined are retreating; those staying have publicly criticized the president, a military strongman in the 1980s who came back to power via an election last year; and foreign investors are pulling their money out.

The corporate tribulations that began with a slide in oil prices and accelerated after the imposition of capital controls are also entangled in a global emerging-market slump. In propping up the naira in a futile bid to contain inflation, officials have jacked up pressure on an economy running out of cash, deepening a black market in currency trading and causing shortages of imported goods from fuel to milk. U.S. officials said they will press their Nigerian counterparts to change tack during talks in Washington this week.

“Our clients, Fortune 500 and other multinationals, are all quite concerned by the state Nigeria finds itself in,” said Alexa Lion, a senior analyst at Washington-based Frontier Strategy Group, which advises companies looking at developing nations. “Sentiment has worsened. There’s a lot of anxiety.”

Frustration too.

After four years trying to gain traction, Truworths International Ltd., a South African clothing retailer, last month gave up. It closed its last two outlets in Nigeria, in the southeastern cities of Enugu and Warri. Willing to tolerate dilapidated infrastructure, complicated red tape and expensive rent, the company said the import and foreign-exchange restrictions caused it to throw in the towel.

‘Impossible’

“We were happy to lose money for a few years while we developed the business and opened new stores,” Chief Executive Officer Michael Mark said in an interview. “The straw that broke the camel’s back was not being able to get stock into Nigeria. You can’t have a clothes shop with no clothes. With all the other things, it just wasn’t worth it. It was impossible to do business.”

Nigeria’s appeal has faded as the price of oil, source of 90 percent of export earnings, has crashed. Growth slumped to 2.8 percent last year, the slowest since 1999, and will decelerate to 2 percent in 2016, according to Morgan Stanley. In dollar terms, the economy in 2019 will still be 17 percent smaller than its 2014 peak of $542 billion. Only two years ago, McKinsey & Co. said Nigeria had the potential to grow 7.1 percent annually until 2030 and build a $1.6 trillion economy.
As Nigeria lags, other countries in sub-Saharan Africa have gotten more appealing. Last month, Nigeria fell from first to fourth, behind Ivory Coast, Kenya and Tanzania, in a ranking of business prospects by the research unit of Nielsen Holdings Plc.

Portfolio investors including Aberdeen Asset Management Plc and Ashmore Group Plc, which together oversee about $450 billion of assets, have retreated from Nigerian markets. The main stock index is down 10 percent this year, while the MSCI Frontier Markets Index has lost 2.8 percent. Nigeria’s local-currency bonds are the only ones among 31 emerging markets tracked by Bloomberg to have generated aloss this year. Foreign direct investment this year is set to be the lowest since the 2008-09 global financial crisis, according to data from the central bank.

For now, President Muhammadu Buhari and Central Bank Governor Godwin Emefiele say they aren’t budging from their strong-naira policy. While both acknowledge that businesses are struggling to source enough dollars, Buhari says that a devaluation and easing of capital controls would be akin to “murdering” the naira and send prices up. That’s already happening as manufacturers struggle to buy foreign inputs, with inflation accelerating to a three-year high of 11.4 percent in February.

Markets are betting Nigeria will be forced to follow oil exporters from Russia to Kazakhstan and Mexico and let the currency weaken. While the naira has been all but pegged at 197-199 per dollar since March 2015, forward prices suggest it will drop 29 percent to 280 in a year. The black market rate has weakened to 320.

Bruno Witvoet, the Africa President of Unilever, whose Nigerian subsidiary has seen its shares plunge 31 percent since Buhari came to power, said it would be “very insane” for the country to persist with the currency policies. Nestle SA says its local unit, which has fallen 18 percent in that period, has had to widen the number of banks it uses so that it can access enough foreign exchange.

Not all companies are gloomy. In January, Coca-Cola Co. agreed to pay about $240 million for a 40 percent stake in Chi Ltd., which is based in Lagos, and makes fruit juice and dairy products. Boston Consulting Group this month opened its first office in Nigeria.

“It’s an immense market,” said Geoffrey White, CEO for Africa at Kuwait-based Agility Public Warehousing Co K.S.C., which plans to spend hundreds of millions of dollars building four warehouse and logistics parks in Lagos and the capital Abuja by 2020. “You can’t really have an African policy without having Nigeria high up on the list.”

For Frontier Strategy Group’s Lion, Nigeria is too important for foreign companies to exit en masse.

“But a lot will depend on what happens with the currency,” she said. “For now, the opportunity cost of not being there is too high. That could change if the currency situations worsens. It’s definitely a pivotal time.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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British International Investment to Invest $1B in Nigerian Banks, Telecoms, and Other Key Sectors in the Economy

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The British International Investment (BII), the UK Government’s Development Finance Institution (DFI), is investing $1 billion in Nigerian banks, infrastructure and power in the next five years.

The BII’s investment strategy was announced yesterday by the Chief Executive Officer, British International Investment, Nick O’Donohoe, at a briefing in Lagos.

He said the BII has invested $100 million in FirstBank; $75 million in Stanbic IBTC; $15 million in CardinalStone Capital Advisors and a $162.5 million syndicated loan package in Access Bank.

Azura Power also got $30 million in debt finance to support the construction of the 461 mega wats Azura-Edo power plant.

He said investments reflect BII’s focus on mobilising capital to build self-sufficiency and market resilience in Nigeria and improve access to inclusive economic opportunities while helping to catalyse Nigeria’s boundless entrepreneurial ambition.

O’Donohoe said: “Investing in the prosperity of Nigeria’s growing population requires innovative new partnerships that can leverage the country’s abundant capabilities and expertise.’’

He said investments in key segments of the economy are evaluated based on sustainability, inclusion and productivity.

“I am delighted that not only will BII’s investment help to create jobs and provide entrepreneurial self-starters with the means to own their vehicles,” he said.

British High Commissioner, Catriona Laing CB, said: “It’s a pleasure to be in Lagos to mark the launch of British International Investment. BII forms an important part of UK’s package of tools and expertise to help Nigeria build their pipeline for investment and scale up infrastructure investment, in particular, to achieve clean, green growth.”

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Investment Opportunities on the Rise as Nigeria Steps up Efforts to Strengthen Health Sector

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A new focus report, produced by Oxford Business Group (OBG), highlights the opportunities for investors to contribute to the development of Nigeria’s health sector by bridging funding shortfalls for planned infrastructure projects and supporting other segments with high growth potential.

 

Titled “Nigeria Health”, the report provides in-depth analysis of both the health sector and pharmaceutical industry in an easy-to-navigate and accessible format that includes key data and infographics. It also includes an interview with Mojisola Adeyeye, Director General, National Agency for Food and Drug Administration and Control, and contains in-depth case studies and viewpoints from key industry players, such as Fidson, Codix, GSK, Merck and Bayer.

The report explores the key role that public-private partnerships (PPPs) are expected to play in bringing a range of health care projects to fruition and helping Nigeria to achieve its ambitious goals for the sector, which include increasing the number of hospital beds to nearer the global average bed-to-population ratio of 2.7 per 1000 people.

It also considers the potential Nigeria has to boost local production capacity for consumable items, such as syringes, bandages and dressings, needles and catheters, and, in turn, reduce its import bill.

The opportunities emerging in medical technology are another focus. In this section, OBG provides in-depth coverage of the digital solutions disrupting health provision worldwide, which include extending care to underserved areas and facilitating remote diagnosis and treatments.

The report shines a spotlight on Nigeria’s pharmaceutical industry, tracking the growth stories of key companies with a presence in the country and featuring contributions from high-profile industry representatives.

With Nigeria’s reliance on China and India for pharmaceuticals evident at the start of the Covid-19 pandemic, OBG considers the scope for increasing local production capacity. It also notes the part that Nigeria’s Five Plus Five-Year Validity policy is expected to play in increasing partnerships between multinational pharmaceutical firms and local manufacturers.

In addition, the report examines the topical issue of counterfeit drugs, looking in detail at Nigeria’s efforts to address this and related challenges through monitoring and enforcement solutions.

Karine Loehman, OBG’s Managing Director for Africa, said that while Nigeria’s health sector continues to feel the knock-on effects of the Covid-19 pandemic and other, pre-existing challenges, the government had made notable progress in meeting key health indicators in recent years, while a successful PPP model bodes well for investors eyeing opportunities in infrastructure and other segments showing potential.

“Nigeria’s expanding population and underlying fundamentals make it an attractive proposition for the international investment community,” Loehman said. “With the pandemic having created new opportunities for expansion and innovation, and public funds limited, our report points to a health sector ripe for development, offering opportunities that range from capital projects to the provision of high-quality medical services at new and existing facilities.”

The report on Nigeria’s health sector forms part of a series of tailored studies that OBG is currently producing, which includes ESG Intelligence and Future Readiness reports, and other highly relevant, go-to research tools, such as country-specific Growth and Recovery Outlook articles and interviews.

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Lagos Remains Top Destination for Investment Despite Drop in Capital Importation

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Despite an overall 28.09 percent decrease in Capital Investment in Nigeria, Lagos State remains the number one destination for investments in Nigeria in the first quarter (Q1), 2022. 

In the quarter under review, capital investment into Lagos state stood at $1,119.44m, representing 71.16 percent of total capital investment into the country in Q1 2022.

According to the report obtained by Investors King from the National Bureau of Statistics (NBS), the total value of capital importation into Nigeria in Q1 2022 stood at $1,573.14m from $2,187.63m in the preceding quarter, showing a decrease of 28.09 percent. 

On a yearly basis, the capital importation decreased by 17.46 percent from $1,905.89m.  

The report showed that the most significant amount of capital importation by type was received through Portfolio Investment, which accounted for 60.87 percent ($957.58m). 

This was followed by Other Investment with 29.28 percent (US$460.59m), and Foreign Direct Investment (FDI) accounted for 9.85 percent ($154.97m) of total capital imported in Q1 2022. 

Breaking down the number into sectors, capital importation into banking was the highest at $818.84 million in the first quarter, amounting to 52.05 percent of total capital imported. 

Capital imported into the production sector came second at US$223.67 million (14.22 percent). The finance sector followed with $199.37m (12.67 percent).

Capital importation by country of origin shows that the United Kingdom ranked top as the source of capital imported into Nigeria in Q1 of 2022 with a value of $1.021.21m, accounting for 64.92 percent. 

This was followed by the Republic of South Africa and the United States of America, valued at $117.50m (7.47 percent) and $82.07m (5.22 percent), respectively.

In terms of Destination of Investment, the Federal Capital Territory, Abuja, comes second after Lagos with a value of $446.81m, representing 28.40 percent. 

Standard Chartered Bank of Nigeria imported the most fund at $543.20m (34.53 percent) while Citi Bank Nigeria Limited with $439.03m  (27.91 percent) and Stanbic IBTC Bank Plc came third with $251.52 (15.99 percent). 

 

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