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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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Nigeria’s Insecurity Issues Force Mexican Investors to Stall Investment Plans

The insecurity issues ravaging Nigeria have forced some Mexican investors to put a hold on their plans to invest in the country.

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The insecurity issues ravaging Nigeria have forced some Mexican investors to put a hold on their plans to invest in the country.

This was disclosed by the Nigerian Ambassador to Mexico Hon. Adejare Bello.

He said that the Nigerian embassy frequently receives inquiries from investors about their plans to invest in the country and for possible collaboration.

With the abundance of natural resources in Nigeria, these investors have been looking to invest in areas such as gold mining, oil and gas, and agriculture, as well as partnering with Africa’s richest man Aliko Dangote in the area of fertilizer procurement.

Unfortunately, these investors have stepped back on their plans due to the incessant attacks and insecurity challenges bedeviling the country.

In his words, “In the last decade, one of the critical challenges facing the Nigerian economy is the lack of adequate security of life and properties which has made the country lose so much in terms of foreign direct investment.

“The present situation in the country is very clear evidence of the impact of insecurity on the nation’s development in general and on the economy in particular.

“Lives are lost in the bombings, properties destroyed and businesses collapse as some businessmen who are not indigenes of the affected states leave and migrate to other states. Even the indigenes are taken to refugee camps leading to an increase in government expenditure”

Hon. Bello stated that the insecurity issues in the country have led to a slowdown of Foreign Direct Investment (FDI) which is worrisome, noting that it would be beneficial to the country due to its recent economic challenges.

He, therefore, called on the Federal Government to summon the political will necessary to ensure adequate internal security on a sustainable basis and create a friendly investment climate for inflows of foreign capital into the country.

Investors King understands that Nigeria’s insecurity challenges have not only slowed down investment inflow in the country, but it has also led to the exit of several multinational firms.

The country continues to miss out on so many opportunities of attracting Foreign Direct Investments (FDI) due to escalating insecurity crisis.

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Ogun State Government Inaugurates Ogun Invest, Facilitates Agency

Ogun State Government on Friday inaugurated the Ogun State Investment and facilitation Agency, commonly referred to as the OGUNINVEST.

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Governor Abiodun of Ogun State

Ogun State Government on Friday inaugurated the Ogun State Investment and facilitation Agency, commonly referred to as the OGUNINVEST.

The inaugural ceremony was held at the Governor’s Office in Oke Mosan, Abeokuta.

The Ogun State Governor, Dapo Abiodun who led the inauguration said the newly inaugurated OGUNINVEST would promote the state and give access to both local and international investors.

The Governor, during the ceremony, said his administration had so far attracted nothing less than 36 investment portfolios that are worth over $1 billion.

He said that the investments altogether were able to generate over 40,000 jobs for the citizens of the state, and the facilitation agency would strengthen governance and diversification in Ogun state.

Abiodun disclosed that the primary focus of the agency is positioned on making the state an investment of choice, generating wealth for all in Ogun State citizens, and helping the private sectors grow.

He said, ” The facilitation agency is committed to attracting, facilitating, and nurturing investments into Ogun State.

“Our administration through Oguninvest Will continue to play the role of the enabler and facilitator to help the private sector grow, create jobs, and generate wealth for all in Ogun State.

“We have continued to reap a bountiful harvest from our commitment as existing investments are thriving and new investments are being attracted. As of today, we’ve been able to attract 36 new investments into Ogun State worth over a billion United States dollars and generated an estimation of over 40,000 jobs since the inception of OGUNINVEST.”

He disclosed that his administration has always been committed to the growth of the industrial sector in the state and that his administration would soon commence the construction of the Special Agro Processing Zone by November 2022.

The Governor included that a lot of tax reforms had been introduced under his administration, ensuring that multiple taxes were removed and his administration has also successfully made its payment process digital.

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Nigerian Investors Petitions Kenya Courts to Release Funds Held in Several Bank Accounts

2,000 Nigerian investors demanding the release of Ksh 1.44 billion ($1.8million) held by Safaricom and four other banks in Kenya.

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A petition has been made by more than 2,000 Nigerian investors demanding the release of Ksh 1.44 billion ($1.8million) held by Safaricom and four other banks in Kenya.

These investors claim that they were duped billions of shillings by a sports betting platform (86FB) that used Nigerian and African Fintech company Flutterwave to process payments.

Citing Kenya’s anti-money laundering laws, these investors are demanding that the sum of $12 million is split from the Ksh 6.6 B ($55 M) that was frozen in July in 62 bank accounts at Guaranty Trust Bank (GTB), Equity Bank, Ecobank, and UBA Bank, as well as in 19 Safaricom paybill numbers.

The Assets Recovery Agency (ARA) was granted permission to freeze Ksh 5.17 B (USD 49 M) in 29 GTB accounts, with the remaining funds held in accounts at Equity and Ecobank in Kenyan Shillings, US Dollars, Euros, and British Pounds.

The large sums are alleged to be the proceeds of theft, credit card fraud, and money laundering that were wired under the guise of payments for goods and services.

One of the investors who identified himself as Morris Ebitimi Joseph claimed that he and other investors had filed a new lawsuit in Nigeria to seek the return of their funds.

They argued that a portion of the money belonged to them and have opposed the attempt to forfeit it to the Kenyan government which they claimed were fraudulent proceeds.

In his words, “I believe that the issuance of an order compelling Guaranty Trust Bank, Equity Bank, and Ecobank to deposit the sums excluded in the bank account of our advocates, justice shall be served to the 2,468 interested parties who were swindled of their hard-earned money through the scheme”.

Morris claimed that the investors put money into the investment scheme on the promise of better returns from the betting business, but however, never materialized.

Before the payments stopped, according to them, everything was fine for about six months. He also shared that after conducting research, he came to the conclusion that the operation was questionable, and now wants to join the case and help the court resolve the issue.

The Nigerian contingent is requesting the Central Bank of Kenya (CBK), which declared in July that Flutterwave is not licensed in Kenya, to ask that the court issue an order directing Access Bank, Safaricom, and United Bank of Africa to deposit the excluded amount in the account of his attorneys.

“The claim made by the applicant/intended interested party represents the interest of 2,468 persons, thus occasioning monumental public interest.

Failure to expeditiously determine whether the application is in like fashion constitutes substantive and irreparable injustice,” Joseph says. He contends that there may be more people with an interest in the funds in addition to the 2,468 people who are requesting an injunction.

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