Nigeria: An African emerging economy with prospects.

Africa is fast becoming the new frontier for global emerging market investors. The flow is not limited to Johannesburg and Lagos, it obvious in the entire continent as the flows are gathering pace to African countries like Kenya, Ghana and Botswana.

 

Investment opportunities have expanded greatly in African countries, with over 522 firms now listed on sub-Saharan stock exchanges, up from barely 66 in 2000.

Imara, a South African investment group, now offers three African funds, two of which are dedicated exclusively to Nigeria and to Zimbabwe respectively.

Recently, the Russian-based investment bank renaissance capital announced the launch of a billion-dollar pan African investment fund and also creating a fully-fledged pan regional investment banking, Research and Assets Management operation with offices in Lagos and Nairobi.

In the same view, German government recently signed a bilateral trade agreement with Nigeria in the area of renewable energy where the Germany would make available 16.5million euro (N3.5 billion) in the financing of the projects.

Also, Investors in the emerging equity markets are also developing a taste for Africa, with global emerging market funds deploying nearly 10% of their portfolios on the continent.

In addition, Asia’s thirst for competitive exports has spread to the African continent. China, India and Brazil, are also present on the continent. China and India have long had some presence in

Africa, groups like Tata from India and oil companies from China have become major competitors. And this phenomenon is not limited to the so called BRIC countries.


Over the years, China has tactically established diplomatic relations with 48 out of 54 African nations. It has invested in building roads, ports and other infrastructures in the continent. Africa is now a stable trading partner and a supplier for China.

Trying to emulate China's success, India has jumped on the bandwagon. It is trying to gain a foothold into the continent. India plans to help African countries develop and market locally produced commercial products. It plans to offer scientific and research expertise.

This may help poorer African nations improve their lot. And in a spirit of cooperation, India expects more access to Africa's mineral reserves. Access to these scarce resources will help wield significant competitive advantages in years to come.

China and India are in battle for Supremacy in Nigeria as both countries keep boosting their investments in the country. With a population of over 158 million and substantial revenue from oil exports, Nigeria is India’s largest economic and trading partner in Africa. Nigeria is also the largest market in Africa for Indian exports. A large number of Indian companies have footprints in Nigeria, which have made substantial investments in Nigeria. Prominent among over 100 Indian companies in Nigeria are:

 

Bharti Airtel, a telecommunication company, which officially takes over the management of Zain Nigeria in 2010 following the purchase of the African assets of Zain by Bharti Airtel plans to invest $600m over a three-year period to strengthen operations in the Nigerian market.

Bajaj currently exports to over 30 countries in Latin America, Africa, the Middle East, South and South East Asia with an assembly unit in Nigeria commissioned with the help of its distributor to cater for the growing demand in African markets.

Tata Group which comprises over 100 operating companies in seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals has invested over $100 million across the continent, including in Ghana, South Africa, Nigeria and Mozambique among others.

India- Nigeria trade reached the milestone of $ 10.2 billion during 2008-2009; it fell to $ 8.7 billion in 2009-10 due to the global recession. Indian export basket to Nigeria was dominated by manufactured items such as machinery and instruments, pharmaceuticals, electronics, transport equipment etc. Traditionally, balance of trade has been in Nigeria’s favour, due to large Indian imports of crude. Statistics of India-Nigeria bilateral trade are as follows (in Million Dollars):

 

 

The People's Republic of China and the Federal Republic of Nigeria established diplomatic relations on February 10, 1971. Bilateral relations have ever since achieved a smooth and steady development.

China and Nigeria have signed a number of agreements on trade, economic and technical cooperation, scientific and technological cooperation, as well as an agreement on investment protection.


The two countries set up a joint economic and trade commission. The trade volume between the two countries in 2002 reached US$1.168 billion, of which China's exports were US$1.047 billion, and imports US$121 million. Nigeria-China bilateral trade volume surpassed $7.5 billion mark in 2010.

China's main exports to Nigeria are light industrial, and mechanical and electrical products. China mainly imports from Nigeria petroleum, timber and cotton.


Up to now, China has set up more than 30 solely funded companies and joint ventures in Nigeria. The main projects contracted or undertaken in the form of labour service by Chinese companies in Nigeria are the rehabilitation of Nigerian railway, the Games Village of Abuja Sports Complex. Major Chinese companies which have undertaken projects in Nigeria are:

 

On Friday 9th March 2012, the government of The Netherlands said it would increase its investment inflow into Nigeria by 100 per cent from the current €8bn (about N1.656tn) to €16bn (N3.3tn) within the shortest possible time in spite of the security challenges currently facing the country, which have made some investors to express worries about the investment climate in Nigeria.

The Vice-Minister, Foreign Trade, The Netherlands, Mr. Simon Smits, confirmed that their businesses have been active and committed to Nigeria for over 50 years. He also confirmed that both business people from Nigeria and Netherlands said the opportunities in Nigeria outweigh the challenges.

Bilateral economic relations play a strategic role in the growth and development of an economy. Some of the benefits of these economic relations are expected to be advantageous to both the developed and developing nations. Inflow of more foreign investment will surely help to improve Nigerian Economy and as well help developed economies access our market for the their industries.

 

However, it is obvious that what the country needs is not aid from advanced countries as it used to be but ample of investments and steady flow of private investment initiatives into the country, Meanwhile, it becomes the responsibility and life time obligation of the government and policy makers to ensure the sustainability and ensure that growing investment interest towards the country is not frustrated with unfriendly business environment and high state of insecurity.

DISCLAIMER - While the contents of Proshare Limited’s communications are checked for accuracy, we are not liable for any incorrect information included. The details of this mail should not be construed as an opinion or an investment advice by Proshare Limited or/and its employees. We therefore accept no liability for any loss arising from the use of the information contained therein. All opinions in this mail constitute the staff’s best estimate and judgment as of this date and are subject to change without notice. Investors should see the content of this mail as no more than a non-legally binding exchange on the subject of discourse. We recommend that you make enquiries based on your own circumstances and, if necessary, take professional advice before entering into this or any transactions. This email and any files transmitted with it are confidential and intended solely for the use of the individual or entity to which they are addressed. If you have received this email in error please notify the sender and delete immediately. Any use, dissemination, distribution, or reproduction of this message by unintended recipients is not authorized and may be unlawful. Proshare Nigeria Limited will accept no liability whatsoever for any loss, direct, indirect or consequential, arising from information contained or/and actions resulting there from.

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