Pressing matters president Buhari will face in 2016

This article is a section from a report “Investing in Nigeria” and shall be viewed in the context of the title. Please view the report for more information on the subject as well as references for this article.


Ever since the discovery of oil, Nigeria has faced enormous corruption at every level of the government. Historically, every poor country to discover oil has faced high levels of corruption and economic stagnation.

It’s estimated that around $400bn were illegally transferred out of the country and the economy between 1966 and 1999.

It’s very common for democratic African politicians to use anti-corruption in their campaigns. Fighting corruption can easily hit a roadblock however – everyone knows where everyone’s bodies are buried. This results in government officials agreeing to lower the public corruption, but no real actions against roots of corruption are taken.

It appears that corruption is enrooted in the culture of Nigeria – the average Nigerian has faced some sort of fraudulent dealing in every stage of his life. Passing school tests can mean a bribe to the teacher in some instances. Some jobs can be awarded fraudulently.

When Buhari was first the head of state in 1983, his war against in disciplinary proved fruitful – the monthly sanitary law is still active nowadays. Around the world, similar campaigns have changed the public’s actions and views. Nigeria has the media platforms to promote anti-corruption campaigns, this was very well observed with a popular phone application that had the constitution in it. There were also other successful campaigns that popularized the constitution through media platforms.

Corruption won’t disappear in a low GDP per capita country, however it can clearly be limited – it’s a question of political will. There are hopes put on Buhari due to him wanting to leave a legacy, which he partly did with the monthly sanitation law.

Some industries in Nigeria are structured in favour of corrupt activities – the seed and fertilizer industry is a good example. The agricultural inputs were sold to distributors at a 50% discount, to be sold at the same discount to the farmers. The distributors however sold them at the full price. Replacing this system with an e-wallet system saw this sort of fraudulent activities disappear.

Corruption also spreads in a sense of political connections, some of the state run economic initiatives have been awarded based on such terms. The failed Medium Enterprise Equity Investment Scheme and Micro Finance Scheme have been suspected of awarding funds based on political connections.

For investors, it’s important to see where corruption is evolving, especially with the low oil prices and increased investments in development projects. There have been records of decisions in the advancement and development projects being made on political bases, rather than on the actual needs of people. This has led to an increased link between the level of corruption and investment sentiment for infrastructure projects.

Insurgency in the North

Insurgency in the North is already a reality by means of Boko Haram, to a more in-depth detail terrorism is covered in the Terrorism section of this report.

The insurgency problems the nation faces are due to educational and economical gaps between regions and states. These problems have very little to do with religion, there have been times when Nigerians lived as Christians and Muslims happily around each other, in some instances even one family having both Christians and Muslims. This recent tension between the religions can be argued to be politically driven, with politicians trying to gain popularity and creating the tensions as a result. In many instances, this is simply a politician putting the blame onto anything else than himself.

There have always been some level of ethnical tensions, as Saro-Wiwa argued – the Nigerian territory was made by the British on colonial bases, not on the bases of nationalities or ethnicities. This is the main driver of ethnical tensions. The constitution states that a president must be of a federal character and treat all states equal. This doesn’t help with the tensions, when some states feel left out or perceive the president as sectional.

In the instance of the development gaps in the North, the South cannot be blamed. States in Nigeria receive monthly allocations from the oil revenues. The North hasn’t been investing this money, creating the gap between other parts of the country. The governors should be made accountable for the allocations, accounting for where the money has gone.

The South has had an advantage in terms of the oil and ports created jobs, but it has also spend its allocations wiser. Lagos has developed internal revenues by enforcing more efficient tax collections, this has been driven partly due to the monthly allocations being held due to political tensions.

Nigeria has seen more Northern leaders than Southern leaders. The issues we are seeing are in economic development, governing and to some extend in culture. For example, Muslims are allowed to marry up to four wife’s, this has in some instances resulted in children being abounded and not getting educated.

The Nigerian government policies doesn’t help the educational issues – there are different requirements for passing tests between states and regions. Some people have argued that you’re not required to study as hard in the North as you are in the South.

There are many deeply rooted issues in the North, however, there are also successful models in place that can act as blueprints and be copied to solve some of the issues relatively quick. The question again is in the political will. There is a level of in-consistency within the governors of a state, a governor might develop the base for the changes but it might never be followed up by the next governor.

For the population of the North, there definitely will be an opportunity in low skilled agricultural and manufacturing jobs. Many foreigner multi nationals and domestic firms are investing in developing these industries at the North. These industries however depend on infrastructure development in the region and some initiatives for agriculture, such as the Staple Crops Processing Zones that will be location intensive, leading to the opportunities being un-evenly disturbed between the citizens of Nigeria’s North. This will lead to migration between the states and possibly increased unrests.

The fact that Nigeria is an artificial British creation and the cultures and ethnicities within Nigeria are different, gives a base for a particular region to split from Nigeria. This makes it a political priority to solve the issues in the North, else the country will simply split.

Moving the nation forward

Some people in Nigeria are fully self-sufficient and Nigerians generally have had bad and good governance, yet Nigerians have always moved on beside that.

The low oil prices have little impact on the future development of the country, the oil revenues were not used on development projects, but rather consumed, giving a boost to some industries.

Low oil prices have put an urgency for the government to develop other sectors of the economy. A lot of focus is put on diversifying the economy and attracting FDI. The government has taken actions to attract FDI and the attitude is positive – policy makers and government officials are making themselves available for meetings with foreigner investors to address their questions and concerns.

Due to a long political instability and corruption, half of the country is still living in poverty – under $1 a day. The population is highly unequal in terms of income levels and life quality. The infrastructure of the country is very underdeveloped and as some have told me “absolutely embarrassing for the amount of oil revenues Nigeria has seen”.

Investing in Nigeria

Determining where the real investment opportunities in Nigeria are, is dependent on the policies and if the country is able to govern itself out of the challenges it is facing now. The only way Nigeria will achieve its economic potential is by taking a lot of small steps, there is no one, big reform like China had in 1978.

A long term investor should be looking at developments in governing, corruption and infrastructure projects.

A medium term investor should not be making investments based on increased positive conditions in the country due to government policies, but rather seek to capitalize on the opportunities available right now and always seek liquidity.