Analysis of Nigeria’s elections in 2015

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.

The recent elections reflected themselves in investor activity by a “wait and see” approach, trade volumes in the stock marked lowered and there are strong indications of some funds being moved to Kenya’s stock market while the elections took place in Nigeria.

In the recent elections, uncertainty was felt by the average Nigerian, as each elections have the potential to evolve the country forward or put it decades back.

It’s no surprise however that the power was transferred peacefully – the country depends on democracy to advance further and achieve its potential.

There have been international concerns about the democracy development in Nigeria, however it can be argued that the concerns are just a phase in development of democracy. Political changes in a democratic environment cannot happen overnight, even the questioned 2007 elections can be considered normal in an 8 year old (at the time) republic that evolved from a military rule. The issues and concerns of the present government can be viewed similarly.

There is a conscious awareness of the fact that people of Nigeria have rights and power to make changes. The people of Nigeria are hungry for democracy, Nigerians won’t accept any more military rulers. Any political players need to work within the democratic framework. This is largely due to the occupy Nigeria movement, that saw the country held to ransom for 5 days in January of 2012. The fact that hundreds of people died after demonstrations following the 2011 elections, demonstrates the mobility of the population and the desire for democracy.


The parties don’t differ in any ideological way, parties in Nigeria generally represent specific interest lines or ethnicities, not ideology. This results in the people at government changing, not any major changes in developments or ideology. In fact, many of the regulations, laws and policies from the previous federal government is being carried out by this government.

Before the previous administration, there was a tendency for the government’s to start with fresh new plans and policies. This is less of a case within the federal government now, however remains the case with state governments on governor bases. That is one of the main drivers of gaps between the states – no changes can get traction due to being dropped the moment a new governor comes in.

The real change in the fact of the election of APC is that the country now has two strong oppositional parties, which are willing to challenge each other. The PDP is facing the need to settle in as the opposition, if they are able to do this, the country will see more getting done due to public pressures.

Reasons for APC’s success

A question remains of why the citizens felt the need to elect the opposition and face the risks associated with it. Buhari had ran for president in every election from 2003, there was a chance to elect him before. What had changed?

Prior to the 2015 elections, the country had reached an extreme point – Boko Haram was gaining traction, frequency of power shortages hadn’t changed and the corruption was very public. By many of the public, any government was perceived to be better than the Goodluck Johnathan’s government.

Even though Buhari had ran before, he was sectional with his statements and simply put – not electable in the South. This changed in 2015, he gained support from the powers in South and became more electable all around the country, not just the North.

The General Buhari, as he was known before, was also perceived as fairer and able to tackle the very public corruption.

The new Nigerian president Buhari

President Muhammadu Buhari could be considered a power player – he’s been involved in 3 coups before becoming the head of state in 1983 and has ran for the president in 4 out of 5 elections the 4th Nigerian republic has seen.

Buhari seems to have a deep desire to be the president, a personal ambition and a quest. He’s considered the first president to actually want to be a president, the previous presidents were put in by someone or by circumstances – they were foisted to some extent.

Nigeria is facing challenging times and needs a strong government to overcome the upcoming challenges. A concern with Buhari is that the presidency title is his personal ambition and it might not be his career potential. It appears that he’s not fully aware of his responsibilities and demands of this position.

With his drive and ambition to become the president, he has made many statements and possibly promises to other politicians that he simply cannot follow through. This could be considered the main reason why there has been a delay at appointing the cabinet – he’s looking around to whom he can trust and how to deliver the promises he’s made. The fact that the APC consists of merged 3 parties doesn’t help – he will have to upset some people that have sacrificed for him to become the president.

As an example, Buhari made a statement in February 2015 at Chatham House, stating that his government won’t consist of corrupt officials, yet he has gotten to where he is thanks to people that put him there and a collective effort of his party. He will have to be biased at any attempts to tackle corruption, which might lead to him simply tackling the public corruption, which has been the case in many African nations.

The personal interests of politicians are now overlapping the desires of people, the only way this government will work out and transform the country is if they lay down their personal interests. This is not likely to happen, given the motives behind forming the APC party. We will likely see 4 years of the political party members establishing themselves and arguing between themselves.

Some political commentators have even forecasted the APC splitting – “I said it before the elections that the APC will be challenged to stay together, should they win the election. This is because I recognized that there are too many political heads, too many egos in the party with different agenda’s that will need to be satisfied” Priscilla Nwikpo told me.

If the party was to split before the next elections and the nation was to follow its constitution, Buhari would have no legal rights to be the president and a new election should take place. This would add to the already high political risks and likely have some reflection in the countries capital markets due to changes in investment sentiments.

It should be emphasized, however, that all these short term issues and concerns might be a part of transforming the country. Clearly it could be considered good for the country in the long term if the nation followed its constitution and another elections were to take place in case the APC split.

It’s important for long term investors to recognize and follow on aspects of the political landscape that might be off of this transformation and potentially put the country decades back. Africa generally has had a history of power hungry leaders holding power for the sake of it, resulting in leaders making decisions to stabilize their power base, instead of utilizing the power to increase economy and living standards. As long as there is a shift away from this history, we are likely to see developments, especially with the changing view on Africa – journalists are no longer asking about aid and corruption in conferences, but rather about trade, investment and capital.

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.

Terrorism in Nigeria

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.

Boko Haram in the North

It should be recognized that terrorism in Nigeria is a problem, however it’s regional and is not a nationwide threat. The cause of terrorism in Nigeria is economic inequality and terrorists are active in the regions where not much economic activity is happening. A lot of the fundamentals for economic growth and activity are lacking in the North, this makes the north of Nigeria a perfect base for organization such as Boko Haram to rise.

Boko Haram is not considered Muslim by the vast majority of Muslims in Nigeria and it’s very common for Muslim leaders to speak against Boko Haram publicly. The Nigerian population considers Boko Haram an inhumane terrorist organization, rather than a religious group.

The civilian casualty numbers from the attacks are quite high, this is due to Boko Haram attacking isolated villages and using forms of guerrilla warfare. Apart from isolated weak villages, Boko Haram targets religious sites, state infrastructure and in some instances Nigerian security forces.

There have been records of the Nigerian army being afraid to intervene due to Boko Haram being better armed than the army, this was more the case in 2014 however, as Boko Haram was successfully repelled in early 2015 with allied efforts of the neighboring countries of Niger, Chad and Cameroon.

There has been a new wave of Boko Haram attacks, many argue as part of reprisal attacks.

The anxieties induced to the villages by Boko Haram has lead the villagers to take matters in their own hands by forming vigilante groups. Some have successfully repelled attacks from Boko Haram and there have been instances of villagers fighting with arrows and bolts. This indicates that Boko Haram is not as well armed as thought and the perceived success of Boko Haram is due to isolated attacks on civilians that get covered over the media.

There have been instances of crowds of civilians apprehending and beating suicide bombers to death. The intelligence agencies have been able to stop some attacks in the Southern states of Nigeria.

Negative investment sentiment due to terrorism

The attacks of Boko Haram are well covered in domestic and international media, increasing negative investment sentiment over Nigeria. Terrorism is often one of the first concerns when considering Nigeria as an investment destination.

The missing 200 school girl’s case made awareness of terrorism in Nigeria international. Internationally, Boko Haram has been perceived as seizing territory and going the way of ISIL. This perception is mostly driven by the media coverage and cases such as the 200 schoolgirls, without viewing the impact of Boko Haram critically.

Real impact by Boko Haram

There have been a large number of civilian casualties, more than 10,000 people have been killed by Boko Haram since 2009 and 1.5 million have been left homeless. Boko Haram increases the uncertainly and stagnation of the North and should be dealt with an urgency.

Nationwide, the driving engine of the economy is the South where Boko Haram has no impact.

Boko Haram is impacting the economic and business activities in Nigeria only in specific instances, such as if the business relays on sourcing in the north. Some impact has been felt by logistics firms, the truck drivers know their way around in the north and to avoid trouble, but this has increased the length of time each lorry takes to travel between the North and the South. It used to be 5 days, now its 8-9 days. This has increased the costs of each truck and decreased the profitability of each lorry on the road.

To increase the economic condition in the North, some corporations have announced plans to invest money in agricultural and manufacturing plants, to create jobs.

The long term impact might be felt in non-improving education levels in the North, as Boko Haram is against western education in its root ideology and has been attacking schools. This might lead to decreased popularity of education due to students facing the fear of vulnerability of Boko Haram attacks.

Accusations of association

There has been accusations of military officers providing information and weapons to Boko Haram fighters. While the Nigerian military has denied the allegations, a government minister tacitly acknowledged the fact and stated in a BBC interview that the problem officers had been identified. There was a record of a Nigerian businessman who was arrested on charges of helping Boko Haram to plan several attacks and then joining local pro-government vigilante group to gather information.

Considering the Nigerian political landscape and the fact that there is little to non-existing rationale for individual dealings with an inhumane, unsustainable terrorist group driven by poverty, a case could be made that Boko Haram is used as a way to opportunistically incriminate ones political, military or business opponents.

Boko Haram was the main reason the 2015 elections got postponed for 6 weeks, some argue this was done for the PDP to gain more time to gain votes.

There is generally a tendency by politicians and even business people to put blame onto anything else than themselves. Boko Haram is the perfect scapegoat to blame the problems in the North to. One of the interviewees for this report told me of an instance where this was the case – a conference where a top level African nation government executive blamed terrorists for issues terrorists did not cause.


Boko Haram has little impact on the Nigerian nationwide economy and businesses. Their attacks are brutal and high in casualties, so they gain international media coverage.

Investment funds should put emphasis on investment relations, explaining and providing details of Boko Haram to their investors in case of another internationally covered brutal attack or any negative evolvements of the 200 schoolgirl’s case.

Investors should view Boko Haram for what it is – an inhumane terrorist group driven by poverty, destabilizing a few Northern states and leaving some impact on sourcing from the North, instead of making decisions based on media coverage or politician statements.

Nigeria’s appeal to investors

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.

Nigeria is perceived as a great investment opportunity due to its population and the growing middle class. Nigeria is the biggest economy of Africa and one out of every 5 African is a Nigerian. A population of 181 million people is bigger than Russia or any of the EU countries.

One of the biggest drivers for investor interest is unexciting interest rates and small returns from the safe markets such as US and EU. Small returns from the developed markets make investors look abroad for new horizons and new markets.

Nigeria attracts capital from all over the world. Nigeria’s markets are not for everyone, however more people are becoming aware of the investment potential of Nigeria, especially after the 2014 GDP rebasing exercise.

The investment sentiment in Africa is not particularly good, most of the newly intrigued investors are looking at mining natural resources and the domestic market – the African consumer. The issues the country faces, such as Naira devaluation and Boko Haram, are stopping people interested in the country, not the ones already invested in Africa.

The fact that Nigeria has a lot of commodities has driven interest from Asian investors. Asia is already heavily invested in Africa – they need the commodities.

The big international brands are following their demographics to Nigeria. Many of the middle class Nigerians have studied abroad and made a liking of some of the worlds fashion brands. A lot of the big brands are capitalizing on the opportunity right now – huge population, fashionable and a brand loyal middle class with disposable incomes.

Some industries have entered a maturity stage in the developed world, such as pharmaceuticals. The outlook now is at the frontier and developing markets, where Nigeria comes in first. Nigeria is one of the hotspots for pharmaceuticals, the domestic pharma industry is projected to expand and grow rapidly.

In the car manufacturing industry, manufacturers are forced to setup their assemblies in Nigeria and everyone is on the bandwagon, announcing plans for assemblies in Nigeria, not to miss out on the Nigeria’s opportunity.

By 2050, the combined GDP of Africa is projected to be at $29 trillion of today’s money. This has led to the perception of unlimited growth for the next decades, as even if one country slows down, other countries in the continent pick up. This is well witnessed in Asia right now, with the slowdown of China, other Asian countries are picking up in their GDP growth.

It’s not just that Nigeria is Sub-Sahara Africa’s biggest population already, it’s also the fact that it’s quickly growing. There is an opportunity to serve more breakfasts and portions of food generally, regardless of if the economy continues to grow as quickly. This is attracting companies such as Kellogg’s.

Concentrated population and the high urbanization rate in the cities is another interest driver – it’s possible to serve 10 million people by a successful operation in a single city.

Nigeria has seen a lot of endorsement from world leaders, Obama’s visit to Kenya in the summer of 2015 encouraged increased trade between the USA and Africa. Chinas presidents Hu Jintao’s visits to Africa had great success in promoting friendly and cooperative ties between China and Africa.

A big and reputable name that gets involved in Africa usually brings with itself an increased interest and investment sentiment for Africa. This is similar with individual companies that are looking for funding – a partnership with a reputable, continent wide recognized company, can help attract FDI. This is well seen in the companies that partner with telecoms to deliver their products through the GSM networks, such as lottery gaming companies. These partnerships gives credibility to the company.

The low oil prices have driven investors already in the country and the continent to explore other sectors of the economy.

Some of the high returns seen are driven by negative investment sentiment. This was the case in telecoms, where MTN’s $285 million investment returned billions years later. Had Vodafone entered the market in early 2000’s, such a growth rate would not have been possible.

All of these growth potentials are attracting interest from every corner of the world, from many industries and sectors. Nigeria cannot be passed by investors looking at Africa and the developing markets.

Nigeria – ripe for growth

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.

Africa missed out on the industrialization that has happened all around the world in the last 200 years, it is happening to Africa right now and is the main growth driver for the economy and the continents development. The growth will reach a peak in 2050 and Nigeria is due a lot of growth till then.

Nigeria is picking up just now due to the human capital now being way better educated than ever before and the lack of opportunities in other frontier markets, such as South America.

Some government policies have proven to drive the growth of Nigeria, such as the pension funds. Pension funds are creating domestic funds available to be invested in domestic deals.

A UN report listed 9 countries that will have the most population growth by 2050, five out of nine were in Sub-Saharan Africa. In 2050, 50% of people in the world under the age of 25 will be in Sub-Saharan Africa. The preparation for the growing population and this new population itself, is expected to grow the economy and the continent.

People have to eat no matter what, products such as butter are driven by this population growth and there is going to be a lot of economic activity regardless of if the country achieves its economic potential.

Big portion of educated Nigerians have studied abroad, they’re bringing back knowledge to run businesses and also the lifestyle expectations. A lot of the growth in the country is simply due to Nigerians expecting and demanding better quality. People are getting used to good and comfortable lifestyles. Middle class Nigerians have disposable incomes, yet there is little emphasis on savings.

The big multi-nationals that are manufacturing locally are creating demand for commodities, such as sweeteners for bottled drinks companies.

Generally, there is a very strong entrepreneurial spirit in Nigeria, it’s creating Nigeria into a dynamic growth place of Africa.

Investor concerns in Nigeria

While many of the worlds developing frontier markets are similar in their economical appeal, they differ in their operations and if the opportunities are realizable by the companies looking at these opportunities. One of the biggest concerns foreigners have is the business culture and the operational know how.

Enron put blame on their Nigerian power plant when they faced their corporate problems. There have been other examples of huge corporate failures in Nigeria due to lack of governance or other systematic failures. These cases gets associated with Nigeria and create negative investment sentiment.

Rwanda is known of finding out how the criteria for World Bank ratings work and adjusting their policies accordingly. Tactics such as these are employed by countries that have been under a lot of pressure and bad publicity. Rwanda for instance, had to take a lot of aid in the past. This is not a general trend in Africa, but business people should be doing due-diligence on countries themselves, rather than purely relaying on world’s organizations ratings.

Risks can be minimized by understanding the Nigerian market terrain. All of the consultants, documents and reports produced are creating more understanding of the market and generating an investment friendly terrain. Business people shall take advantage of these things to address their concerns.

Another major concern is political stability. There is a risk of emergency elections in case the APC party splits and a lot of the countries potential depends on good governance of the country and passing the necessary policies.

The lack of infrastructure remains a big concern – you cannot run a business without electricity.

The high interest rate government bonds remains an issue. It’s hard to attract investors when the government offers 13% interest rate bonds. The big interest rates are also not sustainable for local manufacturers – it’s hard to stay competitive with a two digit interest rate. By the time a manufacturer receives their money on a 2 year loan period, it’s time to ask the bank to re-finance it.

Marketing to Nigerians

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.

Nigerians are very fashionable people and highly brand loyal – 70% of Nigerians are brand loyal. International brands are so popular among Nigerians that Debenhams has been known to put up signs in Hausa language in their Oxford Street store. Some Nigerians make shopping trips to London every 6 months.

In the interviews for this report, many interviewees empathized the fact that it’s not just the population that’s a driver for investment returns, it’s the people themselves. Nigerians are very fashionable, they follow trends and bring them to Africa. Everyone wants to have the latest iPhone or other trending smartphone. Nigerians have a tendency to buy popular brands even if it puts a financial burden on them – it’s all just to have the perceived experience.

Nigerians are very emotional people, brands need to have a social face and a giving back outlook to gain empathy from Nigerians. This works as an entry barrier for the multi-nationals – you need to spend a lot to gain that empathy and recognition. A brand has to support everything Nigerian to develop a social face and a place in Nigerian hearts. Once Nigerians find a brand they like they stick with it. The brand can charge premiums and raise its prices significantly – Nigerians will still buy its produce.

There is a huge demand for lifestyle and luxury brands from the middle class. The middle class is quite big in Nigeria – 23% of the 181 million population. This has made the market very attractive for international brands.

International brands are perceived as more prestigious than domestic brands. It’s seen as a sign of status to sit down and drink a Heineken or Guinness instead of a domestic brand. The kind of brands demanded vary across all sectors – from prestigious fashion brands to fast food restaurants. There are 17 KFC restaurants in Nigeria.

Nigeria has the world’s biggest religious rate, with 95% of the population being religious. Even sensitive industries such as gambling can find their way into the markets by good PR campaigns and efforts – it’s all about how something is perceived.

Gaming on mobile phones is not viewed as gambling, but rather as a fancy activity. You go somewhere to gamble, you don’t take your phone out to gamble. It’s perceived different as going to a local house to play a game like bingo. Mobile gaming is successfully marketed as a lifestyle choice.

The instant noodles were first not common at all in Nigeria, they were viewed as alien products. It took 20 years and instant noodles are now considered one of the most popular food in Nigeria.

The highly religious population, the different ethnical and religious groups, are accounted for in marketing strategies and generally at running businesses in Nigeria. Even on a political level – the PDP always had a Muslim president and Christian vice-president, and vice versa.

Cultural, religious and social incongruity remains agents of diversity rather than unity. There have been instances of top level business executive’s religious and ethnical background being matched with that of the region the company operates in. To a lesser extent, the executives must talk the local language. This adds to the problems many businesses in Nigeria face – finding and recruiting operating talent.

The PR activities of an industry are often times also at promoting a favourable view for a regulation to be passed.

There is a lot of demand for advertising, it’s a growing industry with many innovations available. Mobile advertising is especially popular. Many fashion brands are operating by the e-commerce channels, brands such as Calvin Klein, Diesel, River Island, Adidas, Zara, Forever 21, H&M, Topshop, Guess, Bulgari and Gucci are available in the e-commerce sites.

Nigerians have money, it’s available to be spent and they are willing to. Some Nigerians that earn a little over £100 a month are carrying 3 mobile handsets. Anything can sell in Nigeria, it’s a question of harnessing that growth and finding a way into it.

Nigeria’s business culture

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.

The Nigerian business terrain is quite unstructured, laws are not followed, nothing works and people don’t follow through to their duties. For instance, the UK’s structure cannot be compared to the Nigerian structure. Everyone follows specific structures and rules in the UK, Nigeria is the complete opposite – people bend the law to what they want.

Nigerian entrepreneurs are very much oriented towards getting things done, there is no time for bureaucracy or much structuring. This can be argued to be a norm in a quickly expanding and growing frontier economy. It might not appear this way from the outside, but things are being done efficiently and productively in Nigeria.

There are magnificent business culture differences between Nigeria and Europe or the US, but there is a code of business in Nigeria, it’s just that it’s very different from that of the developed world. Nigerian entrepreneurs are not used to structured corporate culture, in their view it holds them back from getting things done. The market is very dynamic, you are required to make decisions quickly and there simply is no room for back and forth paper handling or other bureaucracy. Being able to make decisions quickly is considered a priority.

The business culture varies between regions and same products might have different market approaches across the regions and states.

In small outsourcing operations for exports to other continents, it can be a challenge to explain to the employees that the quality that might be accepted in Africa won’t be accepted in the UK, for instance. It’s also not uncommon for employees to work in multiple jobs, especially the employees of small operations. This increase production times.

Nigerians are very much peoples persons, they sell and buy from friends. A relationship with the locals, in terms of goodwill with the masses and having connections with the local business people, is effectively an entry barrier to doing business in Nigeria. The contacts you have in Nigeria have a huge impact on your business.

Business in Nigeria can be very tough. People that try to enter the market without understanding the operational culture, are likely to be ruined before they even start. A working operational model however, will get one over all the obstacles one might face in Nigeria.

It’s very important to have a partnership before venturing into the Nigerian environment. A partner who knows the law such as land ownership, someone who understands the ethnic, religious and social niceties, is necessary to operate in Nigeria. A successful foreigner business is unthinkable without people on the ground that know the given market and sector, even before the business is launched.

Nigerians are very driven, it’s the first time in history they can see success as achievable and replicable. Some of them have seen the good life abroad and will work very hard to achieve the same lifestyle and living standards for themselves and their family in Nigeria. At all levels of the business world people are hungry for success and will push further at all times.

The new generation of entrepreneurs, who are well educated, see the benefits of structure and are creating structured companies that are appealing to equity investors and the capital markets. The landscape is changing and as most things in Nigeria – the current business culture is a phase the country is going through.

Concerns in operating at Nigeria

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.

The main challenges in Nigeria are infrastructural and institutional inefficiencies. The lack of electricity supply is making business tougher to run, offices and factories are known to run on generators. Ports can take weeks to clean goods and congestions are very common. The roads are of bad quality and there have been instances of produce getting spoiled while in transit.

It’s one thing to attract capital and finance ones business and another to actually find operating talent to run the business. A highly skilled and demanded Nigerian employee will rather go into a bank, telecoms or oil and gas company, than the less attractive industries the economy has.

Experience and connections in a field are highly valued in efficiently operating a Nigerian business. This leads to many businesses being dependent on the senior managers to run them efficiently and make the business vulnerable to the managers leaving to start their own ventures. There have been instances of this happening.

The governments protectionism policies are leading to decreased domestic manufacturing costs, since more of the capacity can be used to achieve economies of scale.  This is helping to tackle one of the biggest obstacles faced by domestic firms – two digit interest rates that are known to increase production costs greatly. It’s hard to compete versus foreigners that have one digit interest rates.

There are little emphasis on asset management in Nigerian companies, this can be very problematic with a shortage of technical skills. Asset breakages can take long time to fix and have impact on the whole of the value chain.


It’s not just that you need partners in Nigeria, but also a partner mentality from both sides. A partner mentality is the key to business in Nigeria. There is a need to guide your businesses and managers, the changes will come slowly. Some employees have been working in a company for years and will turn back to their ways of doing things as soon as you go away.

Strategic flexibility should be prioritized and strong emphasis should be put on creating an operational model.

Private equity in Nigeria

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.

There is a lot of interest in Sub-Saharan Africa private equity opportunities. The interest is across all sectors but one of the main sectors is the FMCG market. With 70 million Nigerians who might have $1 a day in disposable income, the FMCG sector is perceived as a good sector for constant cash flow and for great profits.

Private Equity is perceived as the solution to bridge the gap for pre-IPO stage companies. The success of NSE’s goal of 1,000 listed companies is linked to the successful development of the PE sector in Nigeria.

The Nigerian PE landscape is challenging, yet it’s also an enormous opportunity, as David Rubenstein, a billionaire co-CEO of a US based PE firm The Carlyle Group puts it – “The greatest explosion in private equity, if it is going to occur anywhere around the world in the next couple of years, is going to be in Africa, particularly sub-Saharan Africa, where the penetration rate is about one-twelfth or so of what it is in the United States.

There is a lot of supply of capital and demand for good deals, in 2015 alone $4bn has been raised in PE funds for Sub-Saharan Africa. For the next 5 years, there remains a great opportunity for small and mid-sized investments into companies that require $5m-$100m per transaction.

Deals and private equity is happening in Africa, the challenge is finding these deals. Even big funds have to do small deals. There have been instances where a $3bn fund invested as little as $10m in companies.

Many of the South Africa private equity firms are now reaching out to other parts of SSA. This provides more exit options for the Nigerian focused PE firms. Generally, exits are done by selling to another PE fund or by an IPO. IPO as an exit is rare however, so the increased interest in SSA PE is great for the PE landscape, as there are more exit opportunities.

Challenges in the private equity landscape

While capital is very demanded in Nigeria and there is a lot of capital available for deals, there is a lack of good deals available. The main reason for this is people’s attitudes to ownership, companies prefer to borrow than give up equity. In 2015, many businesses still have ownership of 100% for the founders. Many entrepreneurs rather have the whole business than a small piece of a huge pie. There is also a level of emotional ties to the business – many companies are family run and owned.

There are of course businesses that are looking for private equity, especially considering the high interest rate they would pay if they borrowed. The interest rates are not sustainable, they are usually short term, two digit interest rate loans. The companies that are willing to give up the equity usually look for just an investment, not partners. This remains one of the main challenges for PE funds in finding deals – they want to help build the company they’re investing in, rather than simply invest.

Private equity funds are very risk considerate, there are huge number of businesses that need funds but only few get them. The main criteria is proper corporate governance, great auditors and transparency. A company must have a very clear sense of what will be done with the funds raised – PE firms are looking to bridge a gap with their knowledge and capital, not simply invest in a perspective company.

A PE fund is looking to grow with the entrepreneur, to co-operate with him. There is a desire to agree on the businesses strategic direction and fit it with the resources available, instead of simply putting executives in the business to run it. If a fund doesn’t have a co-operation with the owners and a partnership mentality, it will find it very challenging to bring anything other than capital to the business – employees will return to their old ways as soon as the PE executives leaves.

A private equity company induces a lot of discipline around corporate governance, brings expertise in the sector and networks. Private equity companies are accounted by their own investors for these things. This brings to the other challenge a fund faces – it must have the local networks and the expertise. That’s the biggest entry barrier for a fund to operate in Nigeria. Some funds partner with local partners just to bring the local expertise and connections to the table in their deals.

Some of the talent to run the businesses is returning from abroad, but they usually give up after around 18 months due to the unstructured business nature. This is especially witnessed in the medicine field, where nurses return home from the UK or other developed nation, just to find unstructured hospitals run on electricity generators. Many of the Nigerian doctors and nurses want to come home, but they request institutions with high institutional practices and standards.

Once a PE fund finds a great deal, it’s not uncommon for the given company to be run by educated entrepreneurs that have structured it to attract private equity. This results in little bargaining power for the PE fund and it ends up with a minority stake. There is also the issue on agreeing on a valuation, this is one of the biggest deal killers.

There is a major difference between a minority and a majority stake holder in Nigeria. A PE fund with the majority stake will find it needs to have a team on the ground in Nigeria to constantly monitor the transactions and the company, otherwise the majority stake will be majority only formally.

Exit options for a PE fund is improving but are still limited. There is a lack of domestic fund participation – everyone is after the fixed income assets. Pension funds are allowed to invest 5% of their capital in PE, but they rarely do.

There is a need for a positive cycle, companies being bought and sold, a sense of momentum. Lower interest rates would have a positive impact on this, as the domestic investors would invest in PE funds. There are however plenty of funds available for Sub-Saharan Africa, the challenge remains in the business landscape. There is a gap between the ideas the core shareholders value in a business versus what private equity investors would value a business on.

Future of Nigeria’s private equity sector

A lot of the challenges PE sees is being successfully tackled. Many entrepreneurs are becoming better educated and understand the benefits of working with a PE firm – you give up some equity but also receive enormous support in terms of operations and management. The other option is the bank that will charge a company two digit interest rate.

Equity is preferred and in many cases is the only option for the big multi-nationals, but the majority of Nigerian businesses are smaller than that. Some companies have been doing the same thing for 30 years and bringing in profits, yet still run their company out of the bedroom. There is plenty of room for growth for these companies, but they simply won’t attract any private equity. This is creating the gap between the funds available and the companies that receive them. There are, however quite many elements in place that make equity more favourable over debt, so the outlook of the entrepreneurs is on equity over debt.

It’s perceived that once the Nigerian business landscape becomes more structured, it will be easier to attract employees, the ones returning from abroad and foreigners.

Many of the long term investors that understand Nigeria are not tempted by the fixed income assets, they are using the recent economic slowdown to get in on many discounted deals.


There are numerous challenges for private equity funds in Nigeria, yet the gap that they bridge is highly profitable. Due to the specific requirements for investments, PE deals are quite safe and profitable, especially if they have the chance to exit through the capital markets.

The PE funds are run by people that know Africa in and out, know the operations and have Africa wide networks, bringing great deals as well as exit opportunities to other funds.

Real Estate sector in Nigeria

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.

The real estate opportunity in Nigeria is enormous, as Gbite Oduneye put it to me – “The real estate opportunity is almost as exciting as the economic potential itself”. In economical upturns, real estate is one of the best investment options, with a guaranteed demand in retail and offices spaces.

In the 2000’s there was little to none real estate market or development happening in this sector. This has picked up strongly in the last 7 years and is still going strong. For projects such as Victoria Garden City, it took a while for people to get used to the idea of living 15 miles away from Lagos, but it has now taken off.

The real estate landscape in Nigeria

Real estate contributes around $41bn to the Nigerian economy. While a lot of development and building is done, it’s mostly done for the expensive luxury flats in trade hubs like Lagos, not particularly where there is the most demand – affordable housing for the middle class.

Financing for projects is mostly coming from South Africa and the developing countries. The yield in the Nigerian market can be very high, there is also plenty of demand and the flats sell quickly. This has attracted a lot of interest from investors from across the globe, but the main investors remain South African funds. This is expected to change – Asia and the Gulf region will likely be the main source of new capital in the next 12 months.

There is a non-existing mortgage culture, for a country of 180 million citizens, there are only about 50,000 mortgages. The real estate landscape is expected to change once the mortgage culture takes more traction. It’s not expected to happen anytime soon though, as Africa is quite unbanked – only about 15% of Nigerians have a bank account. The banking sector has to develop before any mortgages can be introduced.

There is development of Real Estate Investment Trusts (REITs), they are expected to create much needed exit opportunities for the primary market players and create a secondary market. REIT’s are also expected to provide a better option for long term funding.

The development segments have seen un-even growth pace, for example there is a shortage of high quality office space, affordable housing and formal retail outlets. Most development has been at the high quality flat houses. The demand for these flats has slowed down due to the economic developments over the last 12 months, but will likely pick up soon again – someone is always making money. The high returns seen form the high end housing are perceived as sustainable by developers.

While there still is demand for high quality offices, it’s slowing down due to a sudden over-development as the economy has slowed down. The office rental prices in 2016 are expected to go down due to loads of supply.

The market is regulated by multiple bodies – the situation is similar as it is in infrastructure, with each state having their own ministries and many different government institutions looking over different things, increasing uncertainty and bureaucracy. The private sector however has proven to organize itself quite well – construction companies have professional organizations and influential private sector entities. Building is done by international standards and building codes.

Property or land ownership hasn’t been very popular amongst Nigerians due to the land documentation issues – people simply don’t trust the established structure. This is changing now however, as a lot of the land that’s being developed is coming from Government Residential Areas, making the process a lot safer. Government efforts at developing the affordable housing market by means of PPP, and the generally growing prosperity in Nigeria, are expected to drive the sub-sector of affordable housing in 2016-2017.

The informal sector has proven to be dangerous, the slums in Africa, often times a prime real estate land, is tough to develop as people are suspicious of government’s activities. In some instances at other African nations, people that have been given newly build houses have rented them out and returned to the slums. Slums are dangerous for the overall population, they can see diseases spread very easily, as well as a lot of ethnical tension driven aggression.

Development costs

The cost of building is very high – domestic materials, such as cement, costs a lot to manufacture. Many cement factories are run on diesel generators, resulting in very high prices for their outputs. Imports are cheaper, yet pricey as well, especially considering some of the import tariffs.

Land is the biggest cost for projects. Land can cost up to 60% of the total project expenses.

Financing a project is also very expensive – a bank will charge 15%-18% minimum interest, in some cases even as much as 35%. The financing usually comes from abroad.

The high costs get paid by the end users, it’s not uncommon to pay $100,000 a year for a luxury rental apartment in Ikoji or Victoria Island in Lagos.

Public projects is one of the main segments for construction companies, especially for infrastructure projects. Construction companies have to provide all the documentation of where the construction inputs were sourced from. In projects at the North East states, security is another added cost.

Many of the developers assume currency risks, as they work with Naira, yet their financing is in Euros or Dollars.

Hotels and retail

The Lagos hotel market is generally perceived to have space for more players, as there is a lack of quality hotel rooms. In 2013 there were 30,000 hotel rooms with an occupancy rate of 67%. For a comparison, the UK has an occupancy rate of 45%. 7,000 more hotel rooms are expected to open in the coming years.

Big projects, such as Transcorp Hotels Plc $140 million Lagos Hilton hotel, are being built to satisfy the demand for luxury hotels. Transcorp Hotels Plc are listed on the NSE as of January 2015, providing an opportunity to invest in the hotel sector.

Nigeria has a lot of growth potential in formal retail outlets and malls. In Lagos, there is only 1 mall per every 1.7 million citizens, compared to 49,000 in Johannesburg. The demand for malls is driven by the increasing demand of international brands and popularity of mall tourism.

While there is a lot of demand for these formal retail outlets right now, they might however be a great longer term opportunity, similarly to the high-end flats. There were no malls whatsoever in Nigeria 10 years ago, the industry is just now starting. The successful development of this industry is dependent on the formalization of the informal sector – street trading.

Street trading is a very common way to distribute goods and a chance for income for the low economic classes in highly urbanized areas in the developing economies. The fundamental driving forces of street trading might take decades to tackle and it will happen gradually. This will create a stable and constant demand for formal retail outlets. The growing middle class is also increasingly creating a demand for more malls.

Challenges and concerns in Nigeria’s real estate sector

There is a mix of challenges developers face in Nigeria, from the overlapping organizations and regulations to finding financing. If something gets to the stage of being fully build, it will sell quickly and create high returns. The very tough Nigerian environment shows itself in operating at the real estate market. The sector is considered to have very high risks – it ranks 96th out of 97 nations in transparency. Projects take time to get finished and if they do, they return high returns. The main issues faced are property ownership laws, lack of transparency, political uncertainty and for the developers that are looking to attract domestic capital, any bank regulations result in increased uncertainties. The demand for affordable houses is not fulfilled by the developers, as they can make greater returns by working at the more higher-end projects. The informal settlements, houses that have been self-build, are occupied by the majority of Nigerians – around 75%. It’s considered that for a nation to industrialize, it has to tackle its informal housing and provide affordable housing. A PPP is considered one of the only few ways this gap between profitability for developers and demand for affordable housing can be closed. The political risks are felt by construction companies doing various government projects, with the decreased budget some projects have stopped and in some instances are still waiting for payments from the government.

Playing the real estate market

There are many opportunities in the real estate sectors, from investing in construction and other development companies, to investing directly in the development projects. The REIT’s will be great for secondary market investors.

To enter the market as a developer, you can’t do without trustworthy local partners. Nigerian developers are keen to work with foreigners as they always provide the better option for financing.

Projects have a tendency to go very slow, they take time to pick up and start going. Once it’s developed, they sell quickly. For relatively safe returns, financiers should be looking for later stage projects that need some more funding.

Some companies, such as Transcorp Hotels Plc and a construction company Julius Berger, are listed on the stock market for investors to invest in.

The formal retail units are a great opportunity as well as hospitality.

With an estimated 17mn housing unit deficit, investors should definitely keep their eyes on how the government’s plans to tackle the housing deficit pan out. Affordable housing will be the main sub-sector in 2016 and 2017. Depending on the developments of the PPP’s, this might be a bigger opportunity than imagined.