Monday, January 12, 2009

Lagos State, Nigeria Marches Forward

We do not need official statistics to recognize the strides that Lagos state is taking to change the face of Greater Lagos Area. Other states could be doing greater things but Lagos remains the cynosure of our eyes, perhaps being the commercial hub of Nigeria or because of its enormous population that has bestowed on it a mega city status.

Being a mega city in itself is troubling as it suggests that infrastructure has to be enough for the teeming population that call Lagos their home. Further, it has to be attractive enough to retain its commercial hub status and to attract new ones. It is therefore newsworthy to read of several projects embarked upon by the state government to meet with the infrastructure needs of the people in the 21st century.

Realizing the weight of the tasks ahead, the state has equally called on the private sector and foreign investors to consider Lagos state for their business, providing opportunities for franchising, concessions and adoption of projects such as roads etc.

In other to make the state investment friendly while ensuring that its residents were not frustrated, the state government has accelerated its transportation project which this year, 2009 would include the railways to buoy the bus rapid transit and jetties. The state has construed an energy village, use of wind as an alternative energy and floated a 50 billion Naira infrastructure development bond to boost investment in the state, the governor Babatunde Fashola calls the 'investment haven of the whole world'.

Landscaping and planting of trees is taking place in all parts of the state to improve the aesthetics of the city while serving as absorbents for the high level of carbon emissions from the numerous vehicles that ply its roads and highways, exacerbated by bad roads, snarling traffic and the introduction of motorbikes.

Activities of the Lagos state government leave no one in doubt of their desire to reach their set goals in the realization of the UN Millennium Development Goals through its SEEDS programs and the 20-2020 initiative of the Federal Government, hence the call for state residents and corporate bodies to meet up with their tax obligations to the state.

Lagos state has not hidden its urgent desire to transform the state to a highly industrialized state with the various economic summits held, the opening of the Lekki Free Zone and plans to open up more business zones away from Lagos Island.

This state is not interested in aids but partnership; the governor reminded the visiting German President, Horst Koehler. However, the type of business development expected has to be different from the conventional pathways adopted by Germany and other countries during the ‘smokestack’ industrial revolution. This makes Mr. Koehler’s visit particularly significant as Nigeria and Germany signed an energy partnership. Lagos state and in fact the entire country should not be considered a dumping ground for overused machinery and spent technology from the West as presently witnessed in the ICT (Information and Communication Technology) sector.

Lagos state government should continue in its efforts at providing new or improved programs to better capture the enormous potential for energy savings in existing industries and proposed facilities due to their impact on the environment and economic development.

In other words, efficiency improvements to generate more economic output with less energy input, for instance, in production processes and urban transportation systems is essential for reasons of energy supply security, economic competitiveness, improvement in livelihoods, and environmental sustainability.

Lagos state should learn from the mistakes of rapidly developing countries including Brazil, Russia, India and China by deploying technologies that are sustainable, energy efficient and would improve the quality of life of its 14million people. As a microcosm of the entire country, other states would emulate its pathway to economic development if properly implemented. The Federal Government should on its part grant Lagos a special status to enable it continue to function as the state for all Nigerians and visitors to Nigeria.

Ndudi Osakwe
IBG Nigeria

Friday, January 9, 2009


That Nigeria’s economy would be in a dire strait in 2009 is no longer news; not with the fall in the price of petrol in the international market and the much talked about and already pinching global economic meltdown. Capital flights by foreign investors to bail out parent companies in their ailing economies have not helped matters.

According to Dr. Mailafia, former deputy governor of the Central Bank of Nigeria, the global recession will have seven major effects on the Nigerian economy.

First, as an immediate consequence, it is likely to aggravate the ongoing stock market crisis. Recently, it was reported that foreign portfolio investors have withdrawn some US$15 billion from our capital markets. Such massive withdrawals compound the crisis of confidence which will further complicate the capital market recovery process.

Secondly, dwindling petroleum prices mean a severe reduction in foreign exchange earnings, which, in our case, derive overwhelmingly from the petroleum sector. Some experts are predicting that petroleum prices may come down to as low as US$30 per barrel over the coming years. Others believe we are approaching a stabilization point where the price may hold for sometime. Hardly anyone imagines that prices would recover to the levels exceeding the US$100 that we witnessed about a year ago.

Thirdly, and deriving from the above, it is likely to affect our budget plans in a major way. Already, the 2009 federal budget proposals have an inbuilt deficit of 1.09 trillion naira, a figure that many consider to be unsustainable. While government is optimistic it would be able to finance it through taxation and accruals from signature bonuses from the sale of certain privatized companies, the skeptics seem to be carrying the day.

Fourthly, lower revenue expectations through all tiers of government mean reduction of funds for much-needed investment in infrastructures development. This would not only deepen the infrastructure finance gap, it would also bedim the prospects for our much-vaunted Vision 2020 project.

Fifthly, we would have to reckon with reduction in net capital flows, both in terms of investment and concessional resources. Whilst we may not be major recipients of official development assistance (ODA), we do benefit significantly from bilateral and multilateral aid resources, which are often the soft target when developed countries face a major financial crisis. Inevitably, investment flows, both in terms of FDI and portfolio, are likely to be affected, in addition to remittances from the Nigerian Diaspora, which, according to some calculations, exceed US$2 billion annually.

Sixthly, the lowering of growth in the OECD countries will translate into lower growth in Africa as indeed in our country. Earlier estimates about growth exceeding 10 percent would clearly have to be revised downwards. We may have to be content with something of the region of 7 - 8 percent growth for 2008.

Seventh, lower growth would also mean a slowdown in the fight against poverty. Worsening poverty removes farther the prospects of our attaining the internationally agreed targets for halving the number of the poor within the framework of the Millennium Development Goals (MDGs) by the year 2015.

These are desperate times no doubt but the Nigerian economy is resilient. In fact, a former President once claimed that Nigerian economy defies all known laws of economics. It could be the hope of the people for better times ahead otherwise how else do you explain Nigeria on top of the chart of the happiest people in the world amidst suffering and lack? Meanwhile, Merrill Lynch has endorsed Nigeria as one of the safest countries for foreign investment in the entire world.

We have been receiving telephone calls and emails from people from all over the world on what the investment climate would be like in 2009. With dwindling revenue from oil, many state governments would be interested in investment proposals that appeal to their local environment as they jostle for public private partnerships. It is also time for foreign companies to consider relocating some of their plants as they change technologies for more energy efficient ones. We are not recommending that Nigeria should be turned to a dumping ground for old and environmentally hazardous industrial equipment.

Below are seven areas that an investor would not regret investing in Nigeria in 2009.

Hospitality: As recession bites, many foreign investors would seek overseas outlets for their products and services culminating in increasing patronage for hotels, restaurants and bars. In Nigeria, hotels are enjoying boom times despite their exorbitant rates. Oriental, continental restaurants and fast food eateries are all over the major cities while bars and night clubs are packed every evening by locals and foreigners. Beers and energy drinks companies are all smiling to the banks as a result of heightened patronage by revelers. Car rental companies would find the market attractive as a complementary service.

Information and Communication Technology: Nigerians may be earning less than two dollars a day but their appetite for high end smart phones with 3G capabilities are high. Mobile phone use is presently less than half the population of 150 million people, ample opportunity for mobile phone companies to set up local plants for new or refurbished phones, the Nigerian Communications Commission (NCC) permitting. Suppliers of computers, laptops and network accessories including wireless routers, switches and data security and encryption would find a ready market here. Most banks have deployed electronic payment platforms and there is need to protect ATM users from identity and password theft. Most Nigerian banks consider expanding their offshore banking operations and need fraud and risk solution technologies as they deploy. Surveillance cameras and panic alarms are in demand as financial institutions, companies and individuals install cameras in and around their property. Internet penetration is still low. Such services are worth considering as Governments may be encouraged to deploy e-government platforms to save administrative costs while providing access to the citizenry.

Agriculture: Subsistence agriculture is widespread in the country but no longer tolerable if the country must feed itself. Improved seedlings, modern farm equipment, herbicides, storage facilities and mills for food processing are necessary in the fight against hunger, exacerbated by the use of the crops for alternative energy development. Governments are interested in partnering with companies that are willing to go into joint venture with them for aquaculture, livestock breeding and in the production of livestock feeds and fertilizers. These projects have the capacity to generate employment for the teeming youths in the various states. Manufacturers of farm equipment and consultants in these areas would make good sales.

Services (Outsourcing)-Repatriates or returnee Nigerians from Diaspora form a ready pool of skilled and experienced human resources for companies that seek best practice for their business as they consider locating in Nigeria. With exposure in management practice, health care, accounting, HR and schools, their expertise are of immense value as companies tap into the huge opportunities available in the country in these service sectors. SAT, GRE and GMAT testing remain attractive to families that desire top notch education in the US and the UK for their children. Companies in Nigeria prefer graduates from good overseas universities to local universities as the educational system have become comatose. Private primary and secondary schools are enjoying a boom and this is not likely to change soon. Preference for expatriate teachers and administrators are high, perhaps due to absence of many committed personnel in the country. This void has been filled by repatriates with adequate skill set and passion to succeed.

Construction: Public private participation in road construction by the way of concession, build, own, operate and transfer (BOOT) are avenues considered by the government at various levels to contain the hydra headed problem of road dilapidation in the country. Rapid economic development is enhanced when people and products are able to move from point A to B. Mass transit rail or bus service are looked at by various governments as solutions to the transportation problems in their states. Bullet proof cars are still in high demand by chief executives of companies, embassies and the politicians. Technologies for road repairs, bridge construction, signage and traffic control would be interesting to the Governments.

Affordable housing is still out of the reach of the teeming population; therefore economic housing projects for estate development are of concern to Governments, local developers and banks, with which strategic alliance could be formed. Demand for luxury and secured housing estates is high for the expatriate population, repatriates and middle class to upper- upper income class group therefore all the appurtenances for housing construction, fittings and interior decoration remain in demand. Sand dredging especially in urban centres remains an attractive venture as more residential estates are built. Demand for security doors and locks remain high especially among the nouveau rich and the political class.

Energy:The search for reliable sources of power continues with many Governments contemplating Independent Power Plants (IPP), set up of small refineries and alternative sources such as wind, biogas and solar energy. Imports of generating sets remain high as the population subscribe to any appliance that provide them with some semblance of regular power supply. Homes and offices are in dire need of energy to power on their air-conditioners, office equipment and industrial machines. Though in the long run, the Government anticipates renewable and sustainable sources of energy development, any source of power is acceptable in near term.

Health and Medical Equipment: Many Nigerians still travel overseas for tests as routine as eye and laboratory testing and medical check up. Government hospitals and clinics are comatose and without drugs leaving the population with no choice but to seek alternative health therapy. Expatriates take leave of work to return to home country for treatable ailments such as malaria. Opportunities abound here for well equipped clinics and specialized centres for heart-related ailments, kidney problems etc. Good laboratories with modern diagnostics equipment would enjoy good patronage especially among the middle class and above, foreign residents and expatriates. Massage parlors and health spas to ease stress of living, rheumatic pains and arthritis remain a wise investment. Trading in generic drugs and syrups is a worthy investment once approval is given by National Agency for Drugs and Food Administration (NAFDAC). Consulting in alternative medicine such as acupuncture is not regrettable.

Ndudi Osakwe
IBG Nigeria/Infoplus