Best of tar 2014 nigeria by The Africa Report

eBola The world finally wakes up

SoUtH aFrICa Malema pushes for Zuma arrest

w w w.t hea f r ic a r ep or t .c om

MInIng End of the Iron Age

N ° 6 4 • o c t o b e r 2 014

the africa report

NIGERIA

monthly • n° 64 • october 2014

Game of Thrones President Goodluck Jonathan has to tackle insurgents and forge ahead with power reforms to win the 2015 elections

InternatIonal edItIon

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The hague | NEthErLANds ntaganda faces 18 charges of war crimes and crimes against humanity. icc-cpi.int M

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cAr prEsidENtiAL ELEctioNs June

SIA KAMBOU/Afp

ELEctioN buzz the year 2015 will be dominated by elections as hundreds of millions of Africans head to the ballot box to vote for new presidents and governments. in west Africa, Nigeria’s president Goodluck Jonathan’s battle for re-election will take centre stage (see page 20) on 14 february, but voters will also elect leaders in Guinea in June, in togo in July and in côte d’ivoire (pictured) in october. the East of the continent is no less busy, with Ethiopian federal elections in May, presidential and general elections in burundi and somaliland respectively in June, and general elections in tanzania in october. the africa report

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A New Major is Emerging in Africa.

An ant is only as strong as its colony. A company only as strong as its people. Our vision, resilience and teamwork have led to the successful conclusion of a landmark transaction set to redeďŹ ne the sector and position us as the ďŹ rst indigenous major. This is just the beginning. We are Oando. We are proudly African.

west africa

Country 177 Profiles

nigeria

Harnessing optimism against despair NIGER

FEDERAL MIGHT

On the other hand, Jonathan can earn sympathy from southerners who view the crisis as a deliberate ploy by northern power brokers to undermine a southern president. Boko Haram and the government signed a tentative ceasefire in October to allow for the release of the girls kidnapped in Chibok, but it quickly fell apart. In seeking a second and final term in Aso Rock, Jonathan will be banking the africa report

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ABUJA

NIGERIA Lagos Port Harcourt

CAMEROON

Gulf of Guinea

poLLInG unIT suspIcIons

Population: 173.6 million ■ Population growth: 2.8% ■ GDP per capita: $484 ■ Life expectancy: 52.5 ■ Adult literacy: 59.57% ■ Inflation: 8.29% ■ Human development index (out of 187 countries): 152 ■ Foreign direct investment: $1,811m ■ Current account as % of GDP: 3.67% ■ Mobile phone penetration: 73% ■ Key export: Petroleum and crude oil ■ Last change of leader: 2010 ■ GDP growth (%) ■

5.4

7.0

7.3

467.1

521.8

594.3

657.2

2012

2013*

2014*

2015*

4.3 ■

GDP ($bn)

*Estimation Oct. 2014

CHAD

Kano

BENIN

E-commerce gets a boost from investors and catches the public imagination otwithstanding the country’s extraordinary challenges, a general wave of optimism seems to hold sway among Nigeriansathomeandabroad.Economic growth is continuing at a fast pace, and the government impressed many with its efforts to contain the recent outbreak of the Ebola virus. Unless a fresh outbreak manages to slip past the authorities, the sectors of the economy worst hit by the panic – hospitality and aviation – are expected to return quickly to normality. In the crucial election year of 2015, the Boko Haram terrorist insurgency will cast an especially gruesome shadow. Now in its seventh year, the crisis has displaced more than half a million people and disrupted the latest farming season in an important livestock and food-growing area. Apart from the fact that the legitimacy of the presidential election will be in doubt if no voting takes place in the three most affected states, the insurgency will continue to be the biggest theme during the remaining weeks of campaigning. The opposition All Progressives Congress (APC) will capitalise on it to argue that President Goodluck Jonathan does not deserve a second term and will be seeking to draw on support from other parts of the north where Boko Haram has already staged spectacular attacks.

the Nigerian National Petroleum Corporation did in the past year at the height of a public squabble over claims of missing oil monies. Several state governorship elections conducted in recent months suggest an improvement in INEC’s capacity to manage vital logistics. Critics have been quick to point out that the nationwide polls, due in February, will be a much bigger test.

300 km

The Boko Haram threat will overshadow both the election and its results

on the power of incumbency or “federal might” as Nigerians like to call it. The most powerful elements in his People’s Democratic Party (PDP) have publicly endorsedhiscandidacy.Thepartyfaceda roundofdefectionsin2014,andJonathan will have very little opposition within the PDP. His main obstacle will be the newly confident APC but only after a hotly contested race for the ticket between longstanding aspirants, the former military head of state Muhammadu Buhari and former vice-president Atiku Abubakar. The Independent National Electoral Commission (INEC) will dominate the headlines the way the central bank and

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INEC plans to improve the transparency of the elections with the issue of chipbased permanent voters cards to replace the slips of paper that were the norm four years ago. Distribution so far has been far from hitch-free. INEC’s problems have been compounded by a controversial decision to allocate the bulk of the 30,000 newly created polling units to the country’s north, which has awakened age-old suspicions that northern Nigeria is bent on political domination. Ethnic, geographical and religious divisions still define Nigerian politics. The ‘zoning’ debates that occur at the national level – with the overall aim being to ensure an equitable rotation of power among the key ethnic interests – also play out with similar passion across the 36 states. Unwritten rules stipulate that opportunities for governorships should rotate among each state’s senatorial districts. Much of the scheming for 2015 will proceed along those lines. In Lagos, the economic capital, the APC will be looking to maintain its 16year grip on the governorship of a state that according to ratings agency Fitch accounts for up to 25% of Nigeria’s GDP, 10% of its population and more than half of the tax revenues generated by all the 36 states combined (see box). Another key battleground is the oil and gas hub of Rivers State, which since 1999 had been solid ground for the PDP until the defectionofitsgovernor,RotimiAmaechi, to the APC left pundits guessing on the outcome in 2015. The APC is confident of expanding beyond its heartlands in the south-west and north-west, while the PDP is counting on maintaining support

178 Country Profiles

west africa

nigeria Harnessing optimism against despair

tight monetary policy

The central bank will have to contend with the inflationary impulse of election-year spending, but Godwin Emefiele, the bank’s low-key governor who took office in June, is expected to maintain the tight monetary policy of his predecessor. Emefiele will struggle to

Nigerian State Governors by party (as of 31 October)

PDP (People's Democratic Party) 21 1 APGA (All Progressives Grand Alliance)

APC (All Progressives Congress)

2 million

Barrels of oil per day on average in 2014, well under the 2.4m target

shake off perceptions that he will be a pliable governor, beholden, unlike Sanusi, to powerful banks and political pressure. The controversial bill to revise the fiscal termsoftheoilindustrywillnotbepassed into law by the current parliament before its tenure expires in 2015. The resulting uncertainty is likely to affect the take-off of much-awaited projects like a $9bn refining and petrochemical plant in Lagos and Nigeria Liquefied Natural Gas’s seventh production train. The oil industry has seen a spate of divestments by oil majors. ConocoPhillips completed the sale of its upstream business to Oando,

source: the africa report research

in of the oil-rich states and the south-east. In most of the north and the Middle Belt, loyalties are harder than usual to predict. Jonathan hopes to reap the goodwill arising from reports of improved electricity supply across Nigeria. To a populationlongusedtolengthydailypowercuts, even modest gains would be quickly noticeable. More than a dozen state-owned power plants have been handed over to private investors, but there is a risk of the reforms losing momentum. In September 2014, the government announced a $1.3bn bailout to help the power companies cover revenue shortfalls. Alongside security and infrastructure, the APC is seeking to make federal corruption a major issue. It will point to a continuing lack of transparency in the management of crude oil revenue after the hounding out, in early 2014, of the whistle-blowing former central bank governor Lamido Sanusi. But the latent cynicism in an environment where politicians are generally seen as corrupt means that an anti-corruption agenda on the soapbox could have limited impact.

a local player, and Shell was finalising plans for the $5bn sale of four oil blocks in late 2014. Oil production in 2014 averaged about 2m barrels per day, well under the government’s target of 2.4m. There has been a return of initial public offerings to the Nigerian Stock Exchange. The listing by oil company Seplat on the London and Lagos exchanges in April 2014 was the first since the market crashed six years ago. Conglomerate Transcorp followed suit with an offer that opened in September, as did Stanbic IBTC. E-commerce is thriving, at the behest of venture capital firms like Kinnevik, Rocket Internet and Tiger Global Management, which have invested tens of millions of dollars in internet-based startups peddling everything from discount deals to movie streaming. In 2014, PayPal extended its services to Nigeria, a move analysts see as game-changing in its ability to connect the country to the global marketplace. A national broadband policy launched in 2013 could catalyse the ongoing revolution. Nigeria has struggled to meet many Millennium Development Goals and will not meet the one on poverty by the end of 2015, though it is set to meet some healthgoals.Universalprimaryeducation has been strong in places but national statistics mask vast regional differences. Talk of bringing more development to the north has not led to big improvements. ●

The man who Tamed The chaos of Lagos When former Lagos State governor Bola Tinubu picked Babatunde fashola as his chief of staff in 2003, it was a shock to the system for the lawyer. When Tinubu chose him as successor in 2007, fashola learned quickly on the job and in the last seven years has attracted admiration for his style. he never uses a siren on his car – the

trademark of nigerian big men – and insists he has kept the same mobile phone number and made it publicly available to citizens. he is best known for his efforts at taming the chaos of a city that swells by an estimated 2,000 migrants daily. his government put up street signs, traffic lights and zebra crossings, fixed

anointed a successor. frontrunners are Akinwunmi Ambode, a member of fashola’s All Progressives Congress and a former accountantgeneral; obafemi hamzat, currently a commissioner; Jimi Agbaje, a pharmacist and member of the People’s Democratic Party; and musiliu obanikoro, deputy national defence minister. ●

roads, seeded gardens amid the concrete sprawl and introduced a dedicated-lane bus system. In 2014, the state launched a successful scheme to provide mortgages at single-digit interest rates, in a country where the average commercial bank rates are 15-20%. fashola will step down in may 2015 and has not the africa report

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country focus Nigeria

PIUS UTOMI EKPEI/AFP

Children celebrate Nigeria’s independence, though the legacy still hangs heavy

Divide or conquer D In the century since unity Nigeria has experimented with federalism in myriad forms. Today, as President Jonathan plans a national conference in the face of growing criticism, he fields demands ranging from restructuring and the division of states to autonomous control

By Monica Mark in Lagos

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own a rutted track in the neglected railway town of Zungeru in the Middle Belt lies a dilapidated building where a couple of British colonial governors drew up the frontiers of Africa’s most populous nation. With the stroke of a pen on 1 January 1914, what had formerly been the northern and southern protectorates became the single country of Nigeria. A century later, the abandoned house replete with history is for some a potent symbol of the current state of the

country focus | nigeria

300 km NIGER

CHAD

Kano

BENIN

ABUJA

NIGERIA Lagos CAMEROON

Port Harcourt Gulf of Guinea

naija by numbers GDP

$263bn

GDP/caPita

$1,555

PoPulation below Poverty line

70%

Main oPPosition Party All Progressives Congress (APC) aDMinistrative Divisions 36 states and 1 territory Political control oF state GovernMents: ■ 18 (PDP) ■ 16 (APC) ■ 1 (APGA – All Progressive Grand Alliance) ■ 1 (Labour Party)

Source: WorLD BANK 2012 for GDP fiGureS

rulinG Party People’s Democratic Party (PDP)

jOininG The GianTs millions 2,000 India

1,500 1,000

Nigeria

500

USA

0 1950

2013

2050

Source: uN

China

2100

POPuLaTiOn by aGe 80+ 75-79 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5-9 0-4 12

Male Female

Source: uS ceNSuS BureAu

nation. Nigeria’s tangled federalism is an issue that is bedevilling President Goodluck Jonathan’s administration with growing ferocity. Groups agitating for more regional autonomy or even secession have burgeoned since the end of military rule in 1999. Some totally reject the authority of the federal government in Abuja. At the extreme end are the militant Islamists of Boko Haram based in the north-east. The Movement for the Emancipation of the Niger Delta (MEND) has reconfigured itself in the south-south, and the Oodua People’s Congress still has support in the southwestern heartlands. In the middle – and less easily dismissed as ‘mischief-makers’ by the government – is a broad range of activists calling for a restructuring of the federal government, with its 36 states and federal capital territory in Abuja. Dissatisfaction with the way Nigeria is governed and the cost of governance is a popular sentiment. “one nigeria consciousness”

It was those concerns that President Jonathan was tapping into when he launched his “national conversation” last year about the future of the country. For some, the move to reopen the debate about a national conference and reform of the federal structure looked like political opportunism ahead of a national election. For others, it was a great opportunity to make their positions felt. Jonathan referred approvingly to a “one Nigeria consciousness” when he launched a year of centenary celebrations in October 2013. Addressing a large crowd at Eagle Square in Abuja, Jonathan drew cheers as he called the amalgamation “a blessing”. Commemorative events had been carefully stage-managed, right down to a game show quiz that included participants from each of Nigeria’s six geopolitical zones. Alongside the pomp and cheers celebrating nationhood, the president’s speech included a warning to wouldbe secessionists. “No one should insist on reversing history; those who seek a return to pre-1914 Nigeria only seek to diminish our collective heritage,” he said. That warning has fallen on deaf ears in many quarters. A few days after Jonathan’s speech, the Movement for New Nigeria, a small

but vociferous campaign, told a crowd of youths in Lagos that the country was on the verge of a “monumental disaster” if a “sovereign national dialogue” was not held early this year. “The range of problems that Nigeria is facing requires a resetting of the foundations. We propose a number of federations, each with the right to self-determination,” said Oguchi Nkwocha as his fellow campaigners distributed inch-thick documents emblazoned with the words “True Federation Character”. Nkwocha heads this multi-ethnic movement that advocates that Nigeria should split into several smaller federations. In many other countries, such groups would be seen as fringe sideshows. But Nkwocha caused newspapers to sit up, and, at times, stung the odd politician into responding. Now, as elections approach in February 2015, the pressure has been turned up. Since its inception, Africa’s giant has wrestled with various formulae to give its 250 ethnic groups better representation. Calls for a sovereign national conference have grown louder since 1993, when the dictator General Sani Abacha annulled the election win of Moshood Abiola. Aiming to legitimise his regime, Abacha commissioned a watered-down constitutional conference commission. Those talks produced one important result: that all states in the Niger Delta would be entitled to 13% of the revenue earned from their oil production. Since then, the oil-producing states have been militating for ever higher percentages.

a century of argument: the

1885

1914

Sir George Taubman Goldie claims British dominion over the lower Niger at the Berlin Conference on West Africa. He makes treaties with more than 400 chiefs and obtains a trading charter for the Royal Niger Company. the africa report

Area now known as modern Nigeria is brought together as the Colony and Protectorate of Nigeria. The country was still divided administratively between the North, the South and the Lagos Colony. •

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nigeria | country focus

Scepticism may surround Jonathan’s national conference, but there is a real call for debate

As several senators convened a meeting another senior aide dismissed the chances of far-reaching constitutional reform: “The presidency holds so much power in this country that I cannot see any man in that position relinquishing it.”

Akintunde Akinleye/ReuteRs

what lies beneath

Olusegun Obasanjo, the first elected president after the return to civil rule in 1999, organised the National Political Reforms Conference near the end of his administration in 2005, but little changed on the ground. Then, last October, Jonathan set up a 13man committee to head a promised national conference “within a month”. logic of the splinters

Senate president David Mark, a People’s Democratic Party (PDP) loyalist who has long lobbied for the creation of additional states, tells The Africa Report that a convention – and a constitutional overhaul in the longer term – is much needed: “Nigeria has too many bright

candidates in each region not to have them all represented at national level. That is not in doubt. Rather the issue is how to make sure each region is fairly represented. This is not something that is decided overnight, but it is an issue that cannot be avoided.” The planned convention would not have “legally binding status,” but state creation would be a key point on the agenda. “I have not yet heard anybody who has cogent reasons as to why [state creation] would not be viable for the development of Nigeria,” adds Mark, who has called for his home region, Benue State, to be divided into two to provide a separate new state for his Idoma ethnic group.

Oil, as with so much in Nigeria, is at the heart of the debate. Some of the recent infighting that has erupted in the PDP stems from attempts by Rotimi Amaechi, the governor of Rivers State, to exert greater control over the flow of locally produced oil. Resource control has long been the cri de coeur of militants in the Niger Delta. The Delta, with its myriad creeks, accounts for some 40% of the country’s oil output. “[One] factor that caused the erosion of state autonomy was oil. Quite frankly there was too much money at stake to allow individual states to develop at their own pace and do as they pleased,” argues the historian Max Siollun, whose book Oil, Politics and Violence examines the military coup culture that followed Nigeria’s First Republic (see page 50). “It would have caused spectacular disparities in wealth between the Delta and the rest of the country – even worse than is the case today. Nigeria was created as an economic union and has remained so even 100 years later,” adds Siollun. ●●●

shifting states of the Federal Republic of Nigeria

1960

keystOne-FRAnCe

On 1 October Nigeria gains independence. The 1961 plebiscite results in greater political power for the north. Nigeria becomes a threeregion federal republic in 1963. In 1967, General Gowon divides the country into 12 states. the africa report

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1970

Nigeria emerges united from its 30-month civil war, provoked by the Eastern Region’s declaration of independence. A succession of military leaders follows.

1979-1983

The Second Republic is declared as General Olusegun Obasanjo hands over power to the civilian regime of Shehu Shagari. Regional diversity is underlined by the ‘federal character’ of the nation.

1999

Nigeria regains democracy after another 16 years of military rule, including the short-lived Third Republic of 1993. Obasanjo is elected president of the Fourth Republic, which formalised the current 36-state system.

2014

President Jonathan launches constitutional talks on resource control and devolution. Some are calling for yet more states, but others want the existing states consolidated into larger semiautonomous regions.

country focus | nigeria

A lasting and deep suspicion that the country’s ruling class is holding Nigeria together solely to feed off its resource riches fuels popular anger. It is hard to deny the truth of the sentiment. Northern governors fear a renegotiation of Nigeria’s constitution would endanger their access to southern oil. So in the topsy-turvy world of Nigerian politics, the Arewa Consultative Forum (ACF), the voice of the northern elite, has thrown its backing behind Jonathan’s calls for national unity. That is a rare case of northern and southern leaders seeing eye to eye. ●●●

vote of no confidence

GeorGe esiri/epa/Corbis

“The ACF has made it clear long ago that it is not opposed to any national dialogue that can calm nerves and away from being ‘glorified economic bring about the strengthening of the Nigeria project, provided such national subsidiaries’ of the federal government. dialogue would not take the form of “Calls for a sovereign national conference are an accurate barometer of a sovereign national conference,” explains Anthony Sani, the group’s public the political climate […] that seems to secretary. “This is because a sovereign heighten whenever things seem to be national conference amounts to a vote going awry in the polity,” argues Ekiti of no confidence on our democracy State governor Kayode Fayemi. The and its institutions […] which nobody system of “asymmetric federalism”, [and no] group has the right to do.” says Fayemi, explains why his state, However, southern activists such as with just three million people, is somethose in MEND accuse the 12 northtimes buffeted by political violence. ern states of doing exactly that when “The choice is between competitive they opted for sharia law more than a federalism and a revenue allocation decade ago. Regional autonomy has formula that encourages hard work been shrinking since the military seized and competition on the one hand, power in 1966. With the country’s three and the post-civil-war order with its regions turning to four regions, then 12 highly centralised governance that states and now 36 states, the centre has stifled local creativity and autonomy become stronger at the expense of the on the other hand. In effect, the choice periphery. And the military still wields was no choice.” enormous power on-stage and behind the scenes. Critics accuse the ruling class “First and foremost the of holding Nigeria together military came to power as a unifying force, and its to feed off resource riches credo was to maintain the corporate existence of Nigeria, even Although there is distrust when calls for greater devolution have come from fighting a war to do so. Their fear was some at the top, there are signs that it that increased state autonomy would could boost development. Certainly encourage secessionist sentiment. It history shows the average Nigerian was got to a stage where calls for devolubetter off under the First Republic, when tion became interpreted as treason,” the three large regions had substantial Siollun points out. political authority and autonomy from A whiff of this is reflected in the recent heavy-handed reaction by securthe centre. Even after discounting the ity officials – controlled by the centre rapid population growth and inflation, the average income in Nigeria then was – who have prevented the dissenting almost twice as much as today’s figure Rivers State assembly from sitting. of around $1,500 per capita. Others Many believe loosening Abuja’s hold would force local governments to move point to the success of the commer-

MEND militants increased their attacks and kidnappings in the Niger Delta in 2013

cial capital Lagos, where the opposition All Progressives Congress nurses a long-running feud with the PDP-controlled government in Abuja. “There has to be a loosening of federal control and impetus for states to have greater control of their affairs. At some point the oil is going to run out, and when it does the raison d’être for keeping such a unified structure will expire,” says Siollun. three become one

There is a final twist. When the country’s Richards Constitution was drawn up in 1945, creating a federation of three regions, national experts argued it would undermine national unity and encourage separatist tendencies. Into the fray entered Bernard Henry Bourdillon, the former colonial administrator whose popularity can be seen in the abundance of squares that bear his surname. “In fact, this measure represents not the division of one unit into three, but the beginning of the fusion of innumerable small units into three and from these three into one,” he declared. Bourdillon could hardly have foreseen the political and constitutional maelstrom that would occur 70 years later, after Nigeria had adopted an elaborate and costly federal system: now some activists demand a return to three semi-autonomous regions, while politicians are still lobbying for the creation of ever more states. ● the africa report

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country focus | nigeria

PeoPle to Watch

Billionaires, booty and brains: the many faces of Naija

saying it is “beset with many crises, mostly leadership-induced crises” and it has “lost touch with Nigerians”. The defection gives the opposition All Progressives Congress (APC) a muchneeded boost and could be pivotal in how much ground it can claw away from the party that has been in charge since the return to civilian rule in 1999. The founding member of the PDP, whose presidential ambitions saw him briefly forced out of the party in 2006, is now a favourite presidential candidate for the APC, which has struggled to find a unifying figure for its divergent lobbies. But Atiku’s loyalty is by no means certain. The PDP has downplayed the significance of his defection. “We are waiting for Atiku to go on this voyage and to come back. He has done it before. This is not the first time, and we will welcome him back when he comes [back],” quips Uche Secondus, the PDP’s deputy chairman. pernicious pop star

HectoR iSlAS www.Hec9.com

he Nigerian Prize for Literature combines two things Nigerians love best: books and money. At $100,000 it is one of the richest literary prizes in the world, and is joined this year by the new Etisalat Prize for Literature. Meanwhile another neglected patch of the literary landscape is quietly growing: historical non-fiction. After Oil, Politics and Violence: Nigeria’s Military Coup Culture (1966–1976), Max Siollun recently released Soldiers of Fortune, which tackles the decade in which power rotated between generals Ibrahim Babangida and Muhammadu Buhari. Siollun’s articles and talks have helped bring historical context to the current crisis buffeting Nigeria. “There’s a tendency to think the country’s problems are solely brought on by the leaders but there is little appreciation that some problems are embedded in Nigeria’s structure,” says Siollun. The brash and outspoken businessman Femi Otedola fell off the Forbes rich list in 2009 but returned with a bang at the end of last year. The reason? A 1,395% rise in the share price of the Lagos-listed Forte Oil, formerly African Petroleum. This was a result of Otedola’s branching out into the privatisation of power plants. Forte subsidiary Amperion Power took operational control of the 414MW Geregu power plant last year. Fellow business magnates Tony Elumelu and Aliko Dangote have similarly won bids for power plants. Observers will be closely watching whether these investors can kickstart the country’s crumbling power infrastructure. No less rich, former vice-president and political heavyweight Atiku Abubakar (1) quit the ruling People’s Democratic Party (PDP) in February,

AfolAbi Sotunde/ReuteRS

Otedola, Elumelu and Dangote are finding new ways to get richer, Dencia wants to get whiter, and it seems Atiku Abubakar wants to be president, but for which party?

eASy tAxi

If there are two things guaranteed to set the Nigeria blogosphere afire they are pop stars and skin bleaching. NigerianCameroonian singer Dencia (2) set off a round of debate about skin bleaching after launching a new range of creams called Whitenicious. Critics have questioned the ethics and medical credentials of the cream, whose claim to banish “pigmentation and spots forever” is demonstrated by the spotlessly white-looking singer on the packaging. Still, the $150 price tag for a tiny tub has not stopped the range from selling out. Meanwhile, a wave of young returnees are bringing more skills and innovation to Nigeria. Among them is 25-year-old Bankole Cardoso (3), who has plugged a gap in the market for reliable taxi services with the mobile application Easy Taxi, which was originally founded in 2012 by the German tech incubator Rocket Internet. Cardoso, a former New York-based PwC employee, has adapted it to Lagos. In a city of millions of cars and epileptic public transport, the app connects users to the nearest registered cab driver. After confirming a pick-up point with the click of a button, clients can follow the driver’s approach in real time. “We’re trying to solve the challenges standing in the way of Lagos being a model megacity,” says Cardoso, who has further apps in the pipeline. ● Monica Mark in Abuja

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> 1 billion people > $ 2 trillion GDP > 5% average growth rate > $ 1 trillion in consumer spending > 650 million subscribers > 170 million internet users

It’s not “why?” anymore. It’s “how?” Established in Lagos, Nigeria, we have dedicated the last 20 years to developing in the African continent. In this time, we have founded and managed a wide range of companies, as well as advised and provided support to many more. Today we offer solutions to meet the challenges of entering a new market, implementing strategies and achieving growth potential in a demanding environment. With an unparalleled track record, Novignis Consulting provides its expertise for your ambitions in Africa. So the real question becomes “when?”

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country focus | nigeria

Central Bank of nigeria

Lamido Sanusi’s legacy The central bank governor will step down in June, having saved the financial sector and created plenty of enemies along the way

“

love controversy,” Sanusi Lamido Sanusi, Nigeria’s central bank governor, said at a conference in Lagos on 3 February. Hours earlier he accused the state-run Nigerian National Petroleum Corporation of operating illegally and diverting $20bn of state funds, an outburst that embarrassed President Goodluck Jonathan. His claims followed a leaked letter he wrote to Jonathan that exposed problems in remitting oil revenue to the federation account. The state oil firm denies any wrongdoing. When Sanusi leaves his post in June, he will be remembered by some as a swashbuckling graftbuster, while others may always view him as an irritant who stepped beyond the boundaries any

central bank governor should. Detractors andsupportersaliketendtopraiseSanusi for perhaps his most impressive achievementsincecomingtooffice.Heprevented a financial sector meltdown in Africa’s second-largest economy. When he became governor in June 2009, he had only recently taken over as the new managing director of FirstBank. He wasted no time in cracking the heads of his former peers. Justweeksaftertakingofficeatthehelm of the apex bank, he overhauled the banking sector. “Sanusi came like a wrecking ball on frail banks standing on false fundamentals,” says Oluseun Onigbinde, co-founder of number-crunching website BudgIT. “Sanusi knew the rot in the system, and he moved in with a bang destroying the quietude that enveloped the banking sector.” shockwaves

Sanusi bailed out nine lenders, nationalised three banks and removed eight chief executives, sending shockwaves through

the establishment. “He was able to act very quickly to sort out the good banks from the bad banks and get the banks back to health. That is a huge legacy,” says Wale Shonibare, managing director of investment banking at UBA Capital. Failed banks morphed into bridge banks – Enterprise, Mainstreet and Keystone banks – and were acquired by the Asset Management Corporation of Nigeria, a rapidly formed state-backed bad bank to soak up toxic assets. The fate of these bridge banks is still unclear. “Going through the process of actually fixing a crisis without depositors losing money and getting the banks to pay for that is a major thing, so one would like to see an agreement that the Nigerian banks – over the next 10 years – are the ones that pay for the cost of the bailout after I’ve gone,” Sanusi tells The Africa Report. Sanusi has bagged a string of banking awards and was included in Time magazine’s list of 100 most influential people in 2011. But for all his foreign plaudits, his controversial policies and statements have won him more enemies than friends at home. At the advent of his reforms, jobs were lost, credit stagnated for months and interbank rates spiked. His critics argue that his inability to

Fall and rise oF the nigerian stock exchange 2008-2014 15 September 2008

Lehman Brothers files for bankruptcy. Global liquidity moves from periphery to core. Confidence in Nigerian banks shaken as questions asked about corporate governance. Stories filter out about a build up of ‘toxic assets’ in banks exposed to margin lending, energy companies and state governments.

19 July 2010

The Asset Management Corporation of Nigeria created to absorb and restructure the bad loans that had accrued during the crisis period, and act as a bridge bank in order to manage three of the rescued banks, now called Enterprise Bank, Keystone Bank and Mainstreet Bank.

1 March 2008

The top of the precipice: After several years of accessing the capital markets, Nigerian banks pump up a huge bubble in the Nigerian Stock Exchange (NSE).

3 June 2009

Lamido Sanusi appointed as new central bank governor in the middle of global and Nigerian financial crisis. Three months later, Sanusi sacks the heads of Afribank, Intercontinental Bank, Union Bank, Oceanic Bank and Finbank, and injects N400bn to stabilise the banking sector. A controversial anticorruption fight ensues, with bad debtors named and shamed in national newspapers. the africa report

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Jerome FAvre/BloomBerg viA getty imAges

nigeria | country focus

adopt the reticence typical of a holder of his job threw him into the ring of controversy. Sanusi made a number of public donations in 2012, drawing fire from politicians who accused him of only taking care of his own. The government’s management of Islamic banking and an attempt to introduce the N5,000 ($30.60) note and coins generated media frenzy. Never afraid to criticise Jonathan’s government and the National Assembly, he made enemies who questioned the need for an independent central bank. “Such approach and bluntness, especially his incessant outbursts on the expensive structure of Nigeria’s statecraft, propelled the Nigerian legislature to craft a failed unpopular bill which tinkers with the independence of the apex institution,” observes Onigbinde. Another controversial hallmark in the central banker’s legacy was pushing for the removal of a fuel subsidy in January 2012. The move sparked violence and strikes, whichforced the government to reinstate it partially. The central bank maintains the

benefits of removing the fuel subsidy far outweigh the costs of a higher pump price. Few Nigerians agree. By rewriting the regulatory framework of banks, institutionalising tenure limits for bank chief executives and abolishing the universal banking system, Sanusi managed to strengthen some aspects of banking regulations. However, some of his critics argue that there is still not enough supervision. industry funds

“His mandate is to stabilise monetary policy – so why introduce intervention fundsforagriculture,powerandaviation? It is not his job to be promoting funds for industries,” says Atiku Samuel, a business owner and analyst. “He seems to be more interested in industry policy and fostering an environment for big corporate investments, neglecting banking supervision.” Plenty of ire is also directed towards the central bank’s tight monetary policy. It has kept its benchmark interest rate at 12% since October 2011, despite

calls to cut it. The central bank also increased banks’ cash reserve requirements from 8% to 12% in July 2012. In October 2013, the central bank extended penalties for large cash transactions to bolster the cashless policy Sanusi has been supporting. His supporters maintain that his stringent approach has seen a return of profitability toabankingsector thatwasheavily subsidisedwithhigh-interestgovernment bonds. He has pledged to crack down on money laundering and speculation by enforcing a 75% cash-reserve requirement on public sector deposits. He wants banks to lend to ordinary Nigerians, not to take state funds and lend them back to the government to make an easy profit. His hawkish approach has reined in inflation, which was around 15% when he took office and is now stable well within single digits. Sanusi will also be hailed for bringing relative exchange rate stability, a credit to the central bank and its ability to keep money supply tight, says Shonibare. It is unlikely that the new governor will depart from the central bank’s historic stance on foreign exchange stability, especially given the currency’s critical role in the forthcoming election. Analysts expect that political pressure may push it to lower policy rates and shift to a more expansionary monetary regime ahead of the 2015 elections. ● Gillian Parker in Abuja

12 December 2013

The central bank dissociates itself from the leaking of a letter from Sanusi to President Jonathan, detailing $48bn of revenue that the Nigerian National Oil Corporation had failed to account for.

1 January 2012

Nigeria cuts fuel subsidy. Sanusi becomes strong defender of the action – if not the implementation – on account of huge corruption within the subsidies payment system. A report to Nigeria’s parliament later suggests $6bn was defrauded from the system over the previous two years. the africa report

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Africans Building KappaCity

Hydro Power Generation Gas Fired Power Generation IPP NIPP PPP

Ka Petrol Indigenous Oil & Gas Companies Production Exploration

Kapp Oil & Gas Pipelines Water Network Power & Telecom Lines

www.kappafrik.com

Leo LawaL

Ka Power

Kano residents shop after Friday prayers

K ano State

Political pathfinder for the north

Kano State governor Kwankwaso defected to the opposition in late 2013 as security and economic growth returned to the region

heady mix of radical politics, brash commercialism and Islamic tradition, Kano is West Africa’s oldest city and holds onto its pioneer role in a region in political and economic turmoil. It started life 1,400 years ago as a trading centre on the trans-Sahara route, and today tens of millions of Nigerians depend on its success as the commercial capital of the north. With much of north-eastern Nigeria ravaged by the Boko Haram insurgency, the centre of gravity in northern Nigeria is with cities in the north-west such as Kano and Kaduna. Now Kano is in the ascendant again. “It is going through a major overhaul, partly as a result of the relative security attained in the past year […] as well as rapid infrastructural development,” according to Muktar Dodo Lamido, who works with a civil society group in the city. But security worries persist. Kano was rocked in January 2012 when Boko Haram insurgents opened fire in the city centre and killed about 200 people. A year later, insurgents tried to assassinate Ado Bayero, the emir of Kano, now in his mid-eighties. Political Islam has failed to win many supporters in Kano, despite the underground recruitment efforts of both Boko Haram and its affiliate Ansaru. The city’s two most celebrated figures, Kano State governor Rabiu Kwankwaso and central bank governor Lamido Sanusi, have openly criticised the Islamist insurgents, a stand that many mainstream imams have declined to take. Better security in Kano should not be taken for granted, according to Addo Ahmed, a local civil servant: “We are the africa report

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nigeria | country focus

traders here since time immemorial, but because of lack of employment youths are finding succour in religion extremism.” Kwankwaso, along with local magnates such as cement billionaire Aliko Dangote, is working hard to fire up business in the state and to create jobs. New building projects are springing up all over the city, along with new roads and flyovers. There is also a state-led drive to improve social services. There are more than 20 vocational schools, teaching subjects such as rearing poultry, managing fisheries and information technology. HonEy AnD HEALtHcArE

Abdullahi Abass, the commissioner for the environment, talks about taking agriculture to the next stage. He enthuses about a beekeeper training programme organised by Kano State government. “Agriculture is the way out of poverty,” he argues. Partly to deal with the local healthcare crisis and to find work for unemployed graduates, the state government has launched the Lafiya Jari programme, which gives management training to young people, encouraging them to set up pharmacies in the countryside. So far it has trained more than 1,400 people. Politics is never far from the economic struggles in the state. Kwankwaso’s defection from the ruling People’s Democratic Party to the opposition All Progressives Congress (APC) last year has put the state at odds with the central government under President Goodluck Jonathan. People in Kano are used to being in opposition. Aminu Kano, one of the city’s most famous sons, was a radical activist. He contested national elections in the 1950s on a socialist platform

and abjured material wealth – a highly unusual position for a Nigerian politician. Kwankwaso is a far less ascetic figure. Local politician Ibrahim MohammedcompareshimtoBabatundeFashola,thereforming governor in Lagos, who has done much to promote business, generate local revenue and clean up the city. “The 35MW Tiga and Challawa Gorge dams under construction by the state government have sparked interest in Kano from industrialists,” according to activist Lamido, who points to the revival of the city’s manufacturing companies at the Bompai and Sharada industrial estates. Some Kano activists see Kwankwaso as a future president, perhaps even as the APC’s candidate in next year’s election. Kano has already produced two headsof state – generalsMurtala Mohammed and Sani Abacha. The first was one of Nigeria’s most revered heads of state, but he was assassinated in a failed coup attempt. The second was one of the country’s most reviled military leaders – he was accused of stealing $4bn from state coffers and was poisoned by some of his military rivals. That has not stopped Abacha’s son Mohammed from trying to run for the state governorship in league with Major Hamza al-Mustapha, who was acquitted in July 2013 of charges of running a political hit squad for the late dictator, having spent the past decade in detention. Also in the ring is Ibrahim Shekarau, a presidential candidate in the 2011 elections, who has just pronounced himself a loyal supporter of President Jonathan. Kano’s election year will be far from dull. ● Leo Lawal in Kano and Patrick Smith

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country focus | nigeria

interview

Kola Karim

Chief executive, Shoreline

Building a formidable, nimble African company with the swagger of a new generation, Karim’s Shoreline swept up former Shell assets in 2012 to join the vanguard of nigeria’s indigenous upstream revolution

klearpICS

TAR: How are things changing in the oil sector with regard to the financing of projects? KolA KARim: What is happening today is we’ve now got a commanding position as African corporates because of the paradigm shift in capital – the pool of capital is shifting. African banks and financial institutions can write cheques now. I can sit down and say: “GTBank, write me a cheque of $350m,” done!

Shell was producing about 1m barrels a day [bpd] from all these onshore/shallow water licences. Then they went deep offshore, and in one field called Bonga they knocked 250,000 barrels a day! So someone in The Hague is thinking ‘Hang on, why do I go through all this mess for 36 assets – some producing 3,000, 5,000, 15,000 [bpd] – if I can consolidate my position, go deep offshore where the guys from the Delta can’t reach me easily?’

ShellandChevronaregettingout of onshore operations. How big is this and where is it leading? These guys are just restructuring. Let me tell you something, they’re just ripping people off as well, but the reality is it’s an opportunity. There’s a great opportunity for people like us to build humongous companies in a short time. You will never find these opportunities again. It happened in Russia. Mark my words, in two to three years you’ll see gazillionaires coming out of a place called Africa from the world of business. I’ll give you a typical example so you can follow this analogy well. Shellhasabout36onshorelicences in Nigeria. Now, if you look at the history of the Niger Delta problems, these guys had to shrink their operations or stop working in a lot of places because of these problems, then 12 years ago they went deep offshore.

So perhaps in about 10 years there won’t be any foreign companies operating onshore? I don’t think in 10 years, I give it five.

I’ve gone to ground zero to make sure our engagement is with every community How do you compare in size with other local operators such as oando? Oando’s not very big – there’s no one as big as we are today in exploration and production. In Nigeria, there are marginal field operators who are producing 2,0005,000 bpd. People like us, today we’re producing 44,000 bpd! So the game has changed. We’re just doing our numbers. This year alone we should do about 4.5-5m barrels – that’s a local company, and the game is

changing! But what have we done better than SPDC [Shell Petroleum Development Company] or Shell? Simple, it’s to interface with the local community. It’s not easy, don’t get me wrong. They don’t see you as a big lagos boy who’s coming down to throw his weight about? No, not at all. Which side of the divide do you want to sit? We’ve said that we want to sit on the divide of the people because if you sit on their side and work them well, you’ll achieve what you want to achieve. I’ve gone to ground zero to make sure our engagement is with every community. I’ll give you an example. There is a pump station that’s been closed for seven years. Shell called me and said how the hell did you get it opened? It’s pumping 4,800 barrels today. How’s it going with your partner Heritage oil? Are you able to pull some of its technical knowhow into your own company? Oh, big time! The most senior director [of the joint venture] – Steve Kobak – is from Heritage. All the 22 engineers underneath himareNigerianswhoarelearning from him. We’ve got some in the United Kingdom back and forth. Because you see, for me, my focus is: learn, build a formidable, nimble African company. ● Interview by Nicholas Norbrook

the africa report

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country focus | nigeria

If Nigeria is to realise its industrial potential, it will need a step change at its ports

PIUS UTOMI EKPEI/AFP

ports

Progress and purloining

New equipment and investment make slow progress against endemic corruption and waiting charges

n a sweltering morning in West Africa’s largest port, an official from a Swiss company watched as a container lifted from a ship was transported towards a warehouse for inspection. Inside the bustling Apapa quay, one of three docks in the Lagos port complex, the container was first checked using state-of-the art scanners installed as part of a $210m upgrade that began in 2004. It should have been cleared in a matter of minutes. Instead, several hours later, dockyard workers were carrying out a laborious manual inspection. “The port has modern equipment which the bosses at the top have been quite meticulous in installing, but there is no willpower on the ground to switch to quicker methods. For every minute the ship is delayed, the more demurrage charges officials can collect,” says the foreign official, whose company works in five other African countries. According to internal documents seen by The Africa Report, the clearing of all goods in Nigeria’s seven port complexes is initiated online, but at least 80% of cargo still ends up being inspected manually. In 2004, the country began implementing an overhaul of the crumbling port infrastructure. The adoption of a “landlord model” saw the Nigeria Ports Authority award 20 concessions to companies by the end of 2006. Five years

angered traders. “There is not even a singlecarmanufacturerinNigeria,there’s no electricity and you’re talking about building cars? How?” asks a businessman who imports cars from Germany and who requested anonymity. A damning internal report last year by the Bureau of Public Procurement uncovered systematic corruption across all the country’s ports. Red tape remains the single biggest headache. In the Niger Delta’s Onne port, 74 signatures are required to clear a cargo, the report said. owners abandon cargo

“There are just too many departments in the port. A few years ago there was a form forthefirebrigade,thenthatdisappeared. Now you need to get clearance from the bomb squad, on top of the intelligence services and the police. And believe me, if you don’t pay up, you won’t get clearance,” says one Lagos-based importer who claims soaring costs caused all his foreign clients to quit in recent years. Insiders told The Africa Report exorbitant demurrage charges sometimes lead to owners abandoning their goods. “It can be for the simplest thing, and your cargo will be delayed for weeks. It’s true, sometimes for weeks the [port authorities] will just tell you the server is down. If it gets to a point where it becomes overtime cargo, some people just cut their losses and leave the cargo,” the chief executive of a local company says.

after the reforms began in earnest, cargo throughput more than doubled to some 75m tn, according to the Nigerian Port Authority (NPA). “Nigeria is one of the few countries in Africa successfully rolling out private-public partnerships. It’s certainly the way forward in Africa,” says Cornelis Van Der Waal of Cape Town-based analysts Frost & Sullivan. The concession rounds drew global multinationals such as Julius Berger, Global Infrastructure and Addax Logistics. ShipIn the Niger Delta’s Onne port, pers say waiting times and portsecurityhaveimproved, a total of 74 signatures with one trader saying vanare required to clear a cargo dalism of containers had all but vanished. Authorities Equally worrying, according to the reare also pushing ahead with the buildport, were signs of state monopoly. An ing of two deep-sea ports. Last year the investigation is underway in Onne port government approved $1.35bn for the where “concessions have been given Lekki deep-sea port, which is expected exclusively to Intels [Nigeria Ltd] as a to handle 4m tn of cargo annually. terminal operator exclusively for all oil red tape tangles and gas sector imports.” Some see potential for progress. Seven Still, much remains to be done. Policy years ago, a frustrated Alhaji Sani reloflip-flopping has continued. From March, car importers will face a hike in import cated his import-export business from Apapa in Lagos to Benin’s Cotonou, frusduties from 10% to 35% as Nigeria aims trated with obsolete equipment and corto become the first sub-Saharan African ruption. On a visit last year, he was struck country since South Africa to build a doby the improvements. “I decided to start mestic car manufacturing base. doing business here again,” he says. ● Such moves, ostensibly designed Monica Mark in Lagos to stimulate the local economy, have the africa report

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country focus | nigeria

prOfile

Folorunsho Alakija Executive vice-chairwoman, Famfa Oil

Fine threads and crude oil make a powerful combination Africa’s first female billionaire started out as a secretary. She now owns a share of a major Nigerian oil field and is said to be contemplating a move into politics

ne recent morning, Folorunsho Alakija walked into an exclusive dressmaker’s shop and began ordering dozens of hand-embroidered fabrics imported from India and Dubai. Having made purchases worth several thousand dollars, she told the happy store owner: “I don’t mind paying money for something that’s worth it.” Alakija should know. Recognised for her one-of-a-kind fashion sense, Nigeria’s first female billionaire started off as a dressmaker herself. Armed with a fashion degree from London, Alakija quickly made a name for her label, Supreme Stitches, after its launch in 1986. With an estimated net worth of $2.5bn, she was listed by Forbes as Africa’s 13th richest person in 2013. BLOCKS FOR FROCKS

FF/AP/SiPA

In the late 1980s, Alakija’s label landed its biggest client: Maryam Babangida, the wife of then military dictator Ibrahim Babangida. The details remain murky, but in 1993 Alakija’s Famfa Oil acquired the deep offshore oil prospecting licence 126, which is now oil mining licence (OML)127andconDiAnE BOnDArE

around 250,000 barrels per day, the field is now one of Nigeria’s most lucrative. Evidence of Alakija’s quiet but undisputed clout can be seen in a six-year-long legal battle against then President Olusegun Obasanjo, insiders say. In 2000, Obasanjo’s government forcefully acquired a 50% stake of OML 127. The Nigerian Supreme Court reinstated Famfa’s rights in 2012. “It is not everybody who could have taken on Obansanjo at the height of his power and walked away with victory,” an insider points out. PROPERTY EMPIRE

tains the Agbami field. There was no public tendering process. For years, many questioned the wisdom of the acquisition. “Most serious, long-sighted business people at the time were looking at telecoms,” explains an investment banker close to the businesswoman at dinner at his exquisitely furnished flat in one of Abuja’s most prestigious apartment blocks. “It wasn’t a particularly smart acquisition in relation to oil prices at the time,” he says. Famfa discovered commercial quantities of light and sweet crude in 1999, but commercial production did not begin until 2008, when surging global oil prices made the field profitable. Producing

Almost as remarkable as her ascent is her own background. Among her father’s 52 children, she and her sister were the only two educated abroad, causing a stir in the Yoruba community at the time. Upon returning from the UK, she applied for a position at a newly opened American bank on the advice of her husband, Modupe, himself a successful lawyer. Her time as executive secretary at The First National Bank of Chicago, now Finbank, exposed her to many members of the country’s banking elite. Friends say she invested most of her salary in stocks and property. “She was very determined. She had built her first house in Lagos even before her 30th birthday,” says a longtime family friend who requested anonymity. She has built a dizzying property portfolio in the United Kingdom. Rose of Sharon 5 Limited, an Isle of Man-headquartered company managed by Barclays, reportedly manages a property portfolio worth £60m ($98m). Alakija herself snapped up a property at London’s exclusive One Hyde Park last year, and acquired a Bombardier Global Express 6000 jet. There have been whispers that Alakija is eyeing the political field. In late January, dozens of campaign posters cropped up in the Lagos neighbourhood of Alausa. Alakija was quick to say that she did not sanction the posters. ● Monica Mark in Abuja

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country focus Nigeria

Game of Thrones A

Veteran politicians regard national elections as monumental, epoch-changing events, often reaching into history for parallels such as power struggles in the Yoruba kingdoms or Shakespeare’s history plays. This time they are not exaggerating, judging by the build up to the Nigerian elections due next February By Tolu Ogunlesi in Lagos and Patrick Smith

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gainst the backdrop of Nigeria’s worst conflict since the civil war in the 1960s, billions of naira are sluicing through the political system, thousands of activists are on the street and the two main parties are beset by high-level intrigues. Much will depend on the election outcome and how it is achieved. Will it reaffirm support for national unity and pluralism or will it fire up divisions and deepen regional rivalries? The poll will resonate far beyond Nigeria’s borders. Nigeria is the ● ● ●

country focus | nigeria

● ● ● newly crowned largest economy in Africa, so what happens there matters more than ever. Until now there has been a strange disconnect between commercial opportunities and political realities. Suddenly, companies planning to invest billions in electric power, retail chains and food production are looking more critically at developments. “It’s good that people are trying to understand our politics better,” said one of President Goodluck Jonathan’s political allies attending the US-Africa Leaders’ summit in Washington DC in August. “They can at least see the complexities. He [Jonathan] can’t snap his fingers and make things happen. There is this myth of the all-powerful president sitting in Aso Rock, and the trouble is everyone believes it until you work here,” he explained.

300 km NIGER

CHAD

Kano

BENIN

ABUJA

NIGERIA Lagos CAMEROON

Port Harcourt Gulf of Guinea

nigeria in numbers 173.6 million

PoPulation urban PoPulation (% of total)

51%

life exPectancy at birth

52 (2012)

fDi (current US$)

power at the centre

$7.1bn (2012) $522.6bn

GDP Growth (annual %)

7.3%

inflation, consumer Prices (annual %)

8.5%

total reserves (includes gold, current US$) $47.5bn (2012) internet users (per 100 people)

mobile cellular subscriPtions (per 100 people)

Source: World BaNk 2013

GDP (current US$)

gdp GDP by sector in Q2 2014 (%) Industry

25.96

20.89

Agriculture

Services

53.15

growth Oil and non-oil quarterly real growth (%) 40

Non-oil

Oil

20 10 0 -10 -20

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011

2012

2013

2014

Source: Nigeria NatioNal Bureau of StatiSticS (2014)

“In fact, some of President Jonathan’s greatest successes have been getting the government out of the way,” he added, pointing to the US investors’ interest in Nigerian business. “We now have a private electricity industry with an incentive to deliver, we have our own major private oil companies and we want to see more of that in agriculture and manufacturing. We would make more progress if politicians and officials were less fixated on power at the centre.” The focus on power at the centre, however, is relentless and more fiercely partisan. In February 2015, Nigerians are to elect a president, 369 federal legislators, and governors and legislators in at least 29 of the 36 states. For the first time since the return of civilian rule in 1999, the ruling People’s Democratic Party (PDP) faces a national opposition party, the All Progressives Congress (APC), formed in 2013 when the four largest opposition parties merged. Since the APC’s founding, political sentiment has been yo-yoing. Initially, the opposition coalition seemed to be making all the right calls: its ranks were quickly swelled by leading PDP members such as former vice-president Atiku Abubakar and five state governors including those of Kano, Nigeria’s second most populous state, and oil-rich Rivers State – both key strongholds for the ruling party. Until the beginning of this year, the PDP and the government were on the back foot, consumed by internal divisions and failing to respond to height-

Campaigning has begun, even though Jonathan has not formally agreed to stand for a second term

ening claims of grand corruption in the oil industry and worsening insurgency in the north. But, under Adamu Mu’azu, its new national chairman, the PDP has fought back aggressively this year, hitting at the opposition’s weaknesses and using its power of incumbency to the hilt. “This will be the most expensive election ever in Nigeria,” says Nasir el-Rufai, a former minister and leading stalwart of the APC. “The PDP is offering billions to us to defect. It’s about misspending the people’s money, not policy or strategy.” Next year’s contest still looks more evenly matched – and more unpredictable – than any of the past five national elections. The PDP has solid support in the oil-rich south-south states and the south-east. The APC has strong backing in the south-west and the north-west. Loyalties are fluid in the Middle Belt. Some doubt elections can be held in the north-east, where Boko Haram insurgents continue to launch attacks and claim to control territory. Godswill Akpabio, governor of Akwa Ibom (see page 61), told The Africa Report that there was no question of postponing national elections: “This terrorism is the africa report

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NIGERIA | country focus

Nigerian speaker accused the APC of being dominated by Muslims. Another suggested that it had some responsibility, direct or indirect, for Boko Haram’s jihadist insurgency. Certainly, the APC’s two main national figures – General (retired) Muhammadu Buhari and Bola Tinubu – are Muslim, as are 11 of its 14 state governors. Buhari, from the northern state of Katsina, has a reputation in the south for sympathies towards fundamentalism. This is despite his choice of a Christian pastor for his running mate in the 2011 elections. a shot at hillary clinton

Akintunde Akinleye/ReuteRs

A report by American academic Jacob Zenn for the Bow Group, a lobby group within the ruling Conservative Party, echoed those views, describing the APC as “an Islamist-leaning political party founded in 2013 for the purpose of challenging President Jonathan in Nigeria’s 2015 presidential elections.” The report heavily criticised US presidential hopeful Hillary Clinton, criticising her failure to put Boko Haram on the US terrorist list. Zenn concluded that “a US government that continues to be led by the Democratic Party would welcome the consultant who worked with major oil rise of the APC in Nigeria – as it initially companies and regional governments, did with Egypt’s Muslim Brotherhood.” made those claims in early September. Outgoing Ekiti State governor Kay“If the government is unwilling to ode Fayemi, a Catholic, dismissed such investigate and, if necessary, prosecute labels as “grotesque” in an interview these people, we want these cases to with The Africa Report in July. “I do be taken to the International Criminal not believe APC is a religious party. I Court at the Hague,” Lai Mohammed am sufficiently senior in APC to know if told the British members of parliament. we are running a religious organisation. “In view of the fact that the alleged Boko As a matter of fact, some of us Haram sponsors are either are quite resentful of the idea members of the ruling party A recent survey by of bringing religion at all into or friends of the president, polling ﬁrm NOI the politics of nationhood and it is clear the PDP-led fedfound that 51% development,” he said. eral government is unwillof people in After losing a state election ing and unable to try them.” Nigeria reported and with its loyalists being tarMohammed went on to improved geted for impeachment, the accuse the Jonathan govdomestic APC has lost momentum. As ernment and the PDP of electricity supply it struggles to hold together its exploiting the insurgency to component parts, it has to face win kudos from attending a bigger question: Is it really international security summits, boosting the security so different from the ruling budget to $7bn this year party? Many of the APC’s senior figures seem united and selectively declaring by little more than a desire emergency laws in APCto unseat Jonathan. ruled states. The PDP, also an uneasy Some of the ferocity of coalition of rival interests, this attack seems to have benefits from the centripetal force of been triggered by the government’s presidential power. As long as Jonathan attempts to label the APC as a party of can secure the presidential nominaIslamists and Boko Haram sympathisers. Indeed, at the Westminster meeting one tion and pacify the party’s sceptics in

an international crisis. We have seen it here before and we have dealt with it. We won’t stop elections. We are organising state elections in Adamawa in October. The terrorists will have no veto.” Yet terrorism and the threat of violence have ramped up the political rhetoric on both sides. APC leaders accuse Jonathan’s government of incompetence and a disregard for northerners in its handling of the Boko Haram Islamist insurgency. “I have heard one of the president’s advisers say that the insurgency is seen in Abuja as a fight among northerners, not a concern for the government,” says El-Rufai. “The question they have to answer is how do they let a ragtag insurgency defeat the biggest army in Africa – 100,000 strong – that is why we hear about so many conspiracy theories.” attacked in london

In an extraordinary meeting at the House of Commons in London on 8 September, El-Rufai and Lai Mohammed, the APC’s national publicity secretary, called on the Jonathan government to investigate claims that former chief of army staff Lieutenant General Azubuike Ihejirika and senator Ali Modu Sheriff had been financing Boko Haram. Dr Stephen Davis, an Australian security the africa report

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51%

country focus | nigeria

the north, he can rely on a formidable national organisation and billions of naira of patronage. The PDP has turned the tables on its opponents. Apart from winning the Ekiti governorship election in June, which gave it a foothold in the APC-dominated south-west, the PDP has benefited from a string of high-level defections. Jonathan’s team has also been hyping improvements made to electricity provision over the past few months. A recent survey by the Gallup-affiliated NOI Polls found that 51% of respondents “experienced an improved state of power supply to their households”. candidates for the throne

Both parties have to choose their presidential candidates and quieten the malcontents. An advocacy group with backing from powerful figures within the government has been holding large rallies canvassing signatures urging Jonathan to run for a second term. Governor Akpabio has no doubts: “President Jonathan will run. The people want him to run and he will win next February.” The APC is more taciturn about its favourites for the presidential ticket, but it is likely to field a northerner. Frontrunners include Buhari, Abubakar, Kano State governor Rabiu Kwankwaso and former Kwara State governor Bukola Saraki. Its handling of the primaries will be critical for the cohesion of the opposition coalition. “There’s an assumption we are going to have a strong [APC] candidate. But that will only be valid in the event of successful primaries that do not lead to a walkout by those who lose,” says Jibrin Ibrahim, director of the Abuja-based CentreforDemocracyandDevelopment. For Omano Edigheji, a Nigerian political economist and consultant for TrustAfrica, there are grave risks should the election be reduced to a north-south contest: “If President Jonathan wins, it’ll be more difficult to quell Boko Haram. If a northern candidate wins the elections, the Niger Delta [militants] are likely to take up arms again.” For Edigheji, the best approach at this point would be to ratchet down the regional rivalries and agree on “an inclusive government” rather than the winner-takes-all model, giving strong executive powers to the presidency in Abuja and the 36 state governors. But as election fever starts to envelop the country, power-sharing looks even less likely than a rancour-free vote. ●

What happens after the elections in February 2015? SCENARIO ONE: PDP VICTORY President Goodluck Jonathan, the candidate of the People’s Democratic Party (PDP), wins outright in the first round. To get the numbers, Jonathan will have to keep all his core support in the south-south and south-east states. The toughest struggle will be in Rivers State, where outgoing governor Rotimi Amaechi has defected to the opposition All Progressives Congress (APC). Jonathan’s other priority will be to hold onto the electoral support that he won in south-western states such as Lagos, Ondo, Ekiti and Ogun in 2011. Then, he was helped by a back-room deal with Bola Tinubu, the godfather of Lagos politics. There is talk of another such deal for 2015. In 2011, Jonathan lost in the three largest northern states of Kaduna, Kano and Katsina. Many now argue Jonathan is more unpopular in the north than he was four years ago. Suspicions of vote rigging could provoke serious street protests in the north, which could be exploited by insurgents to ramp up confrontation with the authorities. Jonathan may try to dampen down the crisis by offering to form a government of national unity, like his predecessor President Umaru Musa Yar’Adua. If Jonathan wins by a substantial margin again, the APC could disintegrate. ●

SCENARIO TWO: APC VICTORY The opposition APC wins by running an energetic and well-organised campaign. To counter Jonathan’s and the PDP’s use of the advantages of incumbency, the APC would have to be well funded with a strong northern candidate who exploits Jonathan’s unpopularity there and a dynamic running mate, probably from the south-west, the opposition heartland. For victory, the APC would have to shore up its support in the south-west, energise its substantial following in the north, make some inroads into the Middle Belt and hold on to its new base in Rivers State. It would face strong opposition in Rivers, and elsewhere in the Niger Delta, from the militants who have pledged loyalty to Jonathan. This would put great pressure on the leadership skills of the new president and vice-president to reassure the south-south and south-east after the election. A change at the centre would make little difference to the Boko Haram insurgents who are opposed to all northern politicians. After 16 years in power, the experience of losing office could deal a fatal blow to the coherence of the PDP. ●

SCENARIO THREE: STALEMATE AND POWER SHARING Neither of the two parties gets the required 25% minimum vote in 24 states to be declared winner and the election goes into a run-off, the first time in Nigerian history. This also results in a stalemate in which both parties quibble over results amid allegations of rigging and manipulation, as they have in Afghanistan. This could lead to more flashpoints of violence or even more insurgencies in the north, the Middle Belt and the Niger Delta. There would be grave concerns about the ability of the much-weakened military to contain such pressures, running at least two major security operations at the same time. This could encourage a new elite pact, perhaps along the lines of the powersharing deals in Zimbabwe and Kenya. New to Nigeria, such an arrangement might just stop the dangerous political and regional polarisation in the country. ● T. O. and P. S. the africa report

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ADVERTORIAL

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> Historical Background and Mission

country focus | nigeria

Afropolitan Vibes, the monthly roots music night at Freedom Park, where the palm wine flows

Andrew esiebo/PAnos-reA

Lagos Fashion & Design Week kicked off in 2011 and swiftly acquired heft with partnerships with MTN, GTBank and the British Council. “In an international fashion world where a blasé boredom often engulfs the audience, the Lagos Fashion & Design Week was a tonic,” former International Herald Tribune style editor Suzy Menkes wrote about the 2012 edition. This year’s events will take place from 29 October to 1 November (see page 88). book fests galore

The Lagos Book & Art Festival has taken place annually since 1999. In recent years it has made Freedom Park its home and this year’s edition, from 14-16 November, will celebrate Soyinka’s life. CulTure LagosPhotoFestival is a month-long gig that describes itself as “the first and only international arts festival of photography in Nigeria.” This year it will be held from Whether it’s Fela, film or fiction, Nigeria’s economic 25 October to 26 November. capital has a non-stop calendar of cultural events, The enthusiasm for the arts extends beyond Lagos. After years of unrest but other cities have their offerings to the muses too caused by militants, the return of calm to Port Harcourt made it possible for the like Open Mic Night and Afropolitan reedom Park, a former colonial city’s bid for 2014 World Book Capital prison, has become the symbol of Vibes, which draws attendees to Freeto be taken seriously. The ambition an artistic renaissance in Lagos – a dom Park on the third Friday of every city of 21 million people that can itself paid off, and last year Port Harcourt month and plies them with live music became the first city in subsometimes feel like an overcrowded and fresh palm wine. Saharan Africa to be named prison. Where the prison’s gallows once During the fourth quarter of a World Book Capital. Book stood is an open-air stage that overlooks the year, the pace becomes feactivist Koko Kalango, an an art gallery named for Nobel laureate verish. The season unofficially Wole Soyinka. kicks off with the three-yeararchitect of the bid, has orTerra Kulture is another popular arts old Lights, Camera, Africa ganised a literary festival venue, home to the annual Taruwa Festfilm festival from 25 September in the city since 2008. This year’s Port Harcourt Book ival of Performing Arts and a year-round to 1 October. This year’s festFestival will take place on schedule of visual arts exhibitions and ival focuses on “connecting the 20-25 October and will be a theatre. Alongside Freedom Park, it hosclassics to the avant-gardists More than celebration of the city’s new ted a recent series of plays to commemin an audiovisual history that 100 musical artists status. In November, film orate Soyinka’s 80th birthday. spans the times and genres”. are expected buffs will shift their attention FollowingthisisFelabration, Adenrele Sonariwo, a curator of arts to take part in the to Calabar and the literati events and founder of the Modern Day a week-long festival commem2014 Felabration will turn to Abeokuta for the School of Arts, says: “There are really inorating who else but Fela music festival Africa International Film teresting things going on in the cultural Anikulapo Kuti, the musical in October Festival and the Ake Arts & space in Lagos, some superficial, some genius who invented Afrobeat Book Festival, respectively. with a lot of depth. Either way, it takes a in Lagos in the 1960s. The festAbuja, Nigeria’s capital, is struglot of courage to do anything in Lagos, ival, from 13-19 October, is timed to coso everyone deserves commendation.” incide with Fela’s birthday on 16 October. gling to cast off a reputation for culThe month ends with the Musical Sotural limpness. In the city, political feverish pace ciety of Nigeria (MUSON) Arts Festival, intrigue seems to be the only show in The city’s arts calendar is an impressive Lagos Photo Festival and Lagos Fashion town. This is slowly changing but, for one, featuring weekly events like In& Design Week. MUSON is the most innow, Lagos – long-standing muse of artist and scam artist alike – continues dustry Nite at Club Royale, Ikeja – bringfluential promotor of classical music in to hog the cultural limelight. ● ing together the money and the talent in Nigeria. Its annual festival takes place Tolu Ogunlesi in Lagos the music business – and monthly ones this year from 16-26 October.

The beat goes on in Lagos

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country focus | nigeria

The NorTh

Hanging on in there

Wracked by insurgency, northern Nigeria is fighting against the odds to revive its farms and processing plants with the help of major investors

Development estimates that 4.2 million hettima Haruna is a farmer in Chibok, the village in north-east people in northern Nigeria require huNigeria that Boko Haram militmanitarian assistance. ants attacked on 14 April. The insurgents “There is a direct correlation between kidnapped more than 250 schoolgirls, the violence [in the north-east] and a prompting the international ‘Bring Back decline in productivity,” says Omano Our Girls’ campaign to demand their reEdigheji, a consultant at the nonlease. Haruna’s daughter was kidnapped governmental organisation Trust that day and is among the more than Africa and a political economist. “People have been dislocated from their normal 100 still missing. economic activities – agriculture, SMEs As he desperately awaits the safe return of his daughter, Haruna has to face [small and medium-sized enterprises], another side of the crisis: the growing the service sector – which will have an economic destruction in the north as the impactonGDP[grossdomesticproduct].” insurgents have killed, abducted, looted In July, finance minister Ngozi and chased more than half a million Okonjo-Iweala said the insurgency people from their homes. Like many of could reduce GDP growth by 0.5% in the men in Chibok and the surrounding 2014. Some fear still more damage. The villages, Haruna grows maize and beans: fact that the Boko Haram attacks have the maize for his family and not harmed the national economy reveals the dominance the beans as a cash crop. of other regions in the counUsually, the planting seatry’s economic performance. son is June to September, when the rains come. But the Despite feeding much of insurgency has stopped the the country, the north has farmers. “The rain is almost lagged behind in terms of gone, just one more month,” social development. Boko Haruna told The Africa Report Haram’s insurgency has The number of by phone from Chibok. “I’ve made those disparities children aged lost all my crop because of even worse. According to a between 12 and Boko Haram.” National Population Com23 months who mission survey last year, the With no prospect of a harare immunised number of children aged vest, Haruna and his fellow in Nigeria's farmers worry about how they between 12 and 23 months north-east is only will feed their families. “This that are immunised in the a third of the is the second year in which north-east was just a third number in the people have not farmed at all of the number in the southsouth-west. in southern Borno and parts west. “Northern Nigeria’s of Yobe,” says Jibrin Ibrahim, pooreducationindicatorsare director of the Centre for Democracy a deterrent to investors seeking skilled and Development, a thinktank in Abuja, labour,” noted a 2013 report from the Nigeria’s capital. investment bank Renaissance Capital about Nigeria’s 36 states. food shortages Renaissance Capital added that Borno Most of Nigeria’s grain and livestock State – the heartland of the insurgency – “has the lowest per capita power supply comes from the north. Its commercial centre, Kano, has the largest grain marin the country at seven watts.” School attendance rates in the region are in single ket in West Africa. Food shortages are digits. Boko Haram has also attacked worsening in the north, and prices are rocketing in faraway cities like Lagos, which depends heavily on beans, tomaDespite the insurgency, tanning toes, onions and meat from the north. and leather goods manufacturing continues to thrive in Kano Britain’s Department for International

economic and social institutions. Most schools in the state are now shuttered. In July, the Islamist sect destroyed a bridge linking Nigeria to Cameroon. Since last year, mobile phone networks in the worst-hit states have been patchy. Boko Haram has destroyed cellphone masts. The government has also ordered mobile phone operators to shut down networks to stop the insurgents from coordinating attacks by phone. The authorities closed the main airport in Borno after an attack, and now most people have to use the roads that are stalked by insurgents. Nigerian religious leader, Father Matthew Hassan Kukah, Bishop of Sokoto does not believe the problem

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NIGERIA | country focus

is irredemable, but that, “The political class has to develop a bipartisan attitude that helps them appreciate that this is not about the triumph or failure of Jonathan”. Andthenorthisprovingresilient.Some entrepreneursaredefyingtheinsurgency, and some of the country’s strongest companies have their roots in the north’s economy. Paul Lubeck, a professor at the University of California, told reporters: “The leather industry is booming in Kano. They are producing leather, shoes, some textiles, some plastics, and there’s a large amount of food processing.” rice mills multiply

Akintunde Akinleye/ReuteRs

There are many new projects that could revive and expand the economy. In July, President Goodluck Jonathan visited the sleepy town of Rukubi – some five hours byroadfromAbuja–tocommissionarice mill built by Olam, the Singapore-based agribusiness company that describes Nigeria as its homeland. It started operations there in 1989 before becoming one of the world’s largest commodity traders.

Olam says the mill, which can process of the highest unemployment rates in 105,000tn of rice per year, is the largest the country. Too many people lump all the northin Africa. Over the past four years, 17 ern states together as devastated by the new rice mills have opened in the north. Locally produced rice is fast replacing insurgency, according to Gambo Manzo, who hails from Gombe State. He says the imports from Asia. Joining the new investors in commerpicture of regional chaos in the north cial agriculture in northern Nigeria is is widespread because “nobody wants Africa’s richest man, Aliko Dangote. After building a Some of Nigeria’s strongest cement empire, the Dancompanies have their roots gote Group has acquired in the north’s economy 150,000ha to grow rice in five states, four of which are to travel there and see things for themin the north. Dangote is building another selves.” A local government councillor tomato-paste factory to process local in Lagos, he remains a strong advocate tomatoes in the north after his first one replaced imports from China and Italy. for business in the north. The group is also planning to build sevmarshall plan for the north eral rices mills with a combined capacity Reviving activity and bringing more that will dwarf Olam’s. development to the north will require This kind of new investment could determined government action as well lead to the creation of much-needed as a change in perceptions. In 2012, jobs. Nigeria’s National Bureau of Statistics reports that the northern states of then central bank governor Lamido Katsina, Gombe and Bauchi have some Sanusi called for a ‘Marshall plan’ for the north. Since then, the federal government launched the Presidential Initiative for the Northeast (PINE). Soji Adelaja, the coordinator of the PINE programme who works with the national security adviser’s office, calls it a comprehensive framework to coordinate the efforts of business, international development agencies and the government to rebuild the regional economy. Thatmeanseverythingfrombackingnew enterprises and keeping schools open and safe, to providing entrepreneurship training for young people. Building new infrastructure and supporting agriculture are two of PINE’s other focuses. In recent years, the government has allocated billions of naira to support dry-season farming. This should boost production, with the help of irrigation, in the months after rains have ended. This year, President Jonathan announced a N14bn ($86m) grant for the scheme. This means that farmers such as Haruna, having missed this year’s rainy season, will no longer have to wait an entire year to start planting and harvesting. Such efforts will make sense only if the farms and surrounding villages can be protected from the Boko Haram insurgents. Sadly, Chibok and many of the surrounding towns and villages in the north-east corner of the country remain vulnerable to deadly attacks and kidnappings. ●

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Tolu Ogunlesi in Abuja

ADVERTORIAL

Dr. Lanre Towry-Coker Ph.D Biopic

r. LanreTowry-Coker is the son of a distinguished Civil Engineer who in the early 60’s was the planning adviser to the late Malayan Prime Minister,Tunku AbdulRahman. Dr. Lanre Towry-Coker was educated at the popular St. Matthias Roman Catholic (Primary) School, Lafiaji, in Lagos, and at the Kingston College, Surrey, in the United Kingdom, where he obtained the GCE ‘O & A’ Levels. He later received his academic training at the prestigious Architectural Association School of Architecture, London, (after passing the entrance examination). He then went to Thames University where he completed his Royal Institute of British Architects’ part 1 exams. He completed his RIBA part II at the N E London University. Dr. Lanre Towry-Coker, who holds a Post-Graduate qualification in Architecture from the University of North East London, completed his professional training at the World famous Royal Institute of British Architects (RIBA). He is also an Associate of the Chartered Institute of Arbitrators in the United Kingdom (ACI.Arb.) and a Fellow of the Nigerian Institute of Architects (FNIA). A graduate of the renowned Harvard University Graduate School of Business Administration (OPM), in the United States of America (which he attended as a full-fledged professional in the course of his brilliant career). He later undertook a five year PhD programme at the Lagos State University, culminating in the award of the Degree of Doctor of Philosophy (Urban planning and Geography), with his thesis subject, “Housing Policy AndThe Dynamics Of Housing Delivery In Nigeria UpTo 2008: Lagos State As Case Study”. A seasoned Architect, who started his own architectural practice in 1976. Dr. Lanre. Towry-Coker has originated numerous prestigious buildings all over Nigeria and has won numerous competitions. He was one of the original planners of Abuja and takes credit for originating the initial concept of the first hotel in the relocated Federal Capital, Abuja Sheraton Hotel (now re-christened NICON Luxury Suites Hotel) and won the competition to design the Abuja Conference Centre both of which were completed. Not long ago he was adjudged the best entry in an international competition (WHICH ATTRACTED A TOTAL OF 110 ENTRIES) to design

the World Bank Resident Mission Headquarters, and Residences in Abuja, which was commissioned. He has in his professional career designed and supervised several major buildings all over Nigeria, and trained over 150 archtects. A past Chairman of the Public Relations Committee and International Relations Committee of the Nigerian Institute of Architects (NIA). Dr. Lanre. Towry-Coker has led numerous delegations of the NIA to different types of organized parallel international and regional professional bodies. He was NIA’s representative at the World photo – voltaic association arranged by the International Union of Architects and led the Institute’s delegation to a forum held in Australia under the auspices of the Commonwealth Institute of Architects. More

recently in 1997, he was the head of a Nigerian mission to the United States Building Business Symposium. He is an ex-member of the Lagos StateTenders Board. In 1999, Dr. Lanre Towry-Coker was appointed the pioneer Honourable Commissioner for Housing in Lagos State. He served as a full cabinet member for 4 years, and subsequently was a key adviser to President Olusegun Obasanjo, before returning to the private sector in 2003. He was a Member of the Presidential Committee on Housing and Urban Development, inaugurated by the President Commander-in-Chief of the Armed Forces, Chief Olusegun Obasanjo, in 2001-2002. During his tenure as Hon. Commissioner he completed no less than four large abandoned estates and initiated another ﬁfteen housing estates in Lagos State. Dr. Lanre.Towry-Coker, entered partisan politics in 1992 when he contested the Lagos Central Senatorial Seat under the banner of the former Social Democratic Party (SDP). He has over the years authored different publications on wide-ranging topical subjects which are of timeless relevance. These include ‘Towards a Lagos State Environmental Protection Agency’ (a seminar blue print), “Low-income Housing”, “Technology Transfer: The Construction Dimension” and “The Metro –Line Affair (a review / plan for mass Transportation in Lagos State”). In 2011, he published a 350 page-book titled “Housing Policy and the Dynamics of Housing Delivery: Lagos State as Case Study” to coincide with thirty-ﬁve years of architectural and urban planning practice. A much traveled individual whose professional practice has taken him to no fewer than 36 countries scattered all

over six continents. He is a member of the Nigerian-ASEAN Chamber of Commerce, Nigerian-British Chamber of Commerce and the Nigerian Institute of International Affairs (NIIA). A founder member of the Nigerian-German Business Council. He is also a member of the Nigerian Finnish Chamber of Commerce. He belongs to the boards of a number of companies and bodies including charitable organization like the Chris Ogunbanjo Foundation, Centre for Conﬂict Resolution and the Centre for the Promotion of an Industrial Society, United Way Nigeria, where he is a member of the Governing Board. A warm and outgoing personality who in 1984 was nominated Outstanding Young Person (OYP) of the metropolis by the Jaycees (diminution of the Junior Chamber of Commerce International), a non-governmental organization. Dr. Lanre. Towry-Coker is a member of a number of charitable, social and sports clubs and organizations, notably the Lions Club International, Metropolitan Club (Lagos), Ikoyi Club (Lagos), Polo Club (Lagos), The Lagos Motor Boat Club and Yoruba Tennis Club, all in Lagos. Architect, Urban –Planner- Transportation Planner, Project Manager and Author all rolled into one, Dr. Lanre. Towr-Coker speaks French, and has studied German, Russian. He enjoys writing, and organizing in addition – doing charity work. He plays badminton, golf, squashrackets and tennis occasionally. Dr Lanre Towry-Coker was awarded a Doctorate degree in Urban Planning, after defending his thesis titled ; «Housing Policy AndThe Dynamics Of Housing Delivery In Nigeria UpTo TheYear 2008: Lagos State As A Case Study».

Nigeria TowryTowers, Plot 1,Towry Close, Off Idejo Street, Victoria Island, Lagos, Nigeria.

England 47, Park Street, Mayfair, London W1K 7EB, England.

Tchad B.P: 5894, Rue 3258 Porte: 65, Quarier: Klemat N’Djamena, TChad.

Portugal Beco da Igreja, 2B, 8600-013 Barao de Sao Joao, Portugal.

T. +234 (1) 903 235 4/5 T. +351 282 688 542 E. lanretc@hotmail.com E. lanretc@gtisa.co.uk w. www.gtisa.com.ng w. www.towrycoker.com

DIFCOM/FC - Photos : D.R.

DR. LANRE TOWRY-COKER. PHD RIBA. FNIA. DIPL.ARCH. ACI.Arb. OPM (HARVARD), Ph.D (Planning and Geography)

country focus | nigeria

RegiOns

Diversity in all its states

A breakdown of Africa’s largest economy into its 36 states shows striking differences. Poorer states need to expand their revenue bases to catch up

aving become Africa’s largest the lack of processing facilities. A weak economy with a gross domestic industrial base holds back job creation product (GDP) of more than and deprives Benue State of potential $500bn this year, Nigeria has been living tax revenue. According to state governor up to its claims to represent the continGabriel Suswam, as much as 90% of govent’s diversity – economically, politically ernment revenue goes to paying salaries. and culturally. That diversity becomes To balance budgets, many states take bank loans and issue bonds, which are clear in any research on conditions in serviced from their monthly Nigeria’s 36 states. allocations. “These debt over“While Nigeria’s rise is well hangs weigh heavily on the documented, little is known monthly allocations due to the about the composition of states, preventing them from its state economies,” noted meeting their minimum baRenaissance Capital in a desic obligations to the citizens,” tailed report last year. The reIn 2012, Lagos port found big differences in generated more Elias Mbam, chair of Nigeria’s incomes and social conditions than double the federal revenue allocation across states. Primary school body, said in 2012. tax revenue of completion rates vary widely This unleashes a vicious the 19 northern cycle of debt and dependbetween north and south, as Nigerian states does life expectancy. ency on the centre. One way combined Lagos – the state with the out would be for the states to expand their revenue bases by largest share of GDP – has exattracting new investment. Simplified panded its tax base and set up lucrative land policies and infrastructure upgrades but controversial public-private infracould go a long way towards bringing structure partnerships that other states in investors. have copied. A survey of 29 African cities published the impact of oil revenue by the UK’s Economist Intelligence Unit Monthly oil revenue allocations from last year argued that paying attention to the central government account for only the demographic profile of African cities about a third of revenue for Lagos State. That is far lower than most other states. TheNationalBureauofStatisticsreported in 2012 that Lagos generated more than double the tax revenue of the 19 northern Nigerian states combined. Without the monthly allocations from the federal oil revenue, most states would be insolvent. Eight states are classified as oil producers, which earns them an extra shareofrevenuefromthederivationfund. These relatively high oil revenue allocations have meant that productive sectors such as manufacturing and agriculture have largely been neglected until now. In Benue State, known as the country’s food basket, copious amounts of fruit go to waste every year because of

could reveal “interesting market opportunities”. Lagos, Abuja, Port Harcourt and Ibadan made the list. Port Harcourt is home to what is claimed to be the largest gated, luxury real estate development in Nigeria. This collaboration between the state government and private developers is due for completion in 2015. Abuja had a per capita incomemore than double the national average, according to Renaissance Capital, before the government announced the results of this year’s GDP rebasing. Private equity firm Actis is investing in a 27,000m² riverside mall in Abuja, also due for completion in 2015. regional groupings

For state governments, there could be strength in numbers. States have joined together to form regional economic groupings. Under the Development Agenda for Western Nigeria’s (DAWN) strategy, the goal is for “closer integration of neighbouring south-west states as the first step in creating a larger regional market for development, trade and investment.” Similar groupings have emerged, including the BRACED Commission – an acronym derived from the names of the six member states in the oil-rich Niger Delta – and the South East Nigeria Economic Commission. The six northeastern states – three under a state of emergency due to the onslaught of Boko Haram – came together last December to host a joint economic summit, a possible prelude to a formal grouping. ● Tolu Ogunlesi in Lagos

Gwenn DUBOURTHOUMIeU fOR ja

Lagos is thriving on successful tax collection and lucrative public-private partnerships the africa report

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profile

Godswill Akpabio Governor, Akwa Ibom State

SonAL KAntArIA for tAr

A party man par excellence Akpabio is campaigning for the 2015 senatorial elections in a state that is crucial to the ruling pDp. He talks to The Africa Report about Akwa iborn’s transformation and the party’s prospects

olding court at London’s opulent Dorchester Hotel, governor Godswill Akpabio explains the lengthy economic strides that Akwa Ibom State has taken under his tutelage. Sporting a tailored dark suit with matching red tie and handkerchief, Akpabio does not hide his light under a bushel: he describes himself as Nigeria’s foremost developmentoriented politician. Akwa Ibom has seen, he says, beaming, “an uncommon transformation” from a state that had produced mainly civil servants and home helpers to a place with a “new economic ambience”. It has free education, gas-fired power plants and grand plans for a petrochemicals complex and a new deep-sea port. Down the corridor in the London hotel, staff are setting tables for a private banquet in Akpabio’s honour. It was delayed a month, apparently to accommodate a visit by President Goodluck Jonathan to Akwa Ibom to inaugurate two billion-dollar energy projects.

rally the troops. A year later, the PDP is back on the offensive, and Akpabio is taking the credit. “We’ve been able to answer the yearnings of the people in all facets of life,” Akpabio tells The Africa Report. “From the education sector to the health sector all the way down to good infrastructure [...] that’s why the people call it an uncommon transformation.” In fact, the “uncommon transformation” line comes from Akpabio’s energetic and well-financed political campaigning. After two terms as state governor, he is now standing as a candidate for state senator in next February’s elections,andhedoesn’texpecttolose.

Akpabio owns a Bombardier jet, estimated cost $45m, and a luxury bullet-proof van

rallying the troops

In the hierarchy of the loyal in the ruling People’s Democratic Party (PDP),Akpabioisnearthesummit. When six state governors broke away from the PDP last year and formed a rival faction Akpabio became chairman of the PDP Governors’ Forum with a mandate to the africa report

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“My people believe that my chances are very high. They think mychancesareover90%,” Akpabio says. Some of the confidence he exudes comes from having closely hitched his political fortunes to the incumbent party and president. AkwaIbom,oil-andgas-richand inthesouth-east,isoneofthestates the PDP must win to achieve national victory. And it has the funds to make that possible. Last year, the state’sshareoffederal-government revenuewasN260bn($1.7bn)–the biggest allocation in the country,

accordingtofinanceministerNgozi Okonjo-Iweala. Akpabio has a reputation for spreading state largesse. Some of this he has used to attract investors such as Frontier Oil and Seven Energy. Their Uquo gas-processing project is set to generate 1,000MW of power, more than a quarter of current national capacity. In the sameleague,QuantumPetrochemical,establishedbytheformerchief executive of Zenith Bank, Jim Ovia, is to build a $1.5bn petrochemicals plant at Abeno. splashing cash

Elsewhere, the Akpabio method is more contentious. His entourage splashes cash around at naming ceremonies, sports and social events. In 2012, Akpabio bought a Bombardier jet, estimated cost $45m, and a luxury bullet-proof van. A plan this year to award the governor and deputy governor pensions of around N200m a year for life was hastily modified downward after, it is said, a discreet intervention from Abuja. Aiming to head for the Senate next year, Akpabio remains a party man par excellence: “What is happening is that the only truly national party is the PDP. I don’t want toadvocateaone-partysystem,but I can see other parties collapsing and coming to support the PDP during the election.” ● Patrick Smith in London

OandO Plc

Oando’s July acquisition makes it the top dog of indigenous producers

Oil and gas

Local firms replace majors in the Delta

As multinationals lose their stomach for the fractious onshore fields in the Niger Delta, indigenous companies are increasing their footprints

nternational oil companies (IOCs) like Shell and Chevron are selling off many of their onshore joint-venture stakes to Nigerian companies after a divestment programme attracted little interest from abroad, but opinion is divided about whether this will lead to a thriving locally owned oil sector. Antony Goldman, an oil expert and owner of PM Consulting, explains: “The government characterisesthisdivestmentprogramme as a triumph for local content and points to the capacity of Nigerian companies to manage Nigerian assets better than

Europeans and even to convince stock markets in London with successful IPOs [initial public offerings], but there are well-placed people in Nigeria who are more sceptical. They see the IOCs jumping before they are pushed from assets that they regard as marginal or peripheral for prices that appear to be out of step with market value, with speculation over the sourcing of some of the funds that have gone into financing these deals.” Two high-profile Nigerian operators, Oando and Seplat, illustrate some of the elements of the debate about the future

of the industry. Oando has gone from producing a few thousand barrels per day (bpd) to more than 50,000bpd following its much delayed July acquisition of the lion’s share of ConocoPhillips’s Nigerian assets. The company claims the largest reserves of any indigenous company and targets 100,000bpd of oil production within five years. Seplat, in contrast, has not yet built on the optimism generated by its $500m IPO on both the London and Nigerian stock exchanges in April. The company led by Austin Avuru has the rights to 30,000bpd produced from onshore assets mostly acquired in 2010 from Shell. They include stakes in oil-mining licences (OMLs) 4, 38 and 41. However, a more recent acquisition holds serious risks for the company. Seplat, along with indigenous companies Amni Petroleum and Belema Oil, agreed in late 2013 to purchase Chevron’s 40% stakes in Niger Delta OMLs 52, 53 and 55 for $800m. The prior frontrunner for the deal, local company Brittania-U, has delayed the deal through litigation, claiming its bid for all three OMLs was unfairly rejected. The delay is problematic given the rationale for Seplat’s IPO: to acquire additional assets and invest after modest debts are paid from the IPO funds. Seplat has also been unsuccessful in its bid for assets Shell is offloading. This time the catch was the hefty price. Shell is set to earn around $5bn from the sale of Niger Delta OMLs 18, 24 and 25 and the jewel in the crown OML 29. Those deals are going ahead following the execution of sales agreements in August. As with Chevron’s Niger Delta assets, indigenous buyers are set to profit – even if industry experts believe the sellers are obtaining top dollar. multi-billion purchases

It is unclear whether Shell and the local bidders will face the delays that Oando and ConocoPhillips experienced in obtaining approval from powerful petroleum minister Diezani Alison-Madueke. Taleveras and Aiteo look set to take OML 29 for around $2.8bn; Mart Resources and Midwestern Oil & Gas are in line to pay $1.2bn for OML 18; and Pan Ocean plans to secure OML 24. The pending Shell and Chevron sales should certainly change the game, where the IOCs account for the vast majority of Nigeria’s more than two million bpd in oil production. The Shell fields produced approximately 90,000bpd in 2012.

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NIGERIA | country focus

Estimates suggest that Shell’s OML 29 could produce up to 170,000bpd within five years and as much as 300,000bpd thereafter. This reflects the view that the acquirers will be focused on maximising output rather than being distracted by opportunities elsewhere – a charge levelled at the majors. where is the expertise?

Only a few indigenous producers – including Seplat, Oando and Amni Petroleum – currently produce more than 10,000bpd. A Nigerian joint venture

between Shoreline Power Company and Jersey-headquartered Heritage Oil produces around 15,000bpd. It will take additional divestment and production increases from their existing assets for Nigeria’s oil companies to account for 20% of Nigeria’s oil production and 50% of gas production, targets that Seplat’s Avuru says are achievable by 2018. Indigenous production faces a number of unknowns, including the much-questioned expertise of Nigerian stakeholders and operators. Whereas Oando and Seplat, among others, have

respectable industry expertise, albeit less offshore, energy-trader bidders like Taleveras have meagre upstream experience. So little, in fact, that oppositionists have suggested Shell’s preference for Taleveras and Aiteo indicates foul play. Continued support from the regulatory authorities and passage of the delayed oil bill remain other wild cards. Although government officials say the Petroleum Industry Bill will increase investment, a number of the IOCs are unhappy at some of its provisions. ● Martin Yeboah in Lagos

Wale Tinubu

Chief executive officer, Oando

The market now understands that developing oil deposits in Nigeria is not just reserved for foreign companies TAR: You have finally taken control of the ConocoPhillips assets in Nigeria. Why did it take so long? We signed in December 2012, but the launch date was September 2013. Our market cap at the time was $300m, and we had to absorb a company that was worth $1.7bn. It was always going to be quite complex to raise the funding. We did three rounds of equity in tranches of $350m, $200m and $250m, and three rounds of debt financing of $450m, $250m and $100m. This took time. We had some regulatory delays, which was inevitable. It took another six months to get consent from the regulator. But what is six months when these things are going to be producing for the next hundred years? The deal gives you the Brass River oil terminal, the Kwale-Okpai gas plant and the associated pipeline network. What opportunities does that bring? These facilities are designed for 300,000 barrels per day [bpd] of production, and we the africa report

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are only currently at How do you now fit into the What does it say about 100,000bpd, so there is a lot Nigerian energy landscape? the Nigerian banking of latent capacity available. It’s transformational because sector that it could follow That’s important when this makes us the largest you on this acquisition? we seek to ramp up indigenous producer. We are Nigerian banks have come production. The facilities often the largest indigenous reserve of age. With every deal we take a lot longer to develop holder by far, and it makes do, we de-risk the Niger Delta. than drilling a well. You are us the first indigenous Among those who helped talking about challenging company to be a joint-venture us are FBN, FCMB, Diamond terrain and swamp. With [JV] partner with the NNPC Bank, Ecobank and Zenith today’s security concerns, [Nigerian National Petroleum Bank. Nigerian banks brought it’s good to know that it’s Corporation]. The JV status nearly half of the total financing already in place. We was reserved for the majors and were ready to give more have our own export pipeline and we will be the first if the international banks were and terminal, so we don’t indigenous JV partner with unwilling to take the risk. have to pay handling charges an interest in several blocks, The market now understands to the majors, which not just a farm-in on one block. that developing oil deposits oftentimes is very expensive. We have “We will be generating cash flows of over 40 different up to half a billion dollars net annually” discoveries that have been drilled, mapped and are available Are you ready for all the in Nigeria is not just reserved to be linked into the existing associated cash calls that for foreign companies. Local production system. We come with that? banks have given their backing also have a 480MW power It’s a mature asset, and to our company because plant, with phase two already those cash calls are already we service our debts and pay approved on the same part of our financial planning. dividends to global location, to off-take gas from It runs right now at around shareholders. We have Asian the same gas fields. We $25m a month. We will banks in our consortium, can inject this power into the be generating cash flows banks from America and lots national grid, so there are of up to half a billion dollars of Europeans who say: a lot of things from the net on an annual basis, “We trust this company.” ● infrastructural side that will so we are more than ready Interview by help us exploit this opportunity. for the cash calls. Nicholas Norbrook

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MArk LENNIhAN/NBC/AP/SIPA

interview

business nigeriA

The business Following the Nigerian government’s announcement that the country has the largest gross domestic product in Africa, The Africa Report talked to investors and politicians to evaluate its performance in five key sectors

By Monica Mark in Lagos and Gillian Parker in Abuja

igeria now has the largest economy in Africa, the governmentannouncedon 6 April. With a gross domestic product of $500.9bn, Nigeria should attract more international investment, say officials in Abuja. This has raised debate about what the statistics mean and the performance of President Goodluck Jonathan’s team since he was elected in April 2011. After leading an election campaign on promises to transform Nigeria’s economy, President Jonathan has often found himself a soft target for criticism. Local and international businesspeople and investors can often be heard quietly cursing dysfunctional infrastructure and an obstructive bureaucracy. But they are just as vocal in their endorsement of the opportunities that Nigeria has to offer, and Jonathan’s supporters point to unprecedented gains. In 2013, Jonathan oversaw the privatisation of Nigeria’s dysfunctional state power company. This may yet be his enduring legacy. Electricity provision is by far the most serious obstacle to growth in Nigeria. With 10 new gasfired power stations up for sale,

Nigeria perhaps stands its best chance for decades of ending the chronic power shortages that have weakened the manufacturing base andlefttensofmillionsofpeoplein the dark. Africa’s giant has proven reserves of 180 trillion cubic feet of natural gas, but it flares more gas than any other country bar Russia. Government officials said in September 2013 that flaring is down 20% over the past two years. Agriculturalreformshavehelped clean up the sector, boosting farmers,whoseactivitiesmakeupabout 40% of gross domestic product. Although it may be some time before theybearfullfruit,afertiliserrollout has proved a success in its pilot phase.Thecreationofnewfertiliser factorieslinkedtothegassectorwill reduce prices. The rice plantation schemes, from companies such as Olam in Nasarawa State, will chip away at Nigeria’s import bill. Economicgrowthhascontinued to power ahead at an average of 7% and, thanks to an aggressive monetary policy from the central bank, inflation is in single digits for the first time in years. Finance minister NgoziOkonjo-Iwealahasmanaged to keep national budgets tight, for now resisting pressure to spend more ahead of 2015 elections. the africa report

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companies & markets

scorecard

B-

low appetite for risk

GeorGe oSoDI/PANoS-reA

Abuja, seat of political power in Nigeria, has promised a great deal to the business community

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There has also been progress on rebuilding Nigeria’s industrial base, with new car manufacturing schemes and factories opening in the agribusiness and light manufacturing sectors. The government has sought to oil the slowly turning wheels with a planned specialised bank due to begin offering loans with low interest rates from next year. In collaboration with the World Bank and African Development Bank, the 10- to 15-year loans would bolster the manufacturing sector. But while companies wait for finance, swift industrial growth will remain elusive. “There is limited incentive to create risky assets, although we are seeing some increased appetite to lend to the power and oil and gas sectors,” says Samir Gadio, an emerging markets strategist at Standard Bank. “Addressing these shortcomings will require structural reforms, including the emergence of a credible credit bureau and a corporate bond market, and continued macroeconomic stability,” he says. Kola Jamodu, the head of the Manufacturers Association of Nigeria, says capacity utilisation jumped to 55% from 44% in 2013, while local raw materials usage reached 51%, up from 47% the previous year. “We have seen government initiatives to improve the sector, and these will help Nigeria maximise its key strategic position within ECOWAS [the Economic Community of West African States],” he tells The Africa Report. There has been serious backtracking too. A spate of massive corruption scandals surrounding the management of Nigeria’s oil revenue, which the government depends on almost entirely to run the country, have dogged the government. In the most recent one, $20bn appears to be unaccounted

business | companies & markets

for at the opaque state oil firm, the Nigerian National Petroleum Corporation. The government’s response was to sack central bank governorLamidoSanusi,thecountry’s most respected economic official, who broke the scandal and called for a massive clean-up. Banking reforms were one of the success stories in Jonathan’s early years, but the environment is now becoming unsteady.

how the sectors shape up

easy come, easy go

Investors continue to seek a slice of Africa’s most dynamic economy, but many Nigerian governments have misspent their windfalls from the oil industry. Flush with around $11.5bn at the end of 2012, the Excess Crude Account currently stands at some $3.5bn. In March, two credit rating agencies put Nigeria on watch for a possible downgrade. Other key reforms, such as those targeting the gas sector, which urgently needs to be sorted out to fight power shortages, are stuck in the mud. International oil majors are reducing their exposure to Nigeria’s onshore Niger Delta region as profits are eroded by oil theft, and regulatory uncertainty discourages further investment. Royal Dutch Shell announced in March that it lost nearly $1bn through theft and pipeline disruptions at its Nigerian operations in 2013. President Jonathan has earmarked $1bn for an anti-theft campaign, but few are convinced this money will go to solving the problem. “The Niger Delta-dominated federal government will be unlikely to seriously crack down on bunkering and risk upsetting the regional patronage system,” says analyst Josh Holland at IHS Global Insight. What follow are assessments of the progress so far, sector by sector, presented as The Africa Report’s government scorecard. It is an irreverent approximation of the administration’s progress, based on conversations with businesspeople and politicians, analysts and investors. These are their aggregated opinions. Add your voice at theafricareport.com, where the debate continues. ●

Agriculture

A-

Agriculture minister Akinwumi Adesina introduced the Agricultural Transformation Agenda (ATA) in 2011 and has named 2015 as the year by which the country should be self-sufficient in rice production. The ATA targets improved production for other staple crops. In 2012, the government increased duties on rice imports, which in turn contributed to smuggling. A full ban on rice imports is expected next year. Adesina says that paddy rice production grew from 1.4m tonnes in 2012 to 2.9m tonnes last year. The government also introduced the Growth Enhancement Support Scheme, which helps to cut corruption out of the distribution chain for subsidised fertiliser. In 2010, the central bank launched the Nigerian Incentive-based Risk Sharing System for Agricultural Lending, providing about $500m to encourage banks to lend to the sector. Last year, the World Bank allocated $1.5bn over the next five years for agriculture in Nigeria. The private sector, too, has joined government in the drive to increase production. Dangote Sugar plans to invest $2bn to be spent on sugar projects across six states. India’s Indorama is set to break ground on its urea fertiliser plant in April. Former government fertiliser company Notore is expanding. But the government is still trying to attract investors intro 14 staple-crop processing zones.

Oil & Gas

Despite high prices, oil production is likely to continue to stagnate leading up to 2015’s presidential and parliamentary elections, as oil theft and corruption continue to be used as political patronage. One bright spot is local content provisions, which have started a small revolution for domestic companies. The long-delayed Petroleum Industry Bill (PIB) is supposed to bring clarity to the sector, but suffers from political deadlock. Shell, Chevron, Eni and Total have been in failed negotiations with the government for several years to renew expired licences. With no significant new ventures, the country’s target of producing 3m barrels per day (bpd) by 2020 looks impossible. Output has failed to break far above 2m bpd. The PIB would also clarify the legal framework for developing Nigeria’s largely wasted gas reserves, the ninth largest in the world. Convoluted fiscal terms demanded by the government have prevented Nigeria’s emergence as a gas giant. Asset sales by oil majors are good news for Nigeria’s smaller independent oil companies. Nigeria’s government has a policy forcing any company buying divested assets to partner with a local firm, which should be seen as a positive development. However, some companies have strong political connections and risk being used as vehicles for corruption.

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all pictures: fotolia

companies & markets | business

Electricity

The privatisation of the power sector in Nigeria last year raised $2.5bn and hopes that the key roadblock for major industrialisation was being removed. It began pulling local banks into serious long-term financing roles. Many customers, while seeing a hike in their bills, have yet to see any improvement. Ten new gas-fired plants, adding an extra 5,000MW – more than doubling production – should be sold off by mid-2014. But Nigeria has yet to seriously harness its gas in order to power the electricity sector. Investors may be deterred by gas prices, fixed by the government at $1.5 per ft³. An oil investor who requested anonymity told The Africa Report: “If the price of gas was even just $4 per ft³, we wouldn’t hesitate to sell [the gas] rather than flare it.” George Osahon, the petroleum resources department director, says Nigeria aims to increase domestic gas consumption threefold to 5.4bn ft³ per day, from 1.7bn ft³, by the end of the decade. Officials repeatedly offer assurances that they will bring gas prices in line with export parity. “Gas sector reform and the domestic energy market cannot take off until there is a commercially viable pricing structure. But there has been a tension between what is commercially viable and what is politically acceptable,” explains Antony Goldman of PM Consulting.

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Manufacturing

B+

Machines are once again whirring to life in a former Volkswagen assembly plant, as Nissan Motors gets its Nigeria manufacturing operation into gear. For those willing to enter, outsized returns await. Analysts say Nigeria has a domestic market for up to 3m cars annually, a gap Nissan aims to help plug when it unrolls its first domesticmade 4x4 this April. “There are challenges in power and other infrastructure bottlenecks, but we are confident. Turning to manufacturing is the only way – there’s no alternative solution,” says Parvir Singh, managing director of the Stallion Group. Electricity output peaks at around 4,000MW and almost every factory has a generator. The manufacturing sector has been knocked about by decades of erratic import bans. But many are still scrambling for a slice of the consumer pie – from Innoson, the company behind the first homegrown car plant, to doll-makers giving imported Barbies a run for their money, to juice processors. Once boasting direct flights from Milan and Rome, Kano no longer enjoys the reputation as a centre of excellence for leather and textiles that it had before oil. Chinese and Indian investors are in talks with cotton mills and leather manufacturers. “They are saying, ‘OK, there are problems, but it is better to get in early,’” explains Ibrahim Tukur, president of Kano’s chamber of commerce.

Banks

C+

Since a dramatic banking bailout in 2009, Nigeria’s government and the central bank have reformed the financial sector, but progress has been slower than investors and businesses hoped. Banks are still not lending much to the private sector, despite vocal government pressure. The government and blue chip companies can access credit, but banks see little need to take on riskier debt. The bailout led to a period of tight monetary policies, soaking up extra liquidity and keeping interest rates high. The state-run Asset Management Corporation of Nigeria is yet to clear huge levels of bad debts. The central bank has pushed ahead with a cashless banking policy, which is ahead of the curve in the sub-Saharan African region and should help reduce transaction costs and deepen financial markets. There has also been some success in government incentives to open up lending to farmers and the newly privatised electricity sector. Most analysts fear the appetite for reform will be muted ahead of elections in 2015. President Jonathan rocked investor confidence after suspending central bank governor Lamido Sanusi in February. There is now a risk the central bank may have reduced independence. “Once you enter the political arena, it damages the autonomy of the central bank,” says finance minister Ngozi Okonjo-Iweala.

business nigeria

The new power

tycoons A new sector for old entrepreneurs â&#x20AC;&#x201C; Abubakar, Elumelu and Otedola all succeeded in other sectors before turning to power

companies & markets

Nigerian businessmen and bankers are now committing to the privatisation process, arousing optimism. As a result, the government plans to continue handing over electricity generating plants to foreign and local businessmen

By Jon Marks and David Slater in Lagos

“The investors have got to make erhaps even more this work because they are putting than strengthening their money where their mouth is,” peace in the Niger explains one Nigerian chief execDelta and stabilising utive,speakinganonymously.“And the troubled north, not only that, a lot of the money President Goodluck Jonathan is is being raised from Lagos banks, banking on nothing short of a revolution in the way that Nigerians which will want to see projects implemented quickly to ensure reobtain their electricity to give momentum to his 2014 election campayment flowshappen as planned. paign. “I’m hopeful in the next 24 A lot of people in Nigeria now have months we will be able to stabilise a lot at stake in this,” he says. the power situation,” President The widespread hope is that Jonathan told The Africa Report in in this high-stakes game eleJune (TAR 52, July 2013). “I’m not ments who have undermined saying that we’ll provide 100%, but past power-sector reforms – notit will be relatively stable.” ably the powerful ‘generator and Whilepoliticianstend to focus on campaignThere is a hope that the ing and fund-raising in diesel mafias who have the run-up to polling, electricity consumers undermined reform in the hope the Jonathan adpast are now on board ministration will push through reforms to bring money and better managediesel mafias’, who have earned ment to Nigeria’s woefully underhuge profits from the lack of mains performing power sector. electricity – will be outflanked by a shifting investment environment. Nigeria’s largely state-owned electricity generation industry has “The message is the game has fallen into a desperate state in rechanged. You [the ‘mafias’] may even decide to invest in privatisacent years due to neglect, underinvestment and corruption. Its failtion, from which the rates of reure to deliver has held back what turn may be lower, but they will be stable,” the chief executive argues. is soon to be Africa’s largest economy. The Jonathan government has revived an ambitious privatOtedOla On the inside isation programme first launched The initial results of the privatisaunder former President Olusegun tion round in October 2012 suggest Obasanjo a decade ago. thatlocalbusinessmensupportthe Although a number of chalgovernment’smove.MagnateFemi Odetola, whose Zenon Petroleum lenges remain, the programme’s and Gas is one of the country’s implementation and the positive responses it has received have surmajor diesel importers, is involved prised most observers. Whereas in the consortium that is buying the Obasanjo administration’s efthe Geregu power plant in Kogi fort to sell state generation comState (see map). Other businesspanies (gencos) and distribution men, including Transcorp’s Tony companies (discos) proved an Elumelu (see page 92) are also abject failure, this time most ascoming up with the patient capital to relaunch Nigeria’s electricity sets have found buyers who paid hundreds of millions of dollars in production. Companies linked deposits and were preparing to pay to former military ruler and cureven larger final payments as The rent opposition leader Ibrahim BaAfrica Report went to press. bangida are also involved ● ● ●

business | companies & markets

NIGER

BURKINA FASO

TOGO

KAINJI (hydro)

SHIRORO (hydro)

• 760MW

• 600MW

• Mainstream Energy (Nigeria) /RusHydro (Russia); other Nigerian companies • $50.8m

• North-South Power (Nigeria)/China Three Gorges Corp. (China) and other Nigerian companies thought to include some linked to former military leader Ibrahim Babangida • $111.7m

I. Babangida

BENIN CHAD GEREGU

F. Otedola / B. Steinmetz

• 414MW

SAPELE

• 51% stake to be purchased by Amperion Power Distribution consortium: Forte Oil (Nigeria)/State Grid Corporation (China) and BSG Resources (Israel)

• 1020MW • 100% share to be bought by China Machinery Engineering Corp. (China)/Eurafric Energy (Nigeria), British Power International (UK) /First Bank (Nigeria) • $201m Gulf of Guinea

• $132m

CAMEROON UGHELLI

T. Elumelu

• 947MW • Transcorp (Nigeria)/ Symbion Power (US) • $300m

300 km

Businesses in the power game in the leading bid for the ●●● Shiroro hydroelectric plant. The government is awarding 15-year concessions for the dams but is selling its stakes in generation and distribution capacity. A radical shift was needed as long-held targets to achieve 40,000MW of generation capacity by 2020 have become ever more unrealistic. While previous governments have shown an intent to address this, there has been little improvement, with generation capacity at a similar level to that of the 1980s, despite a rapidly growing population that is expected to reach 170 million people in 2013. On-grid generation of 4,500MW still lags behind the 6,000MW produced by expensive and privately owned diesel-powered generators. With a peak demand of 10,200MW, the sector remains in desperate need of large-scale investment. However, most parties agree that the current privatisation process andthepushtodevelopindependent projects is a major step in the right direction.

The privatisation of the federalgovernment-owned gencos and discos, held by the Power Holding Company of Nigeria (PHCN), is in its final stages and has impressed investors and observers alike, despite some hiccups. Copperbelt Energy managing director Michael Tarney described it as a “process that is very competitive but also very fair”. According to Tarney, whose Zambia-based company is a winning bidder, “the process has been run properly at a high level, although a bit behind but not a great delay.” world bank carries risk

Despite this praise, a number of challenges remain, none more so than the creditworthiness of the PHCN successor companies and general investor confidence in the sector. To overcome this, the government has created Nigerian Bulk Electricity Trading (NBET), a state-owned independent off-taker underpinned by an $800m partial risk guarantee from the World Bank. It will purchase

6,000 MW

National electricity production by privately owned dieselpowered generators

powerfromgencosbeforereselling to discos, thereby avoiding potential defaults. This new body is chaired by finance minister Ngozi Okonjo-Iweala, who has recruited an executive team, and is capitalised with $550m. According to a consultant working on the project, “NBET is there to underpin market confidence that investors will be paid. This is a key role, and although it is in theorytemporaryIthinkfewdoubt that NBET is here for some time, otherwise a lot of contracts will need renegotiating.” Despite the introduction of the Multi-Year Tariff Order II (MYTO2) in 2012 and a significant rise in the price of electricity – which is essential if investments are to be economic – the costs of generating power remain high and the government heavily subsidies its sale price. However, once successor companies are handed over to the private sector this is expected to end, leading to another substantial hike in tariffs to reflect true ●●● market costs.

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to be completed by June 2014. Five of these plants – Oloronsogo II (754MW), Alaoji (831MW), Sapele II(507MW),OmotoshoII(512MW) and Geregu II (506MW) – are operating either fully or partially, while the NDPHC is bullish that the remaining five plants will be commissioned by the end of the year.

Xinhua/ZuMa/REa

strained transmission

Bureau for Public Enterprise acting director general Benjamin Ezra Dikki has attempted to alleviate fears: “I assure you that the tariffs are bound to fall in the not-too-distant future, and I remind us of the dramatic crash in the price of SIM [subscriber identity module] cards in the telecoms sector. SIM cards were being sold for up to N50,000 initially; today, due to competition and investments in the industry, SIM cards now come with free air time.”

●●●

siren call of subsidy

Some investors are sceptical about the removal of subsidies. Tarney says the sector “will need early subsidies to help build up income as it is unlikely discos can raise sufficient cash and therefore pay gencos. There needs to be enough cash in the system for it to work.” Tarney also argued that MYTO2 was a suitable system, saying “MYTO2 provides a model for the industry and the basis of all bids. The principles being applied are at an international standard, but they must be implemented.” He also stressed that “the quality of the regulation is very important. Revenue collection is linked to operating and capital costs, so we need a fair tariff methodology.” While it appears the sector could not be adequately managed in the hands of the government, its success in private hands will

largely depend on which companies run the successor forms. The government has sold many of the PHCN successor companies to groupsincludingbigbusinessmen, and several have strong political connections. Perhaps the most high-profile person is former military leader Abdulsalami Abubakar. Abubakar’s Integrated Energy Distribution and Marketing prequalified to take over the discos in Eko, Ikeja and Ibadan in October 2012. Manylocalcompanieswoninconsortiums with experienced international companies. The completion of the privatisation process is being delayed by labour issues, particularly the protracted laying off of a number of PHCN employees. As a result, winning bidders are reluctant to pay the remaining 75% of the fees due until these issues have been resolved. This is expected by the end of August. Following the positive reaction to the PHCN privatisations, the government has decided to partially privatise a further ten gencos known as the National Integrated Power Projects (NIPPs) located in the Niger Delta. The federal, state and local governments own these projects through the Niger Delta Power Holding Company (NDPHC). Bidders for an 80% stake in the NIPPs are expected to be shortlisted on 8 August, and the privatisation process is scheduled

Nigerian vicepresident Namadi Sambo (centre) is handling negotiations around gas sales to power producers

3,110 MW

NIPPs plants with this total capacity will be open for bids from investors in August

Bidders for the NIPPs will not have to negotiate power purchase or gas supply agreements. Instead, they will inherit the contract structure that already covers electricity sales, supply and transportation of gas and access to the transmission network. A senior source at the NDPHC said that negotiations between the government and gas supply companies were at an advanced stage. Vice-president Namadi Sambo, who is chairman of the NDPHC board of directors, is handling the talks directly. The NDPHC source was optimistic that gas would be supplied promptly following the conclusion of negotiations as the pipeline infrastructure is already in place at all of the sites. Canadian consultant Peter Kieran, whose company CPCS acted as transaction adviser for the government on the PHCN and NIPP privatisations, says there is transmission capacity for the more than 5GW the NIPPs will deliver to the national grid even though new links are required. However, there is no doubt that Nigeria’s transmission networks can’t accommodate the ambitious targets the government has set. The vast investment required to make Nigeria’s power sector work will demand a significant amount of borrowing, much of which may be done on the local market. Following the sweeping reforms introduced by Central Bank of Nigeria governor Sanusi Lamido Sanusi after the 2008 financial crisis, the Nigerian banking sector has a lot of liquidity, according to United Bank for Africa infrastructure finance specialist Wale Shonibare. He pointed to MTN’s $3bn in fundraising in April that was followed by Etisalat’s estimated $1bn syn●●● dicated loan in May.

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business | companies & markets

Such large borrowing may place stress on the financial sector, and companies will need to seek alternative methods of financing, argues Geometric Power vice-president Eluma Obibuaku. “The Nigerian offering is so large it will make huge demands on the market, so it’s just as well local bankshavedeeppockets.However, there will be a need for various forms of support as many projects need seven to 12 years of funding. Enhancements will need to be made to fill the credit gap.”

●●●

terms, could drag on beyond the 2014 election. The PIB has been in the pipeline for almost five years and has slowed vital investment in the sector. “It is crucial for the PIB to be passed to have real regulation in the sector,” argues Geometric Power’s chief executive and former power minister Bart Nnaji. At a moment when unprecedented power-sectorreformsarebeingimplemented, delays to the PIB and concern about political tensions suggest there is still much to do. ●

While a large number of independentpowerprojects(IPPs)have been licensed, investment is not so forthcoming in these greenfield projects, although a few – such as the Azura IPP – are moving ahead. The apparently perpetual deadlock over the Petroleum Industry Bill (PIB) is one disincentive for developers of gas-fired power schemes. There is a fear that the PIB’s continued delay, primarily caused by conflict between international oil companies and the federal government over fiscal

hannibal Slowdown in the Zambian mining sector

of turbulence in prices – three-month copper futures fell 16% so far in 2013 – and the new regulations have cast a pall over the industry. Firms are threatening to cut employment levels. In nvestors in Zambia are dragging their feet. Mining firms have stopped ramping up output, as declining May, Konkola Copper Mines (KCM) – a subsidiary of prices and the government’s attempts to introduce London-listed Vedanta Resources and one of Zambia’s control on export earnings have them scared. Copper largest copper producers – announced plans to lay output in the first quarter of 2013 declined to 212,591tn, off 2,000 workers or about 10% of its workforce. The government immediately halted KCM’s plans. down from 217,524tn for the same period in 2012. Industry sources tell Hannibal that if the retrenchSince coming into power in 2011 after campaigning on populist promises, the Patriotic Front (PF) and ments take place, workers at KCM are likely to go on President Michael Sata have debated imposing new strike and labour unrest could spread to other mines. regulations that would increase tax collection to fund The sources say KCM is not an isolated case, and an expansionary budget. The PF regime resisted calls miners may resort to silent retrenchments instead. Some miners are putting on a brave face, projecting to introduce a 25% windfall tax on base metals but is to increase output. Danny Callow, the implementing regulations that will compel chief executive of Mopani Copper mining firms to keep some export revenue With new Mines, says it will continue to invest. in local banks. The government, which Politicians have brushed off says that tax avoidance is rife, wants to regulations criticism. “Some sectors feel we are improve the scrutiny of exports. frightening going backwards by claiming that we The regime’s decisions to force comare introducing exchange controls,” panies to temporarily repatriate foreign investors, says Zambia’s vice-president Guy exchange earnings and to implement miners are Scott. “This government was not a rule that empowers the central bank threatening elected by the people of Zambia to to monitor the balance of payments are extract 750,000tn of copper a year frightening investors. They are trying to redundancies, but to see to it that the minerals are cut production costs, which have been which beneficial to the people.” driven by increases in fuel and electricity The government will have to work prices, rising labour costs and fiscal policy could cause hard to limit the knock-on effects: the changes, including a doubling of royalty widespread kwacha weakened by 3.9% against rates on copper from 3% to 6% in 2012. labour unrest the dollar this year, making it the Zambia remains vulnerable to fluctucontinent’s sixth-worst performer. ● ations in copper prices. The dual headache the africa report

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dossier infrastructure

Dangote’s

cement rivals Africa’s economic growth is driving demand for building materials. Nigeria’s Dangote Cement and Europe’s Lafarge and Holcim are the top players fighting for dominance in Africa’s cement trade By Gemma Ware

ementgiantsLafarge of France and Dangote of Nigeria have skirmished before, but they are now crossing swords in earnest as Swiss group Holcim prepares to merge with Lafarge to form the world’s largest cement-producing group. Indigenous companies and foreign firms are setting up new plants all over the continent. But while Africa certainly needs more building materials to feed its infrastructure drive, will the fight lead to oversupply?

25%

International Finance Corporation prediction of Dangote’s share of the market in sub-Saharan Africa

In April, Holcim announced its plans to merge with Lafarge to form LafargeHolcim, but the deal faces some obstacles from anti-trust authorities, especially in Europe, and could be settled in the second half of the year. If it is approved, the company will provide intense competition for Nigeria’s Dangote Cement, which is ramping up production. The cement magnate Aliko Dangote’s expansionist policy in Africa over the past couple of years includes the rolling out of new capacity in 13 countries across the continent.

The Holcim-Lafarge deal has also sparked merger and acquisition speculation across the globe as both companies look to divest operations in order to avoid problems with competition commissions. In the meantime, a number of other companies are also planning to extend their footprints on the continent in the shadows of Dangote and Lafarge. The International Finance Corporation (IFC), the World Bank’s private-sector arm that has a $1.1bn global cement portfolio, estimates that Africa needs

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Lucky Cement. According to Exotix, two thirds of sub-Saharan African countries rely on imports to meet half of their demand, with imports worth $5bn in 2012. The new capacity should help boost interregional trade in cement, which was only at 13% of consumption in 2012. Across the continent, demand and supply remain unevenly spread. Demand is not strong in countries such as Côte d’Ivoire, while in Ethiopia there is a large amount of supply due to come online. In 2012, EthiopianSaudi businessman Mohammed Al Amoudi’s MIDROC opened a cement plant at Derba, adding 2.5mtpa of capacity. Rising supply in Ethiopia pushed down prices, which plummeted from $250/tn in 2011 to $150/tn in 2012. They are now hovering at around $120$130/tn, according to Exotix.

Feisal Omar/reuters

dangote catches up

to add capacity of 10-15m tonnes per annum (mtpa) for each of the next 10 years to meet the market’s growing demand. Production in Africa rose by 33mtpa over the previous four years to reach 88mtpa in 2013. Consumption of cement per capita is around 100kg in Africa, compared with around 570kg globally or 285kg if China’s consumption is excluded. Although many African countries have a large unmet demand for cement, some analysts suggest there might be too much new capacity. “Given all the projects the africa report

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With the growth in continental production capacity many countries can cut their imports

au g u s t- s e p t e m b e r 2 014

that are in the pipeline today, it’s very difficult to think that Africa will absorb all this capacity projected to come on stream in the next three to five years,” says Andy Gboka, equity research analyst at London-based Exotix. Prices in sub-Saharan Africa have averaged around $180/tn in recent years, compared with around $100/tn worldwide. New capacity is likely to push prices down further. The companies that are set to be affected adversely are those that export to Africa – companies such as Pakistan’s

For now, Lafarge remains the largest cement manufacturer in Africa, and it also operates in 64 countries around the world. Lafarge has the capacity to produce 44mtpa in Africa, much of it in North Africa, where it has large operations in Egypt, Algeria and Morocco. “Lafarge has not invested anything over the past three to four years in Africa,” says Michel Folliet, industry analyst for the building materials sector at the IFC. “They were concentrating on reducing their debt,” he explains. “Lafarge will not be caught [up] by Dangote over the next five to 10 years,” Folliet says, because of Lafarge’s large base in North Africa.Insub-SaharanAfrica,however, Folliet predicts Dangote will take over as the largest manufacturer this year. “I can see [Dangote] with 25% of the total sub-Saharan market,” he says. Dangote currently has 20.3mtpa of capacity in Nigeria, 1.5mpta in South Africa and a 1mpta import terminal in Ghana. The company plans to commission another 7mtpa in the rest of the continent this year, including another 2.5mtpa in South Africa. Strengthening its rivalry with Dangote, in July Lafarge ● ● ●

dossier | infrastructure

In Kenya, the government is concerned over Lafarge’s share of the East African Portland Cement Company

South African firm PPC is on a drive to expand its business into the rest of the continent. It is already expanding into Ethiopia, Rwanda, the Democratic Republic of Congo and Algeria (see page 84) and recorded first-half profit growth of 52% in 2014. Its model is to build integrated plants, where it controls both clinker production and grinding. moroccan contender

Another company aiming to increase its footprint is Ciments de l’Afrique, owned by Morocco’s Groupe Addoha. It is adding capacity in eight countries and plans to send clinker from Morocco to West Africa, where it will build grinding capacity. “They are going much faster than Dangote,” says Gboka. However, few see Ciments de l’Afrique as a rival to Dangote. “Nobody is interested [in the company’s expansion],” says Gboka. Addoha’s cement strategy is tightly linked with that of its real estate arm, which is working on low-income housing projects in countries such as Ghana. Not put off by competition, players such as China’s Jidong Development Group are moving into the continent. In May, Jidong and its partners announced plans to build a R1.8bn ($167m) greenfield plant with more than 1mpta of capacity in South Africa’s Limpopo Province through a vehicle called Mamba Cement. Although the expansion priority of China’s huge cement French ﬁrm Lafarge companies – including Anhui Conch and China National Buildis the largest cement ing Material Company – is still manufacturer with Southeast Asia, Jidong’s entry operations in shows that they are beginning to 64 countries look at the African market. Dangote and LafargeHolcim look set to dominate the continent’s cement market for the foreseeable future. But their efforts are opening up the way for newcomers with an eye on the continent’s long-term demand. ● Noor Khamis/reuters

shareholders approved a merger of its Nigerian and South African operations to create an entity called Lafarge Africa. The company will have 12mpta of capacity and will be listed on the Lagos Stock Exchange. The merger between Holcim and Lafarge could also bring some consolidation in countries where the two companies operate as separate entities. Lafarge’s operations in sub-Saharan Africa are considerably larger than Holcim’s, although the Swiss firm has plants in Côte d’Ivoire, Guinea and a few other countries. ●●●

nigerian consolidation

The proposed merger raises some interesting questions in Nigeria, where the two companies already have a joint venture, Nigerian Cement Holding, that owns a controlling 72% stake in United Cement Company of Nigeria (UniCem). “The big question mark is will they buy out the minorities,” says Exotix’s Gboka. The other 28% of UniCem is owned by Flour Mills of Nigeria, which did not respond to our request for comment. Both Holcim and Lafarge have paid fines for anti-competitive behaviour, mainly in Europe, and are likely to be keen to avoid pay-

ing out again. In Morocco, the question of competition comes into sharper focus. Combined, the two companies’ operations – Holcim Morocco and Lafarge Morocco, which Lafarge runs as a joint venture with the state-owned Société Nationale d’Investissement – control more than 50% of the cement market. The country does not have strong anti-trust authorities, but Holcim and Lafarge may still come under some pressure to reduce its dominance. While Dangote Cement has emerged as the most highprofile local player on the continent, there are other pretenders to its crown. The winners going forward will be those companies that can keep down their production costs. One model for companies to do this is to control the supply of clinker – a mixture of limestone and aluminosilicates that is used to make cement. In Ghana, for example, companies have to import clinker because of the very limited local limestone reserves. Ghana consumed 5.25m tonnes of cement in 2013, according to the IFC, and three quarters of it arrived in the country as clinker that was then ground into cement.

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Experience the Progress.

www.liebherr.com info.lex@liebherr.com www.facebook.com/LiebherrConstruction

The Group

fiNaNciNg growth

power

local banks

Nigerian banks that survived the radical reforms of a decade ago are now reaping the benefits as they finance the country’s power revolution by Vincent Nwanma

or many, part of the thrill of seeing Nigeria’s power privatisation process inch closer to fruition is anticipating the implications for the country’s banks. When it comes to Africa’s infrastructure projects, foreign banks have too often done the heavy lifting that might otherwise build up the muscles of local banks for further lending. For Lagos-based banks now to be cut in on the deals is a sea-change for the industry. The seeds of this revolution were planted a decade ago. On 4 July 2004 the Central Bank of Nigeria, led by its new governor Charles Soludo, ordered banks to raise their minimum capital to N25bn ($154m), from just N1bn for existing banks and N2bn for new ones at that time. It gave them 18 months to meet the new requirements, and asked those unable to make it to allow themselves to be acquired or bought over by others. At the end of the exercise, on 31 December 2005, 25 banks emerged from 75, with 14 failing the test. Ten years later, the impact of that move is being felt in the Nigerian banking industry, as it’s beginning to flex its muscle by taking on bigger roles in the most challenging and critical sectors of the economy: power and oil and gas. The new central bank governor Godwin Emefiele, who took over from Lamido Sanusi this year, acknowledged this fact at the start of his tenure in June.

“The Nigerian financial system has undergone several years of critical reforms, designed to position it as Africa’s financial hub,’’ he said at his first media briefing in Abuja. “These reforms have produced a financial landscape characterised by large and strong banks, an efficient payments system and improved financial infrastructure.’’ The average capital adequacy ratio of the banking system – which measures

a bank’s ability to meet its obligation in relation to the risks it faces – stood at 16.7% at the end of March 2014, which was better than the global threshold of 10%, Emefiele said. The banks’ improving status showed in their 2013 results, which indicated continuing recovery after the 2008/9 crash. At Zenith Bank (#20) earnings rose 14% to N351.5bn, but profit after tax declined 5% to N95.3bn. For Guaranty Trust Bank

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plugged in

(#21) earnings climbed 9% to N242.7bn, while profit after tax rose 4% to N90bn. Under pressure to rebuild its comatose power sector, the Nigerian government has embarked on an ambitious project tagged the Economic and Power Sector Reform Programme, which, in brief, involves handing over the assets of the sector to the private sector, with the government playing a regulatory role. It also involves an aggressive increase the afric a report

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finance special

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in both generation and distribution capacities to raise power output from about 4,000MW at present. For a country that in April 2014 became Africa’s biggest economy after rebasing its GDP, and as the continent’s most populous with at least 170 million people, the current power production levels are woefully inadequate to meet needs. So the government has set a target of 40,000MW of electricity by 2020.

s e p t e m b e r 2 0 14

Government began by unbundling the Power Holding Company of Nigeria, successor of the erstwhile National Electric Power Authority, into six generating companies (GenCos), 11 distribution companies (DisCos) and one transmission company. Last year, it sold the DisCos and the GenCos to consortia of investors, both local and foreign. That sale has provided local banks with an opportunity to raise their stake in the power sector. For a bank like Fidelity Bank (#34), a tier-two Nigerian lender, the privatisation of the power assets gave it an entry point to provide finance to the buyers, says John Obi, executive director in charge of corporate banking (see interview page 42). funding new plants In addition to the acquisition of the assets, banks are also funding the modernisation of existing equipment and installation of new material, including transformers and power lines, as well as the construction of gas plants needed to supply gas to the power plants. They are also financing the buyers’ investments to expand generation capacities at the old plants. These emerging opportunities are giving rise to complex financing structures that involve different classes of financiers, both local and foreign. Nigeria has abundant gas reserves, but Africa’s biggest oil producer has faced challenges on how to channel the gas to the power plants to generate electricity. New investors are stepping in to fill the gap. One such power plant is the AzuraEdo Independent Power Project, a 450MW gas turbine plant located in Edo State. Owned by Azura Power Holdings, the power plant and a gas plant to supply it feedstock will cost about $1bn, according to the company. The firm is co-owned by Amaya Capital and American Capital Energy & Infrastructure. Financing of the project involves $220m equity and $530m of debt from a consortium of local and ● ● ●

AfolAbi Sotunde/reuterS

international financiers, Azura an e-mailed response to questions. “It said in a statement. Signing of key inis also anticipated that finance will be dustrycontractswascompletedon5May. raised from [development finance inOn that day, Azura also signed a gas stitutions] in other countries such as sales and purchase agreement with SeGermany, France and the US. A total of plat Petroleum Development Company. 14 banks and financial institutions from Seplat, which is listed on the Nigerian eight countries are expected to invest in Azura,’’ the company explained. Stock Exchange and the London Stock Construction is planned to start this Exchange, is investing $300m in new gas processing facilities at its Oben Gas summer, while the plant will take up to Plant. The plant is part of Seplat’s joint three years to build. “We are trying our hardest to accelerate this,’’ the company venture with the state-run Nigerian Petroleum Development Company that said. “But given the length of time it will supply the Azura-Edo plant with the takes to build such a big plant, it will not project’s fuel gas requirements. be until early 2017.’’ Azura has a target The UK’s Standard Chartered Bank plant capacity of 1,500MW, which the structured the financing, the bank said company says will be reached “within in a statement in May, which is coming the next five years.’’ from three different sources: commercial banks, developemefiele plans to push banks ment finance institutions and further into the power sector the N300bn Nigerian debt facilwith funds at concessionary rates ity set up by the central bank, the Power and Aviation Intervention Fund. If the banks have shown increasing The foreign commercial banks are interest in the power sector, Emefiele, Standard Chartered, Rand Merchant the new helmsman at the central bank Bank from South Africa and Gerand, until his appointment, the chief many’s Siemens Bank. From the Niexecutive of Zenith Bank, one of the gerian debt facility, Nigeria’s First City country’s largest, will drive it even furMonument Bank has received credit ther during his tenure. The central bank will facilitate investapproval for nearly N25bn, according ment in key parts of the value chain by to the company. providing funds at concessionary rates to targeted investments in the power europeans chip in sector, Emefiele said. “We will encourThe development finance institutions age investment in the gas-to-power inon this project are the International Finance Corporation of the World Bank frastructure to improve the reliability of Group, FMO from Holland, Swedfund supply of gas to the existing and new of Sweden and the UK’s CDC Group. power plants.’’ All the above institutions have reEmefiele says he plans to adopt a ceived credit approvals, Azura said in development finance model to central ●●●

little can compare with the thrill of the presiDential power reform transaction signing in 2013

banking. This would seek to channel credit through direct intervention to selected sectors. In the oil and gas sector, Nigerian banks’ exposure is up to one-fifth of their loan portfolio, according to industry figures. This has been driven by the government’s local content law that requires 70% content in the sector, which presents opportunities for smallsized upstream and midstream oil and gas transactions. And their participation has progressed from a concentration on the downstream sector, characterised by short-term lending, to upstream activities, as their knowledge of the industry deepens. They are also funding the acquisition of oil assets being sold by international oil companies, as they divest from Nigeria or move further into the deep offshore. Emefiele seeks to strengthen the banks’ participation in the sector. He will support investments in small-scale refineries in order to cut importation of refined product, currently consuming 35% of Nigeria’s annual import bill. He will also look at ways the government could raise funds to pay for its share in the joint ventures with international oil companies, which it currently struggles to do. “We will explore how this can be done through international capital markets.’’ This suggests that the government could sell bonds on the international market for the purpose of raising funds to meet this obligation. ●

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financing growth

interview

John obi

executive director of corporate banking, fidelity bank

power progress is sustainable Nigeria’s Fidelity Bank (#34 in our rankings) dedicates more than 26% of its loans to the power, oil and gas sectors combined. Having taken part in the privatisation of electricity distribution and generating companies, Obi is confident Nigerian power is on the road to recovery TAR: How is Fidelity Bank involved in the power and gas industry? JoHn oBi: At the national level, we have participated in the privatisation of the assets of the Power Holding Company of Nigeria (PHCN), the distribution and generating companies. We have funded some of the DisCos [distribution companies], such as Kano DisCo, Ikeja DisCo and Benin DisCo. For the generating companies, we are supporting the Egbin power plant in Lagos State, and of course the Transcorp power station at Ughelli in Delta State. 13% of our loan portfolio is dedicated to the power sector. How does that compare with the industry? Fidelity is one of the leading banks in terms of power projects. All the three projects we did with the Lagos State government, Fidelity did alone; there were no other banks involved. For the generating and distributing companies, we participated with other banks through syndication. Our belief and the stake we have in the power projects rank among the highest in the banking industry. We should be among the top three banks in terms of power project financing. So, should nigerians look forward to the power problem being fixed soon?

Fidelity Bank

Fixing the power sector will take some time to happen, but we have started in the right direction. The fact that those assets have now been put in private hands is a very bold step by the current administration. The next step is for the private sector to make sure that all those agreements, all the covenants they reached with the government, that they are able to keep them. And the government also has the responsibility to ensure that whatever commitment and obligation they have towards ensuring the success of the process, that they abide by them. Most of the DisCos that acquired the assets, for example, I know they are also working towards getting metering in place,

We are also beginning to have improvements in revenue. So I think it is a progress that is sustainable, and with the support of banks and the society at large, I believe that in the medium term we will be able to see a remarkable improvement in the power situation in this country. We are also involved in the oil and gas sector. Our involvement is both in the upstream and the downstream. Our exposure to the oil and gas sector is just about 13.5% of our loan portfolio. We are quite happy with what we are doing. Of course we know that oil and gas is the bedrock of this economy. What aspects of the oil and gas sector do you finance? We are involved in both the exploration and production in the upstream. I can give you an example of what we are doing in this area. Shell [Petroleum Development Company of Nigeria] has been involved in divestment of some of their assets in the Niger Delta, maybe because of community problems, and they are now moving offshore to work in the deep waters. So those assets are being sold, mostly to Nigerians. We are supporting them to be able to acquire those assets and their work on those assets.●

“the government has to shoulder responsibility to ensure things work well for the generating companies” for them to be able to support the project. And whatever else they need in order to succeed, they are all working towards that. The generating companies are also trying to raise generation, but that does not mean they don’t have challenges. Their problems include vandalism of gas pipelines for the supply of gas to these projects. This is a responsibility that the government has to shoulder to ensure that things work well. the afric a report

interview by Vincent nwanmah in lagos

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financing growth

insurance

global downgrading is good news for africa The vastly underinsured African markets – Ghana and Nigeria in particular – have become an urgent growth area for insurance companies suffering from the negative global outlook

he troubled global reinsurance sectormaybeheadingtolevelslast seen 13 years ago – before the fall of the US’s twin towers. Rating agencies Standard & Poor’s, Moody’s and Fitch have recently downgraded the sector’s outlook from stable to a grim negative. “The current soft market shows many of the traits of the late 1990s – an over-abundance of capital, double-digit annual price declines, a substantial rise in buyers’ bargaining power, and predictions of industry consolidation,” said Moody’s outlook report of 18 June. This puts Africa in a unique position. Its insurance sector remains a market in construction, with huge potential: it nigeria, where only one in 10 people has cover, represents a huge opportunity for insurance firms

ies in East Africa and West Africa as key, partly because they are at the forefront of supporting-technology drivers, such as mobile-supported insurance. While practitioners are confident that education about the use and benefits of insurance will allow them to reap the rewards over time, there remain many hurdles. Blum Khan, the CEO of South African insurer Metropolitan Health Group, said insurers offering retail products in Africa need to ensure robust premium collection

is estimated that nine in 10 Nigerians do not have any form of insurance cover, according to NOIPolls. In Ghana, the insurance market is expanding at 30%, according to the country’s commissioner of insurance, Lydia Lariba Bawa. International insurers are well aware of this trend. UK-based insurance giant Prudential, whose Ivorian CEO TidjaneThiamworkedinRobert prudential’s entry into africa is Guei’sgovernmentinthe1990s, significant, even if africa’s share has started selling insurance in of the industry is just 0.2% Ghana, a first for the company. It has acquired Express Life, an insurer which focuses on people earnmechanisms are in place to drive their businesses’ growth. ing less than $2.50 a day. Prudential’s entry into the Africa is significant, even if The Nigerian market remains a gem. the continent represents just 0.2% of the The South African insurer Liberty Holdings is mulling over the most effective global insurance industry total. The sector is slowly coming to the boil. way to enter. In general, the sector repSouth African insurers view opportunitresents a real opportunity for fast ● ● ●

William Daniels/mYOP DiFFUsiOn

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financing growth

growth, partly because foreign investors are allowed to purchase 100% of local companies, avoiding the costs associated with setting up greenfield operations. The reinsurer Swiss Re believes the Nigerian insurancemarket,whichwasworth$1.6bn in 2012, will grow to $6.5bn by 2025. A recent report by Fitch predicts that consolidation in the Nigerian market will be the next big trend. That might well be driven by market leader Leadway Group. Its asset base hit the N100bn ($617m) mark at the end of 2013, a 47 % growth on the previous year.

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bridging continents In December 2013 Sanlam Emerging Markets (SEM) acquired a 49% stake in NICO Holdings’ general insurance businesses in Malawi, Zambia, Uganda and Tanzania. They are having to deal with the recent trend of healthcare providers entering the health insurance market. SEM has recently concluded a number of acquisitions, including theSorasGroupofRwandaandMCIS Insurance Berhad of Malaysia. SEM has also recently acquired a stake in the leading global micro-insurance specialists, MicroEnsure Holdings, which is based in the UK and has a footprint across Africa and India, serving more than 10 million enrolled clients. Regulatorshavebeendrivingsome of the changes. In Uganda, the insurance act of 2011, which took effect in December 2013, forced insurance companies to split their life and nonlife products into two separate companies. In 2005 and 2007 Nigerian regulators helped consolidate the sector by demanding new capital requirements for insurers, bringing the number of insurers down from 97 to 49. The Nigerian regulator NAICOM has also has pushed its Market Development and Restructuring Initiative, which has focused on re-orienting Nigerian insurers towards the retail market. This is happening in Africa’s francophone markets, too. This is partly down to the growth in selling of insurance through banks – known as ‘bancassurance’ – with accords mushrooming between insurers and banks in places like Cote d’Ivoire. ● thekiso anthony Lefifi

AfricA re moves its focus bAck to AsiA The Nigeria-based reinsurer is winning in a game of high stakes, and plans a new strategy in the face of South African under-performance

frican Reinsurance Corporation (Africa Re) is planning to bulk up its business in China and the rest of the Asian markets following years of scaling back in those regions. In his first exclusive interview after the reinsurance company’s 36th annual general meeting held in Cairo, the group’s boss, Corneille Karekezi, said a new strategy to increase its exposure in Asia is about to be implemented. The Nigeria-based group had scaled back from Asia because it wants to focus on the African continent. Three years ago, Africa Re’s share of business in China stood at 10%; last year it only recorded 7.7%. However, despite the drop China remained one of its best-performing regions in the emerging markets. Developing Asia recorded a 6.5% increase in performance while sub-

corneille KareKeZi, Group ceo of africa re, is sittinG on an a- ratinG and $2.8bn in assets

In the past five years, Africa Re has been the only company on the continent not to lose money. It holds $2.8bn in assets, and invested and deposited $647.3m in various projects and banks in Africa. It also declared more than $30.2bn in dividends. Still, Africa Re’s South African subsidiary has under-performed due to the weakenedeconomy.Someanalysts said they expected Africa With numerous companies Re to scale down South African knocking on africa re’s doors the operations, but Karekezi said company will have to choose well that move is not on the cards. He instead said the company plans to “restructure its [South African Saharan Africa and India added 5.1% operations] portfolio by balancing it.” and 4.4%, respectively. “Growing is easy – anyone can grow, Africa Re South Africa, which was especially if you have a name like Africa visibly absent at the annual meeting, Re, with a [credit] rating and a positcontributes about a third of the group’s profit. The region has been hit by a wave ive outlook,” said Karekezi. The rating of labour strikes, capital flow volatility, a agency A.M. Best recently revised its drop in exports and expanding current outlook to positive from stable and affirmed the financial strength rating of A-. account deficit, all of which resulted in the rand nosediving by 23% against the risky business US dollar in 2013. Partly due to its prudential performance, African currency depreciations, such which did not go unnoticed, Karekezi as this and that of Egypt, are among the said, numerous companies have come issues that might give Karekezi cause knocking on Africa Re’s doors seeking for concern, but he keeps a steady hand reinsurance. This means the company on the tiller. Had the exchange rates can pick and choose who it is goes into remained stable in 2013, the premium business with. The tricky part, however, growth for the group would have been is to make certain it is not hit by high 11.62%. However, Karekezi denied the claims to a point that it cannot survive. group would be investigating currency “Insurance is a risky business, and hedging products to mitigate the losses risk means you can lose,” said Karekezi. caused by such depreciation. ● t.a.L. the afric a report

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business LocaL content

cultivating

homegrown talent

companies & markets

At last, African governments are encouraging the development of networks of small and capable local companies that can become a part of global supply chains and win government contracts By Nicholas Norbrook

Antonin BorgeAud for JA

The oil and gas sector is one of the pioneers in local content, and Nigeria leads the fray

ocal content – the phrase has rippled through Africa’s energy and mining sectors, gathering strength over the past decade. From workshops to conferences, from ministerial briefings to presidential speeches, African governments are devising frameworks that will hitch their domestic industries to the growth that foreign investment brings. Nigeria, Ghana, Angola, Morocco, South Africa, Uganda, Gabon and Guinea have passed local content bills in recent years, often in the extractive industries. The Nigerian Oil and Gas Industry Content Development Act hastoughrequirementsongivinglocal companies priority in oil block licensingroundsandcompelsoilcompanies and service providers to hire Nigerians. Ghana’s local content law likewise gives local companies first preference in bidding rounds for oil blocks and requires a minimum 5% equity stake for Ghanaian firms – not including the government-owned Ghana National Petroleum Corporation – in every oil licence. The rationale is clear. After decades of natural resource flows out of African countries, economies remain locked into the lowest rung of economic development, with local companies unable to add value to raw commodities. The continent’s industrial fabric remains threadbare, and the growing number of young graduates will cause chaos if there are not enough jobs to fill. African Union Commission chairperson Nkosazana Dlamini-Zuma reminded African finance ministers in March that African countries have to “design a comprehensive industrial development framework […] to speed up and deepen value-addition of local production, linkages between

the commodity sector and other economic sectors”. Guinea’s mines minister Kerfalla Yansané says: “We have been learning from our mistakes. Our mining companies were not integrated into the mainstream of our economy. Now we want them to be part of growth corridors. There should be a link between mining activities and the whole environment, meaning agriculture, services, transport, education and so on.” jobs first

For Jean-Louis Ekra, president of Afreximbank, this economic nationalist moment “is not just happening in Africa, because of the difficulty in job creation you see around the world. In Europe, whenever a company says it will move a factory abroad you have instant uproar from the government.” A panel of experts convened by Britain-based law firm Pinsent Masons earlier this year was unanimous: “Local content legislation [in Africa] is here to stay, and those companies that fail to recognise this evolving investment reality will quickly fall behind.” In places where governments have been working on this for some time, like Nigeria, there are real changes afoot. “One of the best testimonies to this is local participation in the annual CWC Nigeria Oil & Gas Conference,” says Fisoye Delano, senior vice-president of CAMAC International and previously managing director of the Nigerian Petroleum Development Company. “The number of Nigerian oilfield services providers has changed significantly, just as significantly as the number of indigenous exploration and production companies. Eighty-five percent of exhibitors in NOG 2014 were local ●●● service providers.”

business | companies & markets

VolkswAgEN

JEAN-MichEl RuiZ

case studies in local content R. VAN DER MEEREN/ED.DuJAguAR

Oil and gas

Automobiles

Power

Nigeria has taken the lead with its 2010 law pushing international oil companies to use local partners. In April, the country’s first deepwater simulation theatre – built by Tolmann Allied Services – opened in Port Harcourt. The challenges of finance and skills are being addressed as never before. Angola, Ghana and Gabon are following suit. In 2012 Angola passed a law stipulating that tax bills and payments from oil companies to local suppliers must transit through the local banking sector. It should boost the financial sector’s capacity to participate in oil investment deals.

South Africa’s auto sector policies are working. The Automotive Investment Scheme has contributed to 193 projects totalling R22.5bn since it began in 2009. The latest C-Class Mercedes is manufactured in Port Elizabeth, where 10 new suppliers are setting up shop. With the new Automotive Production and Development Programme local parts suppliers are improving the quality of production and delivery speeds. In Morocco a dedicated site for parts manufacturers is opening at Tanger Automotive City and new legislation is expected to boost local companies.

In the recent bid rounds to provide South African renewable energy, applicants had to fill in a scorecard to show how much component manufacturing would end up in South Africa. In this way the government hopes to kick-start the country’s entry into global supply chains for green energy. In Morocco’s fast-growing solar and wind power sector local companies are doing some of the preparatory work on project sites. The Nigerian government plans to use a recent electricity privatisation round to lay the groundwork for involving local companies in the sector.

Multinational companies tend to fight against the local content policies. When companies have large international service providers, they can keep costs low and maintain high standards. A senior manager at an oil company operating in Nigeria says: “What they are asking for in local content is just unworkable.” Local service providers often ask for higher fees than their international competitors and do not have the same levels of experience.

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slippery definitions

The complaints of multinational companies are not the only obstacles to the implementation of local content policies. Two additional challenges are rooted in the historical lack of capacity in local industries. The first is that the slippery definitions of local content can often lead to fronting, whereby multinationals structure arrangements so that there is only a semblance of domestic participation. In Uganda, a clause in the local content law says that “where the goods and services required by

the contractor or licensee are not available in Uganda, they shall be provided by a company which has entered into a joint venture with a Ugandan company provided that the Ugandan company has a share capital of at least 48% in the joint venture.” FewUgandancompanies have the capital to set up joint ventures with multinationals. Because of the lack of definition of what constitutes a Ugandan company, civil society groups say that local elites can create front companies that help multinationals to comply without transferring skills and wealth (see page 38). Some of the early black economic empowerment deals in South Africa faced this problem, hence a redoubled effort by the department for trade and industry to crack down with an approach that uses scorecards and an agency to investigate the investors. When there is room for discretion in interpreting the eligibility criteria in local content deals, predatory elites can benefit. The second obstacle to local content policies is the lack of support given to boosting capacity. “Of

Minimum stake for Ghanaian companies in oil licences under the country’s local content law

1,500 Local companies trained by Angola’s CAE in how to win contracts from multinational corporations

course we have to build the capacities of our SMEs [small and medium-sized enterprises] and our manpower so that we can actually turn local content into reality,” explains Guinea’s Yansané. capacity building

In 2012, the Moroccan government established a regulation that entitles SMEs to manage 20% of all government contracts. Ensuring that these companies actually exist is a challenge, but skills and finance are the main constraints that limit the creation of a fleet of local companies that can seize local content opportunities. Here, at least, there seems to be more progress. In Angola’s oil sector, the international nongovernmental organisation CDC Development Solutions created an enterprise development agency called the Centro de Apoio Empresarial(CAE)in2005incollaboration with the Angolan government, international oil companies and the nationaloilcompanySonangol.The CAE provides Angolan companies with training that allows them to participate in the supply ● ● ● the africa report

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dossier

agribusiness

profile

Akinwumi Adesina Agriculture minister, Nigeria

Africa can feed When Nigeria’s billionnaires start investing in agriculture it’s news, says the minister, who has also brought in a raft of state solutions to overturn the country’s crop deficit By Nicholas Norbrook in Kigali

omething is stirring in the wide expanses of northern Nigeria, and it is not another Islamist insurgency. “The governor of Kebbi State says because of the rice revolution they no longer count rice in hectares, they count rice in kilometres,” says Akinwumi Adesina, Nigeria’s minister of agriculture. “In the north in 2012, we produced an additional 1.4m tonnes of paddy rice. Last year, we

expanded that by an additional 2.95m tonnes.” Though Nigeria still produces less than half the rice it consumes, there are signs of a turnaround. Adesina points to the N320bn ($2bn) gross contribution made by rice to the Nigerian economy as a sign that things are improving. “We needed to begin to restructure the economy, to be less dependent on oil and to also begin to have equitable economic growth and prosperity in differthe africa report

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ent parts of the country. And the sector that’s going to give you that is agriculture,” Adesina says. Given the predations of militant group Boko Haram in the north, creating jobs and wealth in the area is a vital part of any peace-building efforts. “We launched a dry-season farming programme, a first for the country. Today, the youth are busy,” says Adesina, who explains that the rice sector alone has created nearly 370,000 jobs. the africa report

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Nigeria has kickstarted its agricultural rise with a mixture of ‘enabling-state’ solutions, such as de-risking agriculture for bank lending, alongside more nimble market-based methods. A good example of this is the provision of fertiliser subsidies, something that the World Bank frowns upon. But by using a mobile-phone-based voucher delivery system, it avoids some of the problems associated with large state bureaucracies.

Brent Stirton/Getty imaGeS

the world “It [the previous system] was corrupt, it was inefficient and it didn’t reach the farmers,” says Adesina. “No more than 11% of farmers were getting the fertilisers bought and sold by government. It took us 90 days to dismantle a corrupt system of 40 years in Nigeria,” he continues. Campaigners for transparency in Nigeria’s opaque oil subsidy system may wonder whether similar methods could be applied to the energy sector.

dossier | agribusiness

Olam InternatIOnal

Nigeria’s former central bank governor, Lamido Sanusi, favoured these sorts of pragmatic solutions. Sanusi and Adesina educated Nigeria’s banking fraternity on financing the agriculture sector. “What I cannot forget was the experience of a meeting in the central bank with all the bank CEOs [chief executive officers] and all the chief risk officers at all the banks in Nigeria. I asked them: ‘How much money do you think you’re going to lose from lending to agriculture?’ They said 90-100%.” lending frenzy

In 2011, when the Central Bank of Nigeria started its innovative de-risking mechanism known as the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending, lending to agriculture was 0.7% of the banking sector’s total loan portfolio. “By last year – 2013 – it grew to 5%. We expect it to be 7.5% this year, and we expect it to rise to 10% by next year,” says Adesina. Small companies selling fertiliser, seed and other inputs have been major beneficiaries, with $53m lent to small and medium-sized enterprises in 2013. These had largely been shut out of domestic credit markets. Big business is getting involved, too. While stressing that smallholder farmers need continued support, Adesina points to the country’s 84m hectares of land, of which 40% is cultivated – just 10% of it with modern technology. The government has

removed import duties on agricultural machinery and is facilitating access to land in order to encourage investment. “In the last two years, we’ve been able to attract $4bn of private sector investment commitments. Those range from those that are making warehouses, to seed companies, to fertiliser companies as well as juice manufacturing companies,” says Adesina. In Taraba State in the north east, United States-based and Kenya-registered Dominion Farms has set up a joint venture with the T.Y. Danjuma Group that includes a plan for $40m in investment. However, the optimism surrounding the project was dented this year by farmers protesting against non-payment of compensation for land. In Nasarawa State, Olam is planning to invest more than $72m in a commercial rice farm, a fully mechanised project covering 6,000ha. It will house a processing facility for milling 210,000tn of rice per year, making it the biggest project of its kind in Africa. Commodity trader Cargill is also setting up a 15,000ha cassava-processing project in Kogi State. Adesina says that the actions of domestic investors are increasingly important. “We have shifted people that have invested in oil and gas – even in the cement business – to diversify into agriculture. That’s a big thing, when Nigeria’s billionaires are going into agriculture,” says Adesina.

Nigeria has undergone a rice revolution, with 4.35m more tonnes produced in two years

“As we speak [Aliko] Dangote is putting $2.3bn into agriculture, and he says he’s going to put $300m into commercial rice production and milling in Nigeria.” Dangote is investing $30m in a tomato paste factory in Kano. Another tycoon, Tony Elumelu, has diversified into agriculture with a juice-processing plant in Makurdi through the Transcorp subsidiary Teragro. africa has the land

Planting the seeds of growth 1988 Earned a doctorate in agricultural economics from Purdue University, US 1995 Became an economist at the International Institute of Tropical Agriculture 1998 Joined the Rockefeller Foundation’s food security programme 2007 Became the vicepresident of the Alliance for a Green Revolution in Africa 2010 Appointed agriculture minister

Policy-makers have the ambition to transform Nigeria from the second-largest importer of rice in the world, spending $2.5bn annually, into a producer that can rival the Thai rice export machine. Adesina argues that the agriculture and agribusiness sectors in Africa will be worth $1trn annually by 2050. He estimates that agriculture-related foreign direct investment in Africa will rise from $10bn to $45bn in just six years. The continent has one of the great global competitive advantages, Adesina argues. “Africa has 65% of all the land left to feed nine billion people in the world by 2050. Nobody drinks oil, nobody smokes gas, but everybody needs food. Now Africa has the potential to feed the world. That’s a huge asset!” This campaigning rhetoric may presage a loss for Nigeria and a gain for the African Development Bank. Adesina is now one of the people touted to replace bank president Donald Kaberuka in May 2015. ● the africa report

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business | companies & markets

intErviEw

Albert Essien

Group chief executive, Ecobank

We will benefit from both worlds Banker Albert Essien talks about the management troubles at Ecobank, its plans for consolidation, and how to manage culture and training across a pan-African institution

cobank was rocked in March 2014 by a boardroomdisputethatledto the sacking of chief executive Thierry Tanoh and the election of a new board. More recently, South Africa’s Nedbank turned its loan to Ecobank into an equity stake of 20%, while Qatar National Bank increased its initial 12.5% to 23.5% and became Ecobank’s largest shareholder.

things properly. I don’t think we’re the only financial institution that hasbanksasshareholders.Perhaps it’s the first time we find ourselves in such a situation, but I think we have a board that is capable of engaging both sides. I also think both sides, knowing that they need not destroy value because they all have strong synergies, would also make sure they rather work to improve the assets they have all invested in.

TAR: You’ve said that it’s good to have a diverse set of investors. Why is that? AlbeRT essien: Diversity is good, and when you have strong partners with shareholders, that’s also good. South Africa’s Nedbank is a strong partner by all rights. It brings perspective from a much more developed part of Africa. My friendsfromtheGulf,Qatar,arevery wealthy, with strong deep pockets. They also have very strong governance principles in the bank, so we’ll benefit from two worlds: from South Africa and from the Gulf.

is ecobank’s regional expansion now on pause? Yes, not a pause per se, but it’s tapering off. All along we’ve made it clear that we’re interested in getting into Mozambique and Angola. We’re now in Mozambique. We bought Banco ProCredit, and we’re actually in the process of converting our licence in Angola into a full commercial operation. We opened in South Sudan, and we have a representative office in Ethiopia. Ethiopia has not opened up to private-sector banks, but it is a very good country. Hopefully that will be converted into a fullscale operation.

Might a battle for ecobank between investors from south Africa and the Gulf divert the board’sattentionfromitscurrent consolidation efforts? It all depends on how these things are handled. I think we have a board that can handle these

Building a Better Bank 1986 Got his first job in the banking industry at Ghana’s National Investment Bank

come with this footprint. This means that we should operate better, we should have a better cost-to-income ratio, we should have better profitability and we should translate these into higher returns for our shareholders.

1990 Moved to Ecobank’s corporate banking department in Ghana

Where will new business come from? To drive revenue we need [to focus on] cross-border payments, trade, remittances. Our strength is to do regional business. We’ve invested in platforms for payments and for collections, for cross-border trade. We acquire businesses by having superior and innovative products and services. We’re into mobile banking. We work with Airtel. We work with MTN where possible. We’re getting more into the card business, deploying more point-of-sales terminals so that there is more reach on the retail side and on the corporate side.

2002 Named managing director of Ecobank Ghana’s operations 2005 Became executive director of the Ecobank group March 2014 Chosen as Ecobank group chief executive to replace Thierry Tanoh

You’re looking at consolidation? We are in consolidation mode. What that means is having efficiencies. We now have scale, and we should be able to drop our costs and galvanise the synergies that the africa report

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ErIc LArrAYADIEU for JA

We have a regional business. We also have someone who coordinates that. We have a global business person based out of London who also coordinates on the same basis, and we have the value chain, so we do the same. We are also a co-sponsor to the first ever SME [small and medium-sized enterprise] seminar coming up in November in Dakar to showcase what we do for SMEs and to link up with businesses. We have a basis for bringing businesses together.

people. When you train them, they lookuptoyouandyouretainthem, and that is the good value we’ll bring to the rest of the platform.

What do you want to bring with you from the Ghana division where you were previously chief executive? Banking is all about people, so the Ghana division has done especially well with hiring good people, training them and retaining them. I’m a product of the Ghana division. This is what we are bringing to the rest. We have our own academy in Lomé, Togo where we are partnering with top-class schools and where we, the senior managers, give our time. We have a syllabus that we have started to go through to train and retain our

“The lesson for us [from the management crisis] is to strengthen governance”

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Regarding the Nigeria acquisition, which is a large part of your business now, how are you integrating it into the wider group? It’s largely going well. We’ve been able to integrate it – with some challenges on the IT [information technology] side much earlier, but it’s much better today.

More than anything else, we’re still working on cultural integration. We had an Ecobank culture, and we had an Oceanic culture. The two have come to meet, so we’ll need to take the good from them but to superimpose our culture. That takes time with a human being. It’s much better than before because the results are much better than in prior years when we started this integration.

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Doyouexpectasofteningofcommodity prices to hit African economies and Ecobank’s business? Definitely. We have iron ore, which has dipped. I think the price changesarecyclical.Whatweneed to do for the African economies is to diversify and use the proceeds of the past to move into agriculture, manufacturing, etc. Those who do that well, and some countries have started working on that well, they will be winners. Banks also need to diversify their sources of revenue. That is what Ecobank has done. Are you pleased to be getting back to your core business after the ejection of Thierry Tanoh and other governance concerns? Yes,butyoualwayshavetomake sureyouwillnotgetbackintothose things. I think the lesson for us is to strengthen governance […]. We have a very good board that is very supportive and making sure that we keep going from strength to strength. The charters have been strengthened, and also we have strengthened management practices and processes. ● Interview by Nicholas Norbrook

CMA CGM

innovation

Mortgages

nigEria loans for lEss Red tape and high interest rates have kept mortgages out of reach for a majority of Nigerians. Now sector reform and national and state-run schemes should boost the number of homeowners

nyi, 35, lives in Lagos and has been trying to get a mortgage for a while. Her struggle echoes the challenges facing Nigeria’s housing sector. The National Housing Fund (NHF), managed by the state-owned Federal Mortgage Bank of Nigeria, is her best bet, because it offers the best interest rates. But getting financing from the fund, even after fulfilling the requirements for eligibility, takes a while: between 12 and 24 months at least. “TheNHFfeelslikeahush-hushthing,” she says. “Meanwhile it’s supposed to be availabletoeveryNigerianofworkingage.” So, while waiting, she has turned to the next best option: a private mortgage bank. That should take less time than the NHF, but there’s one intimidating drawback: the “ridiculously high” interest rate, typically a minimum of 18% per annum, compared to the National Housing Fund’s 5%. Still, she has decided to brave it. Her plan is to arrange a private mortgage for now (because the property she’s set her eyes on won’t wait for the NHF loan to go the afric a report

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through), and then switch to the NHF’s funding when it eventually arrives. Complicated, but better than nothing – if she can get it to work. The sad reality for her is that even the process of getting the expensive private bank mortgage has stalled.Thedevelopersofthepropertyhave had problems convincing the mortgage bank that the title to the land they were developing was genuine. “The mortgage bank said they couldn’t verify the papers with the state government,” Enyi says. Experts say the lack of efficiency and transparency around land-titling is one of the most debilitating issues affecting the housing sector in Nigeria. Ruth Obih, CEO of 3Invest, a real estate consultancy, points out that there are dozens of procedures required to register a piece of land, courtesy of a cumbersome landuse legislation dating back to the late 1970s, which vests ownership of all land inNigeria’sfederalandstategovernments – and ensures that formalities are tied up in corrupt and tardy bureaucracies. When she worked as a conveyancing lawyer in the UK, Obih was used to com-

s e p t e m b e r 2 0 14

pleting land registration procedures in weeks. In Nigeria, she laments, it takes years. Red tape combines with high interest rates, short repayment schedules (20-year mortgages are rare, making monthly repayments high) and an unfriendly legal system (inadequate foreclosure laws) to compound the problem. where are the houses? But arguably the biggest issue is the availability of houses. For decades home constructionhaslaggedwellbehinddemand, so that Nigeria’s housing deficit – the number of houses that need to be built to ensure that everyone has access to one – is now estimated at 17m. It’s hard to talk about a housing finance market without houses, Obih says. At a housing summit in Abuja earlier this year, finance minister Ngozi Okonjo-Iweala said that Nigeria’s housing finance market constitutes only 1% of GDP, a negligible figure compared to the US and UK (upwards of 75%), Hong Kong (50%) and Malaysia (32%). Analysts estimate a functioning housing finance market in Nigeria will boost annual economic growth by as much as a tenth. Withtheacuteshortageofhouses,even ifindustry-wideinterestratesweretofallto single digits and legal knots miraculously

gwenn Dubourthoumieu for Ja

new state-run mortgage schemes put a glimmer on the horizon for nigerians wanting to own a home

innovation

dissolve, there would still be a problem. Developers in Lagos are disproportionately targeting the luxury market; the high rental and sale prices – in many cases denominated in dollars – are their only insurance in a very high-risk market. The financing end of the market has also struggled for years to get it right. In 2012 the central bank announced plans to reform the sector, in a manner similar to what was done to Nigeria’s commercial banks in 2004. survival of the fittest At the beginning of July the verdict emerged. Only 36 of the hundreds of primary mortgage institutions (PMIs) made it over the new capitalisation hurdles: 10 are licensed to operate nationally; the rest have been given regional mandates. Those that failed will be delisted, and the fate of depositors is unclear. Enyi says she is currently trying to recover her deposit from one of the PMIs. “It’s a very unsettled industry right now,” Obih says. But it’s not all gloomy news. Analysts expect that recapitalised mortgage banks will be in a better position to provide cheaper financing. And a new entrant to the mortgage market promises to be a game-changer: the Nigeria Mortgage Refinance Company (NMRC), launched by President Goodluck Jonathan in January 2014 to provide cheap financing to the PMIs,enablingthemtocreatemoremortgages. The company has been likened to America’s Fannie Mae and Freddie Mac, which, until they fell into distress following the subprime mortgage crisis, considerably swelled the country’s class of homeowners.

The federal government is not alone in optimistic for the future. “A system that its quest to transform the housing sector can support some people will ultimately in Nigeria. State governments are also support more people,” he said. “I’m rolling out schemes to encourage activconfident that whether I’m here [as ity. In Ogun State, the government last governor] or not, as many people who want to own a home in Lagos, and who December launched a scheme to fasttrack the vital “certificates of occupancy” are working, will do so.”He stresses that for people who have already built on it’s not only salaried workers who stand to benefit from HOMS, an important their land (typically C of Os don’t come clarification to make in a city where the for years; land owners have to make do informal businesses – traders, artisans, with temporary certification). freelancers – are estimated to account And in Lagos, there is a new staterun mortgage scheme. The Lagos Home for as much as 80% of the economy. Ownership Mortgage Scheme (HOMS) For Dare Okusanya who, even though launched in February provides a 10-year he currently works as a banker in Lagos, mortgage option at 9% interest. The houses are built by the state the lagos state-run scheme through the Lagos Mortgage is delivering 200 homes monthly; Board, while the financing is allocation is by a public draw handled by the Lagos Building Investment Company (LBIC). doesn’t want to live in the city, other All of the funding, state governor Babatunde Fashola has said, comes from taxoptions have to be explored. The one payers. “We have not borrowed one kobo he seems set to settle for is the one most to fund the scheme,” he says. common across Nigeria: self-financing of home construction through one’s Construction work is ongoing at 23 income and savings. sites across the state, delivering, at the moment, 200 homes monthly. Because going it alone the number of applicants exceeds the He owns a plot of land in Oyo State, two number of available houses, a monthly draw is held publicly.“ You don’t need to hours drive north of Lagos, in southwestern Nigeria, where he plans to build know anybody [to qualify],” Fashola told the crowd at the July draw, an attempt to his house. dispel the belief common among NigeriLike Enyi, he once had his eyes on the ans that all allocation schemes are rigged housing fund, even moving forward to to favour those who have connections. make the necessary down payment. “I Fashola acknowledges that the prowanted the Federal Mortgage Bank of gramme is a drop in the ocean, but is Nigeria financing because the interest rate is reasonable,” he says. But after about eight months he gave lagos developers are targeting up and asked for a refund, which he’s the luxury market to make since collected. “I’ve tried to go ahead more profit and take fewer risks on my own to start building on the land. With the little I have I’ve been doing it gradually.” But the prospects for the housing finance sector are great, says Obih, both with the reforms and the NMRC, which should ultimately drive down interest rates and extend loan tenors. No doubt it will take a while for ordinary Nigerians like Enyi and Okusanya to feel its effects. Until cheap financing becomes widely available most will have to settle for the long, hard and uncertain slog of self-developing and self-financing. “[For now] it’s better for you to amass the money and do whatever you want to do with it, than to go for credit,” Okusanya says. ● gwenn dubourthoumieu for Ja

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dossier | telecoms

Finance

Why Nigerian start-ups are worth the risk The rise of successful tech companies in Nigeria has been breathless, so why is the capital still mainly coming from abroad?

ou have an idea, and you need capital to breathe life into it. Welcome to the difficult first days of the start-up in Nigeria’s tech space. You are lucky – the financing ecosystem for young tech companies is far better developed today than even a few years ago. Of course, you start with your own funds and those of your friends and family. You need a space, perhaps a shared space in in two years a tech incubator. From there on e-commerce products, has 100,000 visitors you are looking for grants, perhaps from something like the Tony site Jumia per day and employs 500 people. Elumelu Foundation. They may Lamudi, an online property marhas grown give you up to $5,000 on fairly punketplace, now has 25,000 listings. to sell itive terms – rights of first refusal But who is benefiting? There are 50,000 concerns that these two flag bearproducts and on future rounds of equity finaners are simply bringing models employ cing, for example. Onceyoualmosthaveaproduct developed elsewhere. Both Jumia 500 people or service that is ready to be rolled and Lamudi are owned by African out, there is the Lagos Angel NetInternet Holding, a joint venture work, which can bring funding of between Germany’s Rocket Inter$30,000-$50,000. Beyond that, you net venture capital fund, Swedish have accelerators and early-stage telecommunications company venture funds to get to $200,000Millicom and South African mo$300,000. “And once you get to the bile operator MTN. million-dollar range, you get to players like us,” says Folabi Esan, wider benefits a partner at Adlevo Capital, which Certainly, there are local competitinvests in technology companies ors. Sim Shagaya, a Nigerian entrein Nigeria. “We do $20m-$30m preneur, has launched Konga – an e-commerce rival to Jumia – and deals, with co-investors, putting Source: Dealdey, a site that resembles the in around $5m-$7m of our own Nigeria’S NatioNal Bureau of StatiSticS deal and coupon site Groupon. funds,” Esan explains. Beyond But Esan worries that that, you reach the realm of the whenaforeign-backed large private-equity funds such as Actis or Emerging company like Jumia Capital Partners. or Lamudi does The service sector, The rise of successful incredibly well, including online retailers, now makes up technology companthe lion’s share ies in Nigeria has been of that money breathless. Jumia, an will not remain of Nigeria’s GDP, with the nation’s previous economic in the Nigerian e-commerce service, backbones of oil and agriculture economy. Perwas founded in 2012. now totalling only 37% haps more sigIt now sells 50,000 Akintunde Akinleye/ReuteRs

51%

nificantly, he argues that there are a lot of additional benefits to local investment: “There are issues about who gets consultancy work, the accountants and lawyers chosen, the support infrastructure. A lot gets lost in the process when you don’t have local capital investing in the businesses.” There may be many local tech entrepreneurswhoruethefactthat an experienced foreign company with deep pockets has put its flag downearly.Themanagingdirector ofLamudi,ObiEjimofo,arguesthat the foreign presence is largely due to a lack of interest from domestic investors: “There are opportunities in Nigeria to put your money down in importing highly desired goods,whereyougethugemargins in oil and gas, in property. Most of the money in the country goes towards these things.” Of course, it is rarely a question of either just local or foreign money. “Having both will broaden the general market for these new products and create a new generation of local competitors,” says Adlevo’s Esan. “These new products that are coming in will change people’s behaviour. And they will also inspire local en-

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telecoms | dossier

trepreneurs to try to do the same thing in a more nimble fashion.” Ejimofoagreesandalsopointsto spillover benefits that can improve the economy as a whole. Until the emergence of real estate websites such as Lamudi, it was difficult for companies to get a sense of the differences in supply and demand at a granular level across the market. But now, property developers “really have a clear idea of what the demand is for this particular type of property in this particular area in this particular city,” he says. keep it nimble

These wider contributions were picked up when Nigeria recalculated its national economic statistics earlier this year. Services, including online businesses, now total more than 51% of gross domestic product. The two previous mainstays of the economy, agriculture and oil, make up just 37%. For anyone in the tech sector globally, agility is the name of the game. Not having to interact with government is especially useful in Nigeria, where the bureaucracy can be predatory rather than supportive. “We don’t really have any contact with the administration,” says Jeremy Hodara, co-CEO of Africa Internet Holding. “Even in the ports, we have specialised Lebanese or Indian import-export companies to get all our products in,” he adds. Though they seem centuries apart, there could well be a similar dynamic in the tech sector as was seen in the textiles industry, where foreign investors set up shop, trained personnel and eventually saw them leave to set up competitor companies. Following this model, Rocket Internet is helping to structure the market, but then will experience increasingly stiff competition from local rivals created by former Rocket Internet staff. Indeed, that may already be happening. “Yes!”, laughs Esan. “People are already leaving Jumia to start up their own projects.” From playground to battlefield, the Nigerian tech scene is fast developing a culture of its own. ● Nicholas Norbrook

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interview

Gys Kappers

Chief executive officer, Wyzetalk

By using local talent we can compete with the US

acebook founder Mark Zuckerberg A cheaper alternative to Wyzetalk, on has loudly decried the strict the face of it, would be Facebook, which immigration laws in the US that is free to use. According to Kappers keep talented code developers though, this comes at a cost. “Facebook from its shores. But for Gys Kappers, owns all the content users post, and we who runs Wyzetalk from a small office still do not know how it will all get used. in the pretty Western Cape town With Wyzetalk, all the information posted of Stellenbosch’s buzzing Technopark, belongs to the company.” the laws are a massive boon. The company’s 11-strong team of South Kappers says Wyzetalk is “proudly African developers created Wyzeltalk’s South African” but concedes that its staff software. They all could command massive “is not rainbow at all”, attributing salaries in the US, if only they could his company’s all-white staff to a severe get there. But since US visa restrictions shortage of skilled black coders in the prevent the developers from doing so, country. The company is, however, 25% Wyzetalk’s team members have opted black-owned. to stay in South Africa instead, where they Kappers started Wyzetalk in October get paid handsomely by local standards 2012. While he says it will “not be making but still earn a fraction of what they would a profit any time soon”, it now has 15,000 in the US. This keeps Wyzetalk’s costs users from 650 companies, including far lower than those of its US competitors, Discovery, a South African health and life Jive Software and Microsoft’s Yammer. insurance company, and the Protea Hotel According to Kappers, “those guys Group, which has a presence all over spend tens of millions of dollars on the continent. Kappers is targeting R10m product development every year. in annual turnover in 2014. We developed our app for $1.5m. No one in Kappers concedes that the staff the US could do that.” is “not rainbow at all”, but the And with lower costs, company is 25% black-owned Wyzetalk’s prices are lower too. The company currently charges R20 ($1.8) per user per The company’s funding comes month, while Yammer and Jive charge largely from wealthy individuals introduced $3-12 per user per month for more or less to the company by Cape Town-based the same service. Clifftop Colony investment advisers. “Wyzetalk is a social business software,” In June, funders provided Wyzetalk with Kappers explains. “It’s like an internal R8m to develop its pan-African strategy. Facebook for enterprises. Each The Kenya-based Savannah Fund, organisation has a brain. But due to silos which invests in tech start-ups, is also in the business, the knowledge within backing Wyzetalk. it is not shared. Our aim is to create Kappers says there is plenty of room a community for your business, to enable for expansion into the continent but is you to share ideas.” sceptical about whether this will involve Email, claims Kappers, is a poor way to much government work. “Our app works share ideas within a company, since useful on all the latest software and smart communication is too often crowded out phones, and we go back as far as by an inundation of time-wasting emails Internet Explorer 8. But here in South for which most recipients have no use or Africa, the government guys are still interest. By replacing this with targeted and using DOS for Windows 95. We don’t relevant information-sharing via Wyzetalk’s go back that far.” ● software, says Kappers, companies can Interview by Gregory Mthembu-Salter cut employee email usage by 28%. in Cape Town

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dossier | telecoms

Mobile data

How Nigerians and Kenyans use their phones

recent study by telecoms firm Ericsson predicts there will be more than 635m mobile telephone subscriptions in Africa by the end of the year, with this set to rise to more than 1bn by the end of the decade. This staggering growth is echoed on a micro level by a survey carried out by technology group the Co-Creation Hub. As part of an ongoing research series, ‘How I Use My Phone’, comparing phone use among different Nigerian demographics, the team went out to bustling Sabo market in Lagos to quiz market traders. One of the most surprising results of the survey was that more than half of these working-class phone users subscribed to a data plan, with Facebook and WhatsApp the most popular applications. Also how much they spent on their phone credit : while the biggest group (38%) spent N100-N500 ($0.6-$3) a week, 32% spent N1,000-N2,000 and 7.5% as much as N3,000 a week. In a comparative survey of professional users the professionals did not spend significantly more on their phone use, but bought more expensive handsets (see www.cchubnigeria.com). Meanwhile, the mobile phone itself is proving a useful tool to collect data across the continent. GeoPoll conducts its research by mobile, connecting with Africans and others across the developing world using text messaging and other modes of communication. This month for The Africa Report they surveyed the mobile-money habits of Kenyans. ●

MOBILE PHONE USE IN A NIGERIAN MARKET Do you own a phone?

Which phone do you use?

BlackBerry

Tecno

Samsung

Which network do you use?

yes

Nokia

Others

AIRTEL

MTN

How much do you top up in a week? N100

N500

N1,000

N2,000

Which do you perform most, call or text?

N3,000

Call 50

VISAFONE ETISALAT

N200

N100

N4,000

27 25

GLO

What recharge denomination do you use?

Do you use a data plan?

Text 2

recharge card

Most popular apps FACEBOOK WHATSAPP BBM 200 TWITTER INSTAGRAM

yes no

18 15 11 7 4 4

Respondents 22

Age grade

3 Traders

18-25

26-35

36-50

>50

Gender

Source: co-creation Hub/MXLab

Two surveys – one low-tech and one high-tech – gathered data on phone habits among market traders and mobile bankers

MOBILE MONEY IN KENYA In conjunction with GeoPoll, The Africa Report asked 1,421 Kenyans, across the country, about how they use mobile money. To join the GeoPoll network and answer short surveys like this one, please visit m.geopoll.com

How far do you have to travel to ﬁnd a mobile money agent ? 7%

What kind of transactions do you use mobile money for ?

Which mobile operator do you use most ? 15%

26%

12% 16%

55%

Agent distance Under 1 km 1-2 km 2-5 km More than 5 km I don’t know

19% 68%

65%

Financial institution use

Mobile operator

Personal Business Both

Airtel Safaricom Orange Yu

Charlie Hamilton

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Source: GeoPoLL

top 200 banks

west africa

Nigeria’s banks are well managed and capitalised, but financial governance issues remain. Meanwhile, Ivorian banks are benefiting from an infrastructure boom and a return to political stability

international support Bodo says that there are two things that remain to be done to strengthen the Nigerian banking sector: “The concentration risks are very high, in fact the top five banks control about 50% of the industry.” The central bank identified the eight systemicallyimportantbanksearlierthisyear and told them that they have to meet a higher capital standard than the rests of

14 First Bank Of Nigeria 15 Ecobank Transnational Inc.

nigeria Togo

23.8 22.5

434 148

17 Zenith International Bank*

Nigeria

16.6

643

19 United Bank For Africa Group

nigeria

16.2

287

20 Zenith Bank Nigeria*

Nigeria

15.6

612

21 Guaranty Trust Bank

nigeria

12.9

554

23 Access Bank Group

nigeria

11.3

231

26 Diamond Bank

nigeria

9.3

175

27 Ecobank Nigeria 33 Skye Bank

nigeria nigeria

9.2 6.9

33 98

bank name

country

2013 resuLTs From ToP 200 banks ranking – * IN ItalIcs 2012 results

the banks. “The second thing is that the banks themselves really need to de-emphasise their current lending model,” Bodo explains. He says that almost 80% of loans are destined for the wholesale market – medium and large corporates. The government plans to sell the three banks it nationalised and renamed – Mainstreet Bank (Afribank), Keystone Bank (Bank PHB) and Enterprise Bank (Spring Bank) – this year. Keystone Bank announced that it is selling off its insurance business and loss-making operations in Liberia, Sierra Leone and Uganda before it will be sold. FirstBank of Nigeria (#14) overtook Ecobank Transnational (#15) as West Africa’s largest bank by assets in this year’s ranking. That run of good perform-

ance met trouble in the first quarter of 2014 when FirstBank reported a year-onyear 21.1% drop in first-quarter profits before tax to N28.1bn. New reserve requirements on public sector deposits limit the bank's lending ability. On the other hand, total assets rose by 11.6% over the same period. The international markets have strongly supported Nigeria’s banks. FirstBank launched a $450m eurobond in July, Diamond Bank (#26) issued its first eurobond in May and Zenith Bank (#20) raised $500m in April. Governor Godwin Emefiele took over from sacked governor Lamido Sanusi in June and has since said that the central bank plans to lower interest rates from the current level of 12% ● ● ●

West AfricA's biggest bAnks And their deposits FIRST BANK OF NIGERIA (Nigeria)

18 013 848

ECOBANK TRANSNATIONAL INC. (Togo)

16 489 904

ZENITH INTERNATIONAL BANK (Nigeria)

12 327 869

UNITED BANK FOR AFRICA GROUP (Nigeria)

13 291 269

ZENITH BANK NIGERIA (Nigeria)

11 514 831

GUARANTY TRUST BANK (Nigeria) ACCESS BANK GROUP (Nigeria) DIAMOND BANK (Nigeria) ECOBANK NIGERIA (Nigeria) SKYE BANK (Nigeria)

8 872 617 8 188 225

Total

7 417 171 7 001 000

108 180 183 US $

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s e p t e m b e r 2 0 14

source: Jeune afrique top 200 banks

profits ($m)

economic engines back on course

here was much movement in the top ranks of West Africa’s banks last year, with Nigeria’s banking sector having marked a strong recovery from its 2009 troubles. Wema Bank (#99) illustrates the changes in the industry, moving from unranked last year to 99th place in this year’s chart. The Nigerian regional bank had 89% non-performing loans in 2009, which it reduced to 2.5% in the first half of 2014. Managing Director Segun Oloketuyi left Skype Bank in 2009 to take over at Wema, raising new capital and strengthening management practices. It reported a first-half net profit of N1.4bn ($8.6m) and is applying for a national banking license so that it can operate throughout Nigeria. GeorgeBodo,headofbankingresearch at Ecobank, explains that the Nigerian banking sector is now on firmer ground: “Performance is much better on three fronts. One is from a capital standpoint. They are much more well capitalised and strong ... From a credit-process perspective, the performance is excellent because we now have very clear and laid-down credit processes and that is properly integrated with corporate governance, something that was missing before the crisis. The last thing is profitability. We are seeing a return on equity of about 18%.”

total assets ($bn)

top 10 west african banks rank in top 200

top 200 banks

quarter of 2014, when its year-on-year net over the next five years. After profit rose to 71.8m ($21m), thanks in Sanusi’s high-profile tenure, Emefiele part to a 45.4% rise in net interest income. has sought to strike a more reserved The bank’s share price rose even more position. Nonetheless, in his first policy rapidly, recording 111% growth between statements, he said the bank cannot March 2013 and February 2014. On the solely focus on monetary policy and negative side, non-performing loans for needed to address unemployment and 2013 rose to 5.6% from about 1% due to other factors. The CBN’s interventions the takeover in 2012 of The Trust Bank. have integrated the banking sector further into the economy – via financing the Ghana’s worst performer is the Agpower, energy and agriculture sectors. riculture Development Bank (#180), which launched a rebranding operation The post-2009 consolidation process led to a reduction of international expansion programmes, after Sanusi's high-profile tenure, as many Nigerian banks had emefiele has sought to rapidly launched operations strike a more reserved position throughout West Africa. There are signs that appetites for inin January. The state-owned bank estimternational growth have returned. In ates that it provides 35% of Ghana's agriApril, GTBank (#14) announced plans cultural funding and plans to list on the to open a subsidiary in either Angola, Ghana Stock Exchange in 2015 to source Mozambique or Tanzania, in addition moreprivatecapital.PwC’s2013surveyof to opening an additional 25 branches Ghanaian banking revealed the agriculin Nigeria in 2014. tural bank was the sixteenth most illiquid of the 24 surveyed. The size of the stake mixed fortunes In Ghana, government-imposed restricfor sale has not yet been announced. tions on foreign exchange transactions Ecobank’s Bodo says that Ghana’s since early 2014 are unlikely to hurt banks have been slowed by their weak banks’ bottom lines but are likely to sour take-up of technology and the high cost relations with customers as banks cancel of some products. Mortgages can have accounts. The best Ghanaian performer interest rates as high as 25% in cedi terms in this year’s ranking is Ecobank Ghana and banks have not robustly stress-tested (#106), which rose 22 places. Its strong borrowers, which could prove problematic as Ghana’s economic performance performance continued into the first

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continues to weaken. Meanwhile, Côte d’Ivoire’s booming economy after the 2010 post-electoral crisis has benefited the country’s financial sector, with Atlantique Business International (ABI, #65), its Ivorian subsidiary Banque Atlantique (#135) and Société Ivoirienne deBanque(#156) amongst the strongest West African risers in The Africa Report’s rankings. ABI is owned by Morocco’s Banque Centrale Populaire (#8), and its Ivorian operation is involved in financing priority infrastructure projects. In July, Banque Atlantique Côte d’Ivoire provided a €100m loan to the government to construct a second container terminal at the Abidjan port. It also part financed upgrades to a road linking Yamoussoukro to the north. ABI’s Senegal-based subsidiary has secured a series of lucrative deals with the government there. It loaned the Dakar government 150bn CFA francs ($300m) in December 2013 and won the rights to help it raise an additional $200m from international markets. Togo’s Oragroup (#104) is also growing fast. In September 2013, Oragroup took over the Banque Régionale de Solidarité, which operates in the countries of the Union Economique et Monétaire Ouest-Africaine. A month later, the Fonds Gabonais d’Investissements Stratégiques investment fund bought a 2.66% stake marshall Van Valen in the group. ●

profile

ecobank pan-african giant extends its reach Togo-headquarTered ecobank transnational (#15), has attempted to draw a line under what has been a turbulent year. In early 2014, deputy group chief executive albert essien led a group of senior executives in calling for the resignation of chief executive Thierry Tanoh following a series of scandals and a high-profile probe by the Nigerian Securities and exchange Commission into bank result manipulation. Tanoh stepped down and essien took over in March.

essien, who began his career at ghana’s National Investment Bank in 1986, joined ecobank’s ghanaian division in 1990. he enjoyed a rapid rise, eventually becoming managing director in 2002 before moving to the group's headquarters. despite the internal power struggles, the bank has continued its expansion. It launched new operations in Mozambique in June after buying out Banco ProCredit. ecobank also announced plans to open a bank in angola before the end of this year.

In July, the bank reported a 27% increase in first-half, pre-tax profits to $255m and a 7% rise in net lending in the second quarter. ecobank ghana was a star performer, with a 91.2% rise in 2014 first-half profits to $45.5m. ecobank has focused on reducing costs and its cost-to-income ratio dropped to 68.1% in the first half of 2014 from 70.97% in 2013. Meanwhile, South africa's nedbank (#5) looks set to take a 20% share in ecobank as part of a deal to convert The afrIC a rePorT

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a $285m loan into equity. If approved, the agreement, which is part of a strategic alliance between Nedbank and ecobank, would give the Lomé-based lender a capital adequacy ratio of 18.7% by the close of 2014. ● Honoré banda

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S e P T e M B e r 2 0 14

day in the life

Extraordinary storiEs of ordinary pEoplE

ClementIne Calvé

194

money spinner As a child in his village, Sampson Akligoh set his sights on the city lights he’d never seen. He is now managing director of an investment banking firm in Accra

grew up in the countryside, where you don’t have an idea of what’s happening in the real world. I come from a very humble background. There was no electricity, and I didn’t have the privilege of playing computer games or watching movies. What helped me was reading history books. That’s how I learned that a lot of influential people went to Achimota secondary school in Accra. So I told myself I must go to that school to see what happens there. I quite remember my teachers telling me I wouldn’t be able to enter if I didn’t have connections. I used to spend a lot of time outdoors running around with other kids, but my mother advised me to stop playing football when I wrote my basic examination. I did well in the exams, I had a distinction, and without knowing anyone I was able to get admitted. The first time I lived in an environment that was fully lit, that was Achimota school. It was there that I realised I needed to develop my language skills and critical thinking. The school revolutionised the way I think and do things. I’m the first of five children. My mother had a huge influence on me. She sold salt and onions in the local market to look after us, and we all went to school. She sacrificed a lot:

she didn’t spend anything on herself for funerals and other social events. One of the key things I learned from her is to have an open mind and respect people across cultures. It’s not about where a person comes from, it’s who you are. At 17, I developed a strong passion for economics. That was the beginning, the shaping of my career. After university, where I studied economics and law, I had the opportunity to do my national service at Databank. I was 24 when I took over their economic desk.

opposites attract

In 2011 I left to do a Masters in Maastricht, and when I returned I became head of research at Databank. At around that time I decided to set up an investment banking firm with two friends from Achimota school. We opened our office this year. My wife and I were working together when we met. We’re total opposites, and that’s what attracted me to her. I am a very serious person; she takes life easy. She can say: let’s go to the movies, or: hey, let’s go grab a pizza. That’s something I just wouldn’t think of. I get a lot of satisfaction from creating wealth for people. Another exciting aspect is finding solutions for small and medium-sized enterprises, because it means you’re keeping people employed. We want to invest in unusual things, for example, a mechanic’s workshop. In Ghana, investment bankers are less well paid than commercial bankers. It’s not about greed; I want to contribute to the development of my country and build an institution that will deliver some of the values we need as a nation. ● Interview by Clementine Calvé the africa report

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