Investment Programs

Nigeria’s economy must diversify.
In a land as rich as this one, prospects abound in agriculture, banking, transport, and mining, where investors are snapping up concessions.

Marble, kaolin, and bitumen are altering the mono-product structure of the economy

The Nigerian Investment Promotion Commission (NIPC) was created four years ago to serve as a one-stop agency for foreign investors with questions about the regulatory framework. NIPC is one of the main actors in the current liberalization program. Its mandate is to inform buyers that are otherwise discouraged by the barriers of bureaucratic opacity. It explains the laws backing the privatization scheme that President Obasanjo’s team, with the help of technical advisers from the World Bank, is putting into decree form. NIPC is in charge of registering joint-ventures, acts as a liaison between investors and ministries, and issues guidelines specifying the different tax regimens for sectors like oil, cargo or mines.

“We work closely with the Nigerian Stock Exchange,” says NIPC Chief Executive Baba Bukar Gujbawu. “Most of the companies under privatization are being sold through the stock exchange and we can provide information about them for investors. We have a databank with the facts that investors require. They want to know about tax policy, raw materials, land policy, de facto process, airfare, even the background of partners who they might be interested in when they first come into the country. We can discuss all these things over the Internet,” says Gujbawu. The agency cooperates indirectly with the government’s diversification program by pointing investors toward untapped sectors of the economy like solid minerals or rubber extraction. NIPC has been instructed to promote the languishing metallurgical sector and to prop agriculture back on its feet after years of neglect.

Promoting Nigerian exports , the National Economic Reconstruction Fund (NERFUND) also tries to re-orient trade relations and lessen the overarching importance of oil. Since its inception in 1989, NERFUND has funded 263 industrial projects with $143 million in soft loans. Like NIPC, it fosters capacity-building in the electrical, metallurgical, petrochemical, textile, and solid mineral sectors. The fund thinks of itself as a grassroots effort to stimulate an indigenous business spirit. “NERFUND was designed to refocus the attitude of Nigerians who are generally traders by nature. We encourage them and let them embrace the establishment of small and medium-scale industries that will use 60% of Nigeria’s raw materials,” says Managing Director M. Aboaba. NERFUND provides the working capital necessary for starting a business in the form of long-term credits. “Essentially what we do for entrepreneurs is to fund part of the necessary machinery as well as the installation. It is the banks that provide the working capital,” says Aboaba.

As a hard-working PR manager for Nigeria, the Abubakar Minister of Information and Culture John Nwodo Jr. has done his share of promoting Nigerian exports and pitching the privatization sales. “It is our duty to advertise investment possibilities in our country whether they involve privatization or other investment opportunities. We are thus targeting solid minerals, agriculture, banking, and insurance services,” says Nwodo

Patrick Ibrahim Yakowa

"If you don´t want to go into a joint venture arrangement with a Nigerian company, the new law provides for that too."

“Nigeria is a country that is blessed by God. Looking at the potential we have, solid minerals could challenge oil and gas in the next 10 years,” says Patrick Ibrahim Yakowa, minister of solid mineral development under Abubakar. Nigeria is showcasing its ‘other’ underground wealth by disseminating mineralogy inventories while trumpeting tax incentives to awaken investment interest. At a recent workshop on bitumen deposits, concession blocks were being allocated to eager private bidders. Taking a conscious step toward diversification, the 1999 ‘budget of realism’ vowed to facilitate strategic investments between private mining companies and the state-owned Nigerian Mining Corporation (NMC). The discovery of a 120 km belt of bituminous sands (tarsands) stretching from Ogun to Edo states in the south has revealed deposits of 42.7 billion barrels, the second largest deposit in the world. A capital-intensive mineral, bitumen is applied as a binder for asphalt in road construction. Canadian geologists from the Alberta Research Council determined that due to its sulphur, nickel and vanadium composition, the bitumen can be extracted directly without refining. The government divided the acreage into 15 concession blocks with their own legal framework: tax holidays, deferred royalty payments, help with road access, easy repatriation of profits and 100% foreign ownership. “If you don’t want to go into a joint venture arrangement with a Nigerian company, the new law provides for that too,” adds Yakowa.

“The Abubakar government liberalized mining policy so that anybody can invest,” says Yohannah Kwa, managing director of NMC. “The restrictions in 1976 chased away all investors. Now, anyone can invest and achieve 100% shareholding,” Although NMC is state-owned, its funding from the federal budget will diminish as joint-venture contracts begin to mature. “My own perception is that government should participate minimally in mining. Government cannot run an industry like this one because the ownership interest is not there,” says Kwa. To enhance its own competitivity, NMC operates through several subsidiaries which include the Nigerian Barytes Mining Company and NIMCO Quarry Products Ltd. A joint venture with Tropical Mines has taken NMC’s gold-mining division to assess Pre-Cambrian vein deposits in Osun state; gold is ranked fourth in mineral importance with an estimated 2 million tons in reserves. The company is also developing kaolin and barytes in Nasarawa state, zinc in Ebonyi, and marble in Kogi. “This just scratches the surface of what Nigeria has to offer,” says Kwa.

Promoting Nigeria’s solid mineral wealth from the private side is Global Minerals Ltd (GML), a consulting company based in Abuja. “The NMC, which has held title to vast tracts of mineral deposits, is being commercialized. The playing field is more level for private investors,” says GML’s Tabi Tawo. GML organized the recent bitumen workshop for private investors. “We routinely attend international mining conferences worldwide because it enables us to keep up with trends. We also initiate contacts which we service thereafter,” says Tawo. The concept at GML is to package viable mineral deposits into attractive investment opportunities. The consulting firm carries out its own pre-feasibility exploration and technical auditing, then procedes to find its investors and negotiate sales agreements. “We have blazed a trail and others are following suit,” says Tawo.

LE NIGERIAN CAR: PEUGEOT 306
Nigerians have been whizzing by in Peugeots for decades, but the models out on the streets in 1996 were different. They were made in a factory in Kaduna and the message was simple: Made in Nigeria, i.e., tough and affordable. The idea worked. Peugeot models have been rolling out of assembly lines at a rate of 28 vehicles per day. That number could soon rise to 100. The all-Nigerian 306 is marketed as a pothole-defying winner with low consumption, heavy-duty suspension… and style. No wonder that Shell employees in Nigeria recently turned in their Honda Civics for the 306. There is no lack of enthusiasm on the part of Francis Gouyon, managing director of Peugeot Automobile Nigeria, Ltd. (PAN): “The potential for Nigeria is still fabulous: oil, soil, size, manpower, everything. Peugeot chose Nigeria 27 years ago and they chose well. At the end of 1998 we had sold more than 500,000 cars.” The federal government holds a 35% stake in the joint venture, a local investment bank has another 5%, and Kaduna state and Katisina state an additional 10%. To increase the capacity of the factory, PAN invested 250 million naira of its own in 1998. An equal amount will be disbursed this year without help from Peugeot headquarters in Paris. New data processing systems at the factory coupled with healthy investment prospects for the fresh civilian government are PAN´s best bets for the future. Not to mention that cars in West Africa are good business. “In Nigeria, there is no other means of transportation. Trains are scarce. Airplanes are difficult. Nigeria needs cars!” exclaims an ebullient Gouyon.