News in Nigeria

From BRICs to BRINCs: a real conversation

David Cameroon, the British prime minister, told his party conference on 05 October that he wanted the country to emulate the “energy, hunger and drive” of Delhi, Shanghai and Lagos.  He was not promoting Nigeria to the ranks of the BRICs but we want to make the point that this is a realistic idea. The tipping point cannot be forecast on a mathematical basis. The title of our daily note is the theme of our investor conference this week, when we will hear the views of policymakers, business and banks as to where the economy and its leading businesses are headed.

·         The economy is growing close to 8% per year, and the non-oil sector at close to 9%. When the new national accounts series is released in January, we could well find that Nigeria has a US$300bn, or larger economy.

·         The population is young and full of energy (to quote Mr Cameron). The government is moderately indebted and the banking sector has been restored to a sound footing. The huge potential of the oil sector can be realised with substantial investment while the tapping of Nigeria’s gas reserves has barely started.

·         Nigeria is not a BRIC because of some familiar constraints. Investment in, and lending to the real economy are grossly inadequate. What we have indicated about oil and gas is true of agriculture and the infrastructure.

·         Because the public debt indicators are favourable and because the government has insisted that it wants to protect them, fiscal consolidation is a priority. In our view this requires a sharp rise in non-oil tax collection on the revenue side, and the removal of petrol subsidies and the slimming down of the government’s cost base on the expenditure side.

·         Once the government is able to spend heavily on the infrastructure, the private sector (and the DFIs) will take on more risk. Government investment and an attractive regulatory environment together make a potent combination.

·         The tipping point comes suddenly. In the case of Brazil there were false starts until the first term of President Lula, whom almost all market analysts dismissed as a radical with the wrong policy mindset.  There are many parallels between Brazil and Nigeria.

News headlines

Chinese technology firm to open plant in Nigeria: A Chinese electronics and technology firm that specialises in the manufacture of televisions, air conditioners, refrigerators and mobile phones, Hisense International, has said it will open a manufacturing plant in Nigeria in the next two years. The president, Hisense East and Africa,  Alex Zhu, said the company considered the Nigerian market as critical to its growth in Africa, adding that it would not just engage in products marketing like other competing brands, but build a manufacturing plant that would create employment for over 1,000 Nigerians. (Source: Punch)

First Private Refinery Begins Operation in Rivers State: A private refinery owned by Niger Delta Petroleum Resources Ltd (NDPR), a subsidiary of Niger Delta Exploration and Production Plc, has begun operation in Rivers State. The firm has also been granted a licence to operate (LTO) by the federal government. Built in Ahaoda East Local Government Area of Rivers State, the refinery, which was completed in December 2010, has been undergoing test-runs; while the operating licence was being awaited. Fabrication work was started in January 2010 by Chemex Incorporated of Texas, California in the United States. (Source: Thisday)

CBN: 82 of 104 finance houses unhealthy: The Central Bank of Nigeria (CBN) has declared 82 finance houses out of a total of 104 licensed in the country unhealthy and deficient of the required capital. In fact, the apex bank revealed that while 20 of the unhealthy finance houses were technically insolvent, 33 others were either inactive or had ceased to operate. Deputy Governor, Financial System Stability, CBN, Chiedu Moghalu, who dropped this hint, said the findings were from a recent-on-site examination by the banking sector regulator. (Source: Punch)

FG plans investment councils with 6 developed nations: The federal government said it has concluded plans to establish Trade and Investment Councils with six advanced countries across the world as part of renewed efforts to make Nigeria the preferred investment and manufacturing hub in sub-Saharan Africa. The minister of trade and investment Olusegun Aganga, disclosed this at the weekend during the Rivers State Investors Conference. (Source: Vanguard)

Dangote stakes US$7.7bn in Rivers Energy city: Aliko Dangote, president, Dangote Group, is said to be investing an initial US$7.7 billion (N1.2trn) in the Rivers Energy city in River State. Rivers Energy City is part of the mega city concept known as the Greater Port Harcourt City which cuts across eight local councils including Ogu/Bolo, the host council of the energy city. (Source: Business Day)