Archive | August 2014

How Nigeria Is Keeping Ebola at Bay

APTOPIX Nigeria Ebola

Fears that Africa’s most populous country would become a tinderbox for the disease have so far not come to fruition

Ebola is still running rampant in parts of West Africa. Over 1,500 people have died in Guinea, Sierra Leone and Liberia, where authorities have risked unrest by imposing nationwide curfew and quarantine zones.

Ebola arrived in Nigeria on July 20, when Liberian-American financial consultant Patrick Sawyer flew from Liberia to Lagos, Nigeria’s commercial capital. Sawyer collapsed at the airport and was taken immediately to hospital, reducing chances of infecting more people in Lagos, a city of more than 21 million people.

He infected a few people before he was isolated, as doctors didn’t initially suspect Ebola and didn’t take full precautions. All other confirmed cases were traced back to him; eight have recovered, with only one case still being treated in isolation.

When the government realized Ebola had arrived on Nigerian soil, it acted quickly to coordinate international health organizations including the CDC, the World Health Organization, and recently Médecins Sans Frontières. It invited those groups to “come to the table and… insert themselves into those structures that the government has formed,” said Vertefeuille.

The work is divided into the management of confirmed cases who are treated in an isolation center in Lagos, and epidemiology and contact tracing, key to containing the virus.

Confirmed cases are treated in isolation, while those the victims made contact with pre-diagnosis are visited daily at their homes. If they develop symptoms, they too are taken to quarantine and tested. Nigeria began its program of contact tracing with Sawyer, and currently has more than 100 people under surveillance in Lagos.

But one man slipped through the net, Health Minister Onyebuchi Chukwu said Thursday. A Nigerian man who had contact with Sawyer developed symptoms and evaded surveillance, traveling to the oil industry hub of Port Harcourt last month, where he was treated by a doctor for his symptoms.

The man recovered and returned to Lagos four days later, after a manhunt for him had begun. The doctor, however, had contracted the virus and died on Aug. 22. The government has now begun contact tracing for him, and 70 people are now under surveillance there.

The man who escaped surveillance was an isolated case, Chukwu said. The fact that most people being treated at hospital have survived and were soon discharged has encouraged people under surveillance to cooperate. “Initially when we started we had one or two stubborn cases, but now they’re all cooperating,” he said.

As well as taking a rapid response approach to Ebola cases, the government has also been acting to stop the spread of misinformation about the disease. It has been issuing bulletins explaining how the disease spreads, and attempting to dispel rumors about unorthodox “cures” that have spread on the streets and on social media.

Benjamin Akinola, a 65-year-old retired army officer, said he and his wife bathed with and drank water with salt after a rumor suggested it could prevent Ebola. They stopped after hearing on the radio that it led to the death of some people. “People stopped it, and this is what the government is telling us,” said Akinola.

The government has also been pushing for better personal hygiene practice. Guards at supermarkets, banks, restaurants, and clubs will often spray people’s hands with sanitizers before entering.

The public relations operation seems to be working. Lawrence Obioha, a 43 year old newspaper seller in Lagos said initially fewer people attended his Sunday church service out of fear of Ebola. “Gradually it’s picking up,” he said. “There’s a lot of relief now that they know that at least there’s a response to treatment.”

While fears that Africa’s most populous country would become a breeding ground for the disease have so far proven unfounded, officials in Nigeria are under no illusion that the virus has been stamped out. “We have not eliminated the disease. We have not eradicated it,” said Chukwu. Over 200 remain under observation, and the infection is still raging in Sierra Leone, Guinea and Liberia. The battle against Ebola will continue in Nigeria for some time yet.

“This really could be a long and a hard fight,” said David Daigle, a spokesman for the CDC team on Ebola in Nigeria. “We’re optimistic, but we know that this is like a forest fire and if there’s just one ember left in place it could easily start back up.”

Building A Viable Economy Through Agriculture

Agriculture was the mainstay of the Nigeria economy, before Nigeria joined the league of oil producing nations in 1958. Before this date, the agricultural sector was a major employer of labor in Nigeria, with groundnut, cocoa, cotton, rubber and palm oil the main cash crops produced. And from the Western region cocoa revenue, Chief Obafemi Awolowo was able to implement his free education policy throughout the Western region. Then, agriculture constitutes to about 75 percent of the Gross Domestic Product (GDP). Also, Nigeria was a major exporter of agricultural commodities and earned most of its foreign exchange from agricultural produce.

But with the discovery of oil at Oloibiri, River State in 1958, and as Nigeria began to earn fast money from oil sale, agriculture was relegated to the background. And at present, Nigeria earns about 82 percent of the foreign exchange from oil alone, when the country has the capacity, to make a substantial amount of foreign income from a diversify and more secured economy.

The National Bureau of statistics (NBS) reports that about 20.3 million youths are jobless in the country, while 1.8 million graduates enter the labour market every year. In addition, the World Bank Statistics put Nigeria among the five poorest countries in the world due to high rate of unemployment and low per capita income indices.

And the neglect of agriculture in Nigeria hinders effort at different levels to reduce poverty and unemployment, and increase food security, as well diversifies the economy. Several stakeholders at different occasions argue that if not for lack of credit facilities and negative attitude of many Nigerians to agriculture, there is no reason for many Nigerians to be unemployed, when there are over 80 million hectares of arable land, abundant water resources, adequate rainfall and diversified ecological conditions.

The inability to design policies that will create an enabling environment for both individuals and the private sector to invest in agriculture is a big problem. And the low budgetary allocation to agriculture portrays a lack of commitment. Nigeria needs to draw lessons from some of the world fast advancing economy, such as China, where agricultural development and reforms was a top priority for the entire government since 1950s. And the steady growth in agriculture and rural economy was significant to the acceleration of China’s modernization process. China is the second country in the world after the United States known for spending on agricultural biotechnology.
The Chinese government made funds available for agricultural research and farmers’ education for appropriate training. And to enhance agricultural research necessary institutions, such as Research and Development Institute and research universities were created. The institutions focus on discovery and implementation of new models for seed, fertilizers, and hydraulics. This strategy helped China improve their efficiency of production and maintain sustainable agricultural development.

The development of food interment, production and rural income development agenda in China, which was aimed to create food security, rural stability surplus income and labour supply, enabled about 250 million peasant farmers with each using an average of 0.65 hectares to feed a population of 1.3 billion people. And this greatly contributed to the reduction of poverty in China.
More so, China adopted the land reform policy referred as the Household Responsibility System- a privately leased land use system, designed to boost the rural economy and increase farmers’ income. The system greatly enhanced food production as agricultural output grew at 7.9 percent annually. And at present, China is the world’s largest producer of agricultural products. And China’s agricultural sector employs over 400 million people and produces food capable of feeding about 30 percent of the world population.
And as the Nigeria’s agricultural sector becomes more intertwined with the national economic transformation agenda of President Goodluck Jonathan, it is very important to give agriculture the required attention to effectively address the economic and social problems affecting the country.
Provision of fertilizers, herbicides, pesticides and modern farm tools at subsidized rate, and availability of veterinary doctors, accessible road and good transport system are necessary steps for agriculture to thrive in Nigeria. Moreover, a good policy with an accompanying implementation strategy to facilitate and promote strong private sector investment in agriculture should be introduced.

Other ideas that should be considered as part of agricultural policies are rural electrification project and availability of functional irrigation. Nigeria has a River Basin and Rural Technology Development Authorities (RBDA) that aims to use irrigation to boost food production, but RBDA seems not to be meeting this mandate. In order to harness the country’s water resources for food sufficiency, the RBD should meet the agricultural needs associated with water resources.

The implementation of ban policy on importation of certain farm produce, to encourage the consumption of the local farm produce should be well-supervised. And there is need to eradicate corruption, such as misappropriation of funds allocated to the agricultural sector. Also, adequate financing of agriculture in Nigeria in the form of loans to large and small scale farmers, will boost agriculture in Nigeria, because finance is the backbone of every worth venture.
While prioritizing agriculture, there is the need to reposition agricultural research institutes to meet the emerging challenges. For example, more attention should be given to bio-fortified crops development and distribution. A great achievement will be recorded in agriculture, if most farmers in Nigeria have easy access to pro-vitamin A Cassava stem and Maize seed, and improved breeds of animals for livestock farming.

And apart, from other agricultural world best practices that can be adopted to reap from the numerous benefits of viable agricultural sector in Nigeria, farmers should be encouraged to take up agricultural insurance policies, which will help to re-instate them in times of loss. Knowledge of insurance policies and other ways to increase agricultural productivity in the country can be achieved through expansive awareness among farmers.

An effective communication strategy will be required to drive this awareness campaign. Various communication media in Nigeria may be used to transmit the information. It is very important to approach the media wisely and design appropriate messages for both the local small and large farmers- enhancing agricultural knowledge and attitudinal change among the Nigerian farmers.

If agriculture is given the required attention, apart from the even derivation of foreign exchange and diversified economy benefits, agriculture will be seen as an attractive business and millions of jobs would be created in Nigeria. And this will accelerate development, ensure food security, self-sufficiency and alleviate poverty in Nigeria.

Growing opportunities in diverse sectors of Nigerian economy

Manufacturing-line

RANKED 26th in the world in terms of gross domestic product (GDP), (nominal: 30th in 2013 before rebasing, 40th in 2005), and the largest economy in Africa (based on rebased figures announced in April 2014), Nigeria is a middle income emerging market, with expanding financial, service, communications, technology and entertainment sectors.

  The country is also on track to become one of the 20 largest economies in the world by 2020.

Though currently underperforming, the manufacturing sector is the third-largest in Africa, and produces a large proportion of goods and services for the West African region.

  The National Bureau of Statistics released the figures for the rebased GDP in April capturing a more accurate data of the aggregate economy and giving a better picture of more recent economic activities from the industries like telecommunications and the entertainment.   

  However, the recent economic achievements may not have been possible if not for the economic reforms of the past decade.

  The reforms have put Nigeria back on track towards achieving its full economic potential. Nigerian GDP at purchasing power parity (PPP) has almost tripled from $170 billion in 2000 to $451 billion in 2012, although estimates of the size of the informal sector (which is not included in official figures) put the actual numbers closer to $630 billion.

  Similarly, the GDP per capita doubled from $1400 per person in 2000 to an estimated $2,800 per person in 2012 (again, with the inclusion of the informal sector, it is estimated that GDP per capita hovers around $3,900 per person).

  Before the reforms, Nigeria was one of the poorest economies in the world. The major causes of the decline in Nigeria’s economic fortunes have been political instability and bad governance, most especially in the 1990s.

  Military rule in Nigeria, as has been the case in most other countries with prolonged military rule, led to economic and social stagnation and decline. Similarly, the advent of an elected government at the dawn of the 21st Century after almost three decades of military rule should afford Nigeria the opportunity to arrest the decline in her socio-economic development and embark on economic revival.

   As a result of the revival, several organizations including the World Bank have predicted that Nigeria’s growth will continue in the foreseeable future. The question now is what sectors of the Nigerian economy will champion this growth?  Agusto & Co. & Co. provided the answer in its “2014 Industry Reports.”

  The report identified Agriculture, Real estate, power, automobile, dairy and poultry; Insurance and Banking sectors as key drivers of economic growth and job creation over the next decade. Agusto & Co. also identified the vast opportunities in the power sector for intending investors, given the wide demand-supply gap and the country’s market size.

  The report also highlighted several challenges facing these sectors and identified investment opportunities as well. Other sectors covered by the reports include fast food, telecommunication, pasta and noodles, commodities (rice and sugar), oil and gas, personal care and packaging. 

 Opportunities in the agricultural sector

Following the agricultural transformation agenda of President Goodluck Jonathan, the nation’s agriculture sector has witnessed several changes.  Urging that the reforms must continue, Agusto & Co. pointed out that the growth in Nigeria’s agricultural sector remains crucial to the economy as; agriculture employs 70 percent of the country’s labour force and accounts for 22 percent of the nation’s rebased GDP.

  “Poultry, a sub-segment under in agriculture spurs the sector with its estimated average annual growth of 6 percent both in chicken (broiler) meat and hen egg production since 2007. Currently, the size of Nigeria’s poultry industry is estimated to have reached ₦373.03 billion in 2013. Domestic rural production of poultry accounts for the bulk of the Industry at 85 percent with the balance attributable to local commercial poultry production and illegal imports of frozen poultry products.

  “To succeed in Nigeria’s poultry industry, critical success factors include: availability of credit, good storage facilities, efficient supply chain management, administration of quality vaccines, and access to markets, amongst others. With improved inputs, the “eating out culture” continuously influencing the growing patronage of quick service restaurants (QSRs) and favourable government policies the poultry industry will continue to thrive in Nigeria, “it stated. 

  The report also identified stronger poultry associations advocating for favourable policies coupled with increasing population (hence, growing household demand for chicken meat during festive periods) as key success factors for the industry. 

 Opportunities in the power sector

  The report stressed that vast opportunities exist in the Power sector for intending investors, given the wide supply – demand gap and the country’s huge population.

It added that as at March 2014, electricity supply from the national grid stood at 4,306MW, far below the estimated demand of 12,800MW.

  This, it added, implies that currently Nigeria is only generating about 34 percent of the country’s requirements, and this provides an enormous potential for new and existing players in the Industry.

  “The demand for electricity in Nigeria has been upheld by strong economic growth and increasing urbanisation. With annual economic growth estimated between seven per cent and 13 per cent, as well as urbanization rate of 3.8 percent, electricity demand in Nigeria is projected at 15,730MW, 41,133 MW and 88,282MW by year ends 2014, 2015 and 2020 respectively.

  “To meet the electricity generation projection for year 2020, about 17,441 qualified technicians and engineers are required by the Industry. Furthermore, industry operators require access to stable long term financing, reliable and consistent gas supply, as well as credible power trading/purchase agreements to expand their operations,” the report revealed.

  Agusto & Co.  estimates the turnover of the industry at over ₦380 billion, representing approximately 0.5 per cent of Nigeria’s rebased GDP of ₦80 trillion.

  The industry, it stated, employs about 50,000 workers, majority of which are on the payroll of the PHCN successor companies. Profitability varies from one segment of the Industry to another, with grid-connected generation remaining the most profitable.

  It added that “this is mainly due to the economies of scale derived by grid connected independent power producers (IPPs) and the PHCN successor generation companies (Gencos). Typically, when plants are operating at optimal capacity, grid generation plants record operating profit margins in the region of 15 per cent-20 per cent (due to economies of scale advantage).”

 The telecommunication industry

  The report noted that the Nigerian telecommunications Industry is fast approaching maturing with the market nearing saturation and priorities of consumers changing to reveal a growing desire for a greater quality of service.

  The regulators, it stated, are taking note of consumers’ wishes and imposing strong penalties on operators who fall foul of the set quality of service targets.

It added that operators too are proactively adapting their businesses, streamlining operations by outsourcing non-core competencies and investing in infrastructure, in order to be better positioned to meet the immediate challenges of the industry.

  “The financial performance of operators in the Industry varies considerably with a successful handful of the large players skewing the aggregate picture to mask the dire conditions faced by the majority. The Nigerian Telecommunications Industry as whole is characterised by good profitability, strong operating cash flows and an adequate short term financing structure.

  The Industry is however constrained by high leverage and the large variation in the fortunes of the operators. The financial performance is expected to improve in the medium to long term as maturity comes and weaker players are acquired, merge or exit the Industry, “it stated.

  The Nigerian telecommunications industry, the report noted, has shown reasonable growth in recent years with the Industry’s subscriber base growing by 10 per cent in 2013 to 127 million active lines.

  It added that the industry’s contribution to nominal GDP made a quantum leap under the recent GDP rebasing exercise carried out by the National Bureau of Statistics (NBS) from less than one percent in 2013 based on the old computations to 8.7 percent using the rebased figures.

  “The GSM mobile-cellular segment continues to dominate the telecommunications landscape in Nigeria accounting for the vast majority (over 97%) of the subscriptions in Industry. The other voice segments – CMDA mobile-cellular and fixed-telephone – continue to struggle and face bleak futures having failed to generate sufficient network effects. MTN remains the dominant player in the Industry, accounting for a 45 per cent share of the total subscriber base of the GSM mobile-cellular segment in 2013, “said Agusto & Co.

  The report disclosed that the fixed-broadband internet segment of the industry has plenty of growth potential with a number of operators having landed high capacity subsea fibre-optic cable in Nigeria in recent years.

  It added that the Nigerian government has also shown commitment to mobilise the capacity, which has largely been trapped around the landing areas, to various parts of the country through its Open Access Model plan.

 Growing fast food industry

  The report noted that in spite of several challenges the fast food industry remains resilient with operational efficiency and service delivery as key to the fast food restaurants’ ability to generate revenue in a highly competitive business.

  “In addition, menu innovation, food price and location (catchment area) is important to the success of a fast food industry.  We thus maintain a stable outlook for the Nigerian fast food industry as it continues to grow, attracting international fast food players such as KFC and investments from private equity firms, “it said.

   Agusto & Co. in the report however said it expects the market dynamics to change as new trends develop in the fast food industry such as reliance on technology to drive revenue growth and productivity (customer orders online and other phone apps), a growing preference for offering catering services to business clients and/or delivering fast food for office events and functions and finally resorting to innovative menu offerings to gain competitive advantage.

Supporting these changes, they added, are the improving regulatory oversights of the Industry.

  “The Nigerian fast food industry is regulated by the National Agency for Food and Drug Administration and Control (NAFDAC) (mandated to ensure the safety of all consumer products including food in Nigeria) and the Standards Organisation of Nigeria (SON) (mandated to oversee industrial standards for products and processes in the country).

  “The Industry’s regulators have introduced policies to ensure food safety during and after preparation. The fast food industry also relies on imported goods. Most fast food raw materials with the exception of perishables such as vegetables are imported. However, the supply of these food items in Nigeria is restricted due to the ban on importation on some of these items as well as high tariffs / duties on others in a bid to develop local markets.

  “In 2012, the Federal Government announced a ban on rice imports effective 2015, in addition a levy on rice (brown, semi and wholly milled rice) was set at 100 percent effective 31 December 2012, whilst others have import bans such as pork, beef, fruit juice in retail packs, live or dead birds including frozen poultry.  

  “This has led to high prices for the Industry’s raw materials. We estimate that raw materials (food & beverage) made up about 45 percent of the Industry’s costs, followed by property (rent, maintenance & depreciation) at 18 percent and energy at 15 per cent. In terms of revenue generation, proteins (meat, chicken, and fish) and traditional cuisine account for about 30 per cent and 20 per cent respectively of total sales,” the report revealed.

 The persistent growth in the real estate sector

  The report valued the Nigerian real estate market at ₦6.4 trillion ($41.2 billion), with the Lagos sub-segment accounting for at least 40 percent of the total market.

Growth, it added, continues to be driven largely by new to market residential and commercial properties in Lagos, Abuja and Port Harcourt.

   It estimates the market to grow by an estimated average of 10 per cent in 2014 & 2015 respectively. 

   According to the report, “The Lagos real estate market, which has evolved in the last decade, continues to record significant growth in both the residential and commercial sub-segments. The key growth factors include population growth, economic growth, rapid urbanisation, rising consumer disposable income and the introduction of mortgages. 

  “Supply of real estate properties in Lagos have been supported by the improvement in land titling and ownership transfer, government’s development plans and improved security framework in the state. The Lagos real estate market was delineated under the residential and commercial segments for adequate coverage. “

The residential segment

  The report pointed out that the Lagos residential market remained strong remained across the various sub-markets.

  New residential investments, it pointed out, were prominent in the prime markets comprising Ikoyi, Victoria Island, Lekki and Ikeja GRA.

It added that its research also revealed that new residential investments in the prime markets targeted the growing expatriate community and affluent indigenous tenants.

  The report stressed that supply of new residential investments in the most mainland markets remained subdued due to shortage of land, leaving property developers with the option of buying and remodelling old properties.

  “However family holdings in the mainland market remained a limiting factor to the buying & remodelling option. Owing to the low concentration of affluent and expatriate tenants on the mainland, residential property developers are strongly attracted to the prime markets. Rentals and sales prices were higher in the prime market compared to the mainland market. Typical rental for a 3-bedroom luxury residential property was highest in Ikoyi at an average of ₦10.4 million ($65,000) per annum, with a rental yield of 9.9 percent.

  “Conversely, rental price changes were prominent in the mainland market, with Surulere recording a high cumulative rental price change of 29 per cent from January 2011 to April 2014. Sales prices were also highest in the Ikoyi sub-market, with the price of a four-bedroom detached house on a 2000m² land trending up to ₦856 million in the first half of 2014. Land prices in Lekki and Victoria Island reported the largest cumulative change of 23 percent and 22 per cent respectively between 2011 & 2014.

  “The Ibeju-Lekki development plan remains a strong driver of land and property price changes in the areas. Market perception for the Ikorodu sub-market declined in the review period due to the slow infrastructural development in the area. Although the on-going construction of the mono-rail and the Lagos-Badagry expressway has negatively impacted real estate activities on the Badagry axis, we believe completion of the projects will support growth of real estate properties in this axis, “it said.

 The new middle class growth and the rising opportunities in the pasta and noodles market

Government policy, the report noted, has been instrumental to the growth of the pasta & noodles market.

  It added that the ban on the importation of pasta & noodles has encouraged the production and consumption of locally produced food.

  The report stressed however that wheat, the main ingredient required for the production of pasta & noodles, is not produced in large enough quantities to satisfy domestic consumption.

Due to low wheat production, it said Nigeria spends up to ₦634 billion on the importation of wheat annually.

  It added that “to address the issue of high wheat importation, the Cassava Inclusion Policy took effect in July 2012. The cassava inclusion policy is aimed at stimulating backward integration by the agro-allied and food industries in order to boost local farming output. As Nigeria is currently the largest cassava producing country in the world, the policy is aimed at increasing cassava consumption and involves a 10 per cent cassava flour inclusion to wheat flour with a view to reaching a 40 per cent inclusion rate. Furthermore, to make clear its intentions, the government increased the levy on wheat grain from five per cent to 20 per cent and introduced an additional 65 percent levy on wheat flour imports taking it from 35 percent to 100 per cent.

  “Although the current 10 percent cassava inclusion has largely gone unnoticed by customers, an increase to 20 per cent or further to 40 percent could result in harder textured noodles and possibly a dip in demand for the product, as customers struggle to adapt to the change in ingredient composition. We therefore expect that poor acceptance of significant inclusion of cassava flour into pasta and noodles and other wheat based products remain a huge challenge that could stymie the success of the cassava inclusion policy.”

Dairy industry

  It disclosed that dairy is the second largest segment in the food and beverage industry in Nigeria, with estimated revenue of ₦347 billion in 2013 and an estimated Compounded Annual Growth Rate (CAGR) of 8 percent over the last three years.

  The industry, the report revealed, consists of six major market segments: milk, yoghurt, cheese, Ice cream, butter and Infant formula.

  The milk segment, it added, is the largest in the Industry and accounts for an estimated 61 percent of the Industry’s turnover.

  The dairy industry, it said, has consistently exhibited oligopolistic characteristics with only a few dominant firms.

  “FrieslandCampina remains the market leader with an estimated 30 per cent share of the Industry’s revenue; almost double that of its closest competitor.  Other dominant firms include Promassidor Nigeria Limited, Nestlé Nigeria Plc and PZ Nutricima. Operator’s in the Industry have extensive distribution channels, strong foreign partnerships and enjoy strong product demand. The Industry is however, susceptible to the volatility in the price of raw milk powder, adverse movements in exchange rates, poor infrastructure and inconsistencies in government policies, “said Agusto & Co.

  The report revealed that there is a wide gap between the harvested milk (local supply) in Nigeria and demand, which has resulted in a substantial importation of milk.

  It stated that in 2013, demand for milk was estimated at 1.7 million tonnes, about 1.2 million tonnes in excess of domestic supply which was estimated at 591,470 tonnes adding that imported milk powder accounts for over 75 per cent of the Industry’s input.

  It added that the short shelf-life of milk and the absence of the required infrastructure to operate cold supply chain make it difficult to distribute fresh milk in commercial quantities, thus, limiting the development of local dairy farming.

  “Contrary to international practice, Nigerian dairy processors either import and repackage milk powders for sale or reconstitute imported milk powders into liquid milk and other forms of dairy products such as yoghurt and ice cream. We expect the Industry to remain dependent on imported milk powder in the medium to long term as domestic milk production capacity continues to remain lower than demand, “it noted.

*This analysis was based on Agusto &Co’s 2014 industry reports.

The Obstacles And Opportunities Of Nigeria’s Exploding Economy

 

http://www.npr.org/2014/08/06/338354893/the-obstacles-and-opportunities-of-nigerias-exploding-economy

Follow the link for the full interview on NPR-The Transcript is below.

Nigerian Finance Minister Ngozi Okonjo-Iweala has been attending the U.S.-Africa Leaders Summit in Washington, D.C. She speaks with Audie Cornish about how Nigeria has been coping with the militant group Boko Haram and the responsibilities attendant with becoming Africa’s largest economy.

Copyright © 2014 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

AUDIE CORNISH, HOST:

Nigeria is one of the continent’s fastest-growing economies. Over the last decade it’s won debt-relief from international creditors and made reforms to its banking industry. And instead of relying solely on oil revenues its tried to pump up mason industries like the mobile-phone business, which has exploded into a market of 120 million customers. Some have attributed the gains to the work of Ngozi Okonjo-Iweala. She’s a former vice president of the World Bank and Nigeria’s finance minister. She’s been at the U.S.-Africa Leaders Summit this week in Washington and she joins us now. Minister Ngozi Okonjo-Iweala, welcome to the program.

NGOZI OKONJO-IWEALA: Thank you.

CORNISH: Now you’re accustomed to hearing the critique that it’s not easy to do business in Nigeria. The magazine The Economist wrote back in April that barriers to doing business there are formidable from bureaucracy and graphed to port delays and murky land rights – foreign companies that tough it out in Nigeria have shown they can prosper, even so it is not a place for the fainthearted. What’s your response?

OKONJO-IWEALA: My response is that both the past and present administration of Present Goodluck Ebele Jonathan has really focused on this issue of a climate for doing business. I’m trying to reform that climate in various ways by working on these bureaucratic issues, making licenses, registering a business faster than it used to be. And let me say this – the rate of return on investment in Nigeria is at 34 percent and are there about it’s one of the highest in the world. You know, we are now the largest economy at $510 billion of GDP. So all line indicators, you know, have been trending in the right direction. And we’re really committed to maintaining this.

CORNISH: One indicator were Nigeria is still having trouble is when it comes to corruption. In what ways does this still hamper your growth? What would it take to move Nigeria kind of up the rankings and improving and dealing with corruption?

OKONJO-IWEALA: Yes, this is a real problem. Corruption and governance challenges and I think the key issue is what we’re doing to fight this and how this has to be a continuous process. The whole area of pensions. We have a new pension system that has more than $27 billion in savings. And even the old pension system where there was fraud, that has been cleaned up. The oil subsidy fraud, we’ve cleaned that up. And things have been handled in a transparent manner in the payment of subsidies. So we’ve scored a number of successes and we also believe that the best way to fight corruption is to build institutions and systems and processes that do not give people the room for corruption. I know all these things sound so technical and they are not very sexy in terms of what people want to hear. But really they are the things you find in developed countries and I strongly believe that this is a platform in this new technology age for us to help fight corruption.

CORNISH: Now while the country has made great strides economically, critics look at the industries that are making the most gains and see that they’re creating very high-skilled jobs that are out of reach for much of the population. And unemployment does hover around 23 percent still. And income inequality is rising in Nigeria. How do you see addressing this and how do you square this economic growth with this – so much poverty?

OKONJO-IWEALA: What we are looking at the quality of the growth that we have. It’s not good enough to just have growth. You must look at what is creating that growth. And I think that is what we have probably not done as well. So now we are seeing which sectors can create the most jobs. Most Nigerians don’t want handouts. They want a job. So we’re looking at agriculture. This creates, can create very good quality jobs if we change the way that young people view agriculture. The next area is housing. You know housing creates lots and lots and lots of jobs for carpenters, plumbers, painters, architects interior decorators – so we’re really pushing the sector. And we’ve had a lot of interest from investors in the U.S. who want to come, you know, and help us really make a secondary mortgage market work. We’ve just launched that. We believe that if we can create these jobs and get our young people working the inequality will begin to tackle it.

CORNISH: We’ve spoken today about business investment in Nigeria but critics argue that if there’s a lot of money going to the elite – mostly in the South and the southern sectors where businesses are – this also fuels a widening gap with the north where the government has been fighting Boko Haram, a militant insurgency. How do you address these underlying factors and what role do you see them playing when it comes to the insurgency?

OKONJO-IWEALA: Yeah. Well, we have to be careful, you know, in ascribing all this to the insurgency. However, it will be true that if they find young people who are not gainfully occupied that this provides an easier ground for recruiting them. And, you know, what we’re trying to do is to make sure that our approach to tackling the problems of the insurgency is not just based on military issues alone. But also has an economic dimension for the long-term. And that is developing a base, trying to improve the living standards.

CORNISH: Ngozi Okonjo-Iweala, she is Nigeria’s finance minister. Thank you so much for speaking with us.

OKONJO-IWEALA: Thank you.

Can Africa keep its economic winning streak alive?

By Associated Press August 5

WASHINGTON — They export BMWs and birdseed and plenty in between. Their middle class is growing fast enough to draw the likes of Marriott and Wal-Mart. China, Europe, Japan and the United States are vying to build roads and power plants there.

No longer are the nations of sub-Saharan Africa, long a symbol of war, famine and corruption, an economic basket case. Six of the world’s fastest-growing economies are there. Higher oil prices, richer consumers and sounder governments have raised so much interest in Africa’s economic promise that it’s being showcased this week at the first U.S.-Africa Leaders Summit in Washington.

The question is: Can all this endure?

Africa has stood on the verge of prosperity before only to see its opportunities fizzle. Yet never before has it stood to benefit as it does now.

“Africa presents enormous opportunities,” says Paul Sullivan, director of international business development at Acrow Bridge of Parsippany, New Jersey, which has put up hundreds of prefabricated steel bridges across Africa.

As African leaders gather to mark a decade of economic gains, they appear intent on sustaining the growth and ensuring that the benefits are spread broadly and not siphoned away by corrupt officials and foreign companies.

In the decades after many of the countries regained their independence in the 1960s, their natural resources — Nigerian oil, Liberian diamonds, Congolese copper and cobalt — failed to support durable growth. They sometimes proved a curse: Proceeds would vanish into Swiss bank accounts of corrupt leaders and give armed factions something to fight over.

Analysts note hopefully that the current resurgence is built on foundations sturdier than the ups and downs of commodity prices. Many African nations have become more democratic, making it easier for entrepreneurs to do business, and have boosted investment in education and infrastructure. A decade of solid growth has created a middle class with more spending power — 350 million strong in 2010 by the African Development Bank’s count, up from 220 million in 2000.

Armed conflicts are down despite headlines about the terrorist groups Boko Haram in Nigeria and al-Shabab in Somalia.

The improved environment has benefited even countries without bounteous natural resources. In resource-poor Rwanda, for example, economic growth rose from an average 1.7 percent from 1990 to 2000 to 7.7 percent the next decade.

The consultancy Ernst & Young ranks Africa as the world’s second-most-attractive market after North America. Cumulative foreign investment in sub-Saharan Africa has catapulted from $33.5 billion in 2000 to $246.4 billion in 2012, according to United Nations numbers crunched by the Brookings Institution.

South Africa exports BMW sedans to the United States. Ethiopia has developed a niche making shoes. And it produces the best-selling imported birdseed in the United States.

“We see Africa as the fastest-growing market worldwide,” says David Picard, a manager at heavy equipment manufacturer Caterpillar.

In 2011, Wal-Mart acquired Massmart Holdings, which runs 350 stores in 12 sub-Saharan countries. Marriott International last year agreed to buy Protea Hospitality of South Africa, a 116-hotel chain in seven sub-Saharan countries.

Cummins, based in Columbus, Indiana, has enjoyed double-digit sales growth this year in supplying power equipment to Africa. Consumers in the Nigerian capital of Lagos eat burgers from Johnny Rockets and ice cream from Cold Stone Creamery.

No nation has been more aggressive in Africa than China. Its direct investment in sub-Saharan Africa has jumped from virtually nothing in 2002 to $18.2 billion in 2012. China is hungry for oil, coal and other resources and eager to develop the roads, bridges and ports needed to pull them out of Africa.

Africans tend to favor doing business with China in part because it’s less likely than Western nations to demand economic and political reforms to accompany trade and development deals.

“Investors from the U.S. and Europe have tended to be large investors who demand all kinds of facilitation, who expect all kinds of conditions,” says Frederick Golooba-Mutebi, a Rwanda-based researcher and honorary fellow at the University of Manchester. “I do not see Europe and the U.S. catching up with China.”

Indeed, this week’s summit is seen as an American effort to regain some of the influence lost in the region to China over the past decade. Next year, the United States hopes to expand a 14-year-old free-trade deal with Africa.

On Tuesday, the Obama administration announced $14 billion in commitments from U.S. businesses to invest in Africa — money to be plowed into construction, clean energy, banking, information technology and other sectors. The money includes a $2 billion investment by General Electric by 2018, $200 million by Marriott and a $66 million commitment by IBM to provide technology services to Ghana’s Fidelity Bank.

In addition, Coca-Cola and its African bottling partners announced an investment of $5 billion, raising to $17 billion Coca-Cola’s investment in Africa from 2010 to 2020.

Before Africa’s continued ascendance can be assured, though, analysts say its countries must resolve some thorny questions. Among them:

— Can it build the roads, railways and power plants needed to sustain its pace of growth?

Rosa Whitaker, a former U.S. trade official and now a consultant specializing in Africa, says sub-Saharan countries need to spend more than $90 billion on infrastructure. Electricity is a big obstacle. Two-thirds of people in sub-Saharan Africa have no access to it. “You can’t do much without power,” notes Stephen Hayes, president of The Corporate Council on Africa, which promotes U.S.-Africa commercial ties.

— Can sub-Saharan nations do more business with each other, as nations in more advanced parts of the world have done?

African countries typically conduct only about 10 percent of their trade with their neighbors. By contrast, countries in the Europe Union do about 70 percent of their trade with each other, Southeast Asian countries 30 percent, Whitaker says. Among the reasons for weak intraregional trade: Poor roads and other infrastructure; conflicts and troubled ties among countries; and corruption at customs posts that can delay shipments at the border.

— Can they transition from supplying other countries with materials to generating their own finished products?

Africa traditionally has supplied raw materials — oil, coal, diamonds — and let other countries turn them into valuable goods.

“We have been exporting crude oil and importing petroleum products,” notes Nigerian Trade Minister Olusegun Aganga, a former Goldman Sachs executive. “No nation has managed to go from a poor to a rich nation by relying entirely on export of raw materials.”

Nigeria’s government has an ambitious plan to industrialize its economy and add value to its natural resources — to turn crude oil into chemicals and other petroleum products and sugar cane into the sugar that Nigeria now imports from South America.

— Can they avoid the so-called resource curse?

Abundant resources have failed to build widespread wealth or stable growth across Africa. Many economists say natural riches have tended to promote corruption and conflict and to stunt development in poor countries. Analysts are studying the East African countries of Mozambique, Tanzania, Uganda and Kenya as they develop newly found reserves of oil and natural gas.

In the past, analysts say, African countries have been out-negotiated and exploited by foreign companies. This time, Cullen Hendrix, a University of Denver specialist in global conflict, wonders, “How can host countries get the best possible deal?”

One encouraging sign, Hendrix says, is that ordinary Africans have grown more assertive about holding their governments accountable for deals they cut.

Assessing Africa’s prospects after a decade of solid growth, Jennifer Cooke, director of the Africa program at the Center for Strategic and International Studies, thinks the region’s nations have “an opportunity right now. But it’s not a guarantee.”

“Do they use this moment for economic transformation?”

Nigeria Seen by McKinsey in World’s Top 20 Economies by 2030-Bloomberg

Nigeria has the potential to be one of the world’s top 20 economies by 2030 with a consumer base exceeding the current populations of France and Germany, according to McKinsey & Co.

Africa’s biggest economy may expand about 7.1 percent a year through 2030, boosting gross domestic product to $1.6 trillion, possibly pushing it above Netherlands, Thailand and Malaysia, the New York-based company said in a report today. About 60 percent of Nigeria’s estimated population of 273 million by then may live in households earning more than $7,500 a year, fueling a consumer boom, McKinsey said.

“Nigeria has a very positive outlook,” Acha Leke, co-author of the report, said in an interview with BloombergTV Africa in Johannesburg. “The most important thing that needs to be done to get it there is execution” of government policies.

As Africa’s largest oil producer with a population of about 170 million, Nigeria has consistently posted annual growth rates in excess of 4 percent over the past decade. That’s spurred foreign investors such as Unilever Plc (ULVR), Nestle SA (NESN) and Shoprite Holdings Ltd. (SHP)to expand operations despite an upsurge in violence by militants in the north.

Based on McKinsey’s growth estimates for the economy, annual sales in consumer goods could more than triple to $1.4 trillion by 2030 from $388 billion currently, it said.

Retail Boom

The retail and wholesale trade industry will probably become the largest contributer to Nigerian growth by then and 35 million households are expected to earn more than $7,500 a year, according to the report.

While oil accounts for 70 percent of government revenue and most of Nigeria’s export earnings, its share of the economy has waned. After the statistics office overhauled its GDP data in April, oil’s contribution to economic growth between 2010 and 2013 was 5.1 percent, compared with 14 percent for manufacturing and 20 percent for trade, according to McKinsey.

The Nigerian Stock Exchange All-Share Index (NGSEINDX) has gained 2.9 percent this year, adding to its 47 percent surge in 2013. The naira has dropped 1.1 percent against the dollar since January.

McKinsey’s estimate of Nigeria’s growth potential comes with significant caveats. The government needs to address poverty, lower the cost of basic services, such as housing and energy, expand electricity supply and boost productivity in farming, according to the report.

Stability Risk

“If execution doesn’t happen there’s actually a big risk for the country, even from a security stability perspective, to create jobs and lift millions of people out of poverty,” Leke said. “That has to be a big focus, to grow in a way that is inclusive.”

The most recent poverty survey by Nigeria’s statistics agency, published in 2012, showed that 61 percent of Nigerians were living on less than a dollar a day in 2010, up from 52 percent in 2004.Life expectancy is 54 years, eight years lower than in Ghana and 20 years below Brazil, according to McKinsey.

“The policy world, economists can build all manner of scenarios,” Folarin Gbadebo-Smith, managing director for Lagos-based Center for Public Policy Alternatives, said by phone. “It’s a totally disconnected discussion between what we can be and what we will be.” The outcome “depends on what our government does,” he said.

To contact the reporters on this story: Yinka Ibukun in Lagos at yibukun@bloomberg.net; Amogelang Mbatha in Johannesburg at ambatha@bloomberg.net

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.netNasreen Seria, Sarah McGregor

A Summit of Opportunity: Why Africa’s rising economies are a win-win for U.S. business.

This week’s U.S.-Africa Leaders Summit presents Washington with a historic opportunity not only for broad relationship-building but also for deepening its economic ties to the continent. It would be a mistake to assume that the benefits will all flow from the United States to Africa. There is huge economic potential in this gathering for the U.S. economy, too.

Africa is no longer just a continent in need — indeed, it has become a place of opportunity. Investments from companies like GE and Caterpillar and other private investors such as Blackstone and Carlyle, at $130 billion in 2012, now surpass remittances and official aid as the largest type of capital inflow. Africa stands out for the relative youth of its people — a potential demographic dividend. By 2035, the continent is set to have the largest working-age population in the world, larger than those of China and India, meaning that, for the foreseeable future, Africa will not face the potential drag on growth from shortages of labor that may be in prospect for other economies whose populations are aging.

But formidable challenges await African leaders, including bolstering education, creating jobs, and lifting more people out of poverty.

Still, the continent holds significant economic potential. African economies offer a higher rate of return on foreign direct investment than most emerging economies. Since 2000, the continent has been the second-fastest-growing region in the world; in 2012, the continent was home to six of the world’s 10 fastest-growing economies. The continent’s real GDP, at $2 trillion in 2013, was larger than India’s and Russia’s, and on par with that of Brazil.

But the United States has largely missed out on the economic opportunities Africa offers. Over the last decade, American foreign direct investment into Africa amounts to less than one-third that coming from Europe, and it also lags investment from the BRIC quartet of Brazil, Russia, India, and China. Meanwhile, U.S. trade with Africa is less than one-fifth the volume of its trade with Europe, and only 60 percent the level of China’s trade with Africa.

Moreover, Africa’s rising middle class offers U.S. businesses a huge, untapped new export market for their goods and services. Today, Africa’s undoubted wealth in natural resources such as oil, gas, and minerals only accounts for one-third of the continent’s GDP growth. But, as incomes rise, consumption is a gathering force in Africa. The continent is changing from one whose economic activity is centered on the export of natural commodities to one where domestic spending is playing a larger role. The continent is already home to nearly 100 million people who have enough income to spend on things they want rather than simply on things they need — the basics such as food and clothing. By 2020, that tally is set to rise to 128 million, according to our research. This new consumer army will be spending a projected $1.4 trillion a year by then. More than half of African households will have discretionary spending power. Nigeria, now Africa’s largest and most populous economy, will have 160 million peoplein consuming-class households, more than the current populations of France and Germany combined. African industries that cater to consumers will have estimated annual revenue in 2020 of $1.38 trillion, compared with $540 billion in the case of resources industries.

As Africa’s trade ties with the world deepen, now is the time for the United States to get in the game. In 2012, the continent’s flows of goods, services, and finance were worth $1.5 trillion, or 76 percent of GDP.

Although commodities continue to dominate Africa’s exports, there are distinct signs of Africa’s trade rising decisively up the value chain.

 

Although commodities continue to dominate Africa’s exports, there are distinct signs of Africa’s trade rising decisively up the value chain. Exports of knowledge-intensive goods and services (which have a high R&D component or use highly skilled labor) are growing. Indeed, Africa’s cross-border Internet traffic — made up of everything from international Skype calls and email traffic to e-commerce and video streaming — grew 70-fold between 2005 and 2013, faster than in China or Latin America, although it still lags behind the rest of the world.

Initiatives are already underway to deepen economic ties between the United States and Africa. One example is the Power Africa plan unveiled in 2013, an initiative to double the number of people with access to power in sub-Saharan Africa. Its aim is to enable public and private capital to expand power generation and electrify the continent. In its first five years, Power Africa offers more than $7 billion in financial support and loan guarantees. To date, that government investment has catalyzed more than $14 billion in private project finance. The summit could be an opportunity to expand and broaden this initiative, given that about 550 million people in Africa still lack access to power, according tothe World Bank.

Another initiative is the African Growth and Opportunity Act, signed into law in 2000, aimed at offering incentives to African countries to open their economies and embrace free markets. Equally important will be measures to help the continent develop a new generation of business and political leaders, building on the Young African Leaders Initiative. One useful step for the United States to take would be to ease the path for more African students to attend universities and graduate programs; this may require looking carefully at current immigration rules.

But the United States shouldn’t stop there. U.S.-Africa trade and investment should expand from its current focus on oil and other commodities to include trade in manufacturing and services. American companies have been slow to grasp the investment opportunities available in Africa beyond the natural resource sectors. For instance, the continent will need over $300 billion in infrastructure investment, an area in which U.S. companies can play a major role. Development-finance organizations need to think creatively about risk-mitigation mechanisms to give the private sector the confidence to invest in this dynamic market. New partnerships could be struck to develop Africa’s efforts to boost skills.

For its part, African countries can do more to reach out to U.S. investors and help them navigate regulations and local customs. The summit is an ideal opportunity to explore this area and what can be done better. Many African countries — from Angola to Zambia — have set up dedicatedinvestment agencies. Many, such as South Africa, also have public-private partnership agencies. Both of these are useful ways of enhancing engagement with U.S. businesses. African leaders should use the summit as an opportunity to hear any concerns — macroeconomic, regulatory, or security-related — from U.S. companies that may be preventing them from committing funds to Africa.

The historic Washington summit is an opportunity to address the relative lack of engagement with Africa on the part of the United States and the unevenness of economic development in Africa — despite its enormous potential. Summits can too often be mere talking shops and photo opportunities. The importance of this gathering will only materialize with concrete action. Both sides have work to do.