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Highest stakes for a generation

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By William Wallis

Published: July 12 2007 10:49 | Last updated: July 12 2007 10:49

In the weeks after April’s elections, Nigeria’s capital Abuja filled with politicians and contractors from all corners of the country seeking government positions and largesse. It is a jamboree – hosted partly in the Hilton hotel lobby – that has become familiar in the eight years since the military handed control of Africa’s leading oil producer back to civilians.

In 2007, however, the stakes are high or higher than they have been in a generation, both for Nigerians and for all those with an interest in Africa’s stability. Five years of economic growth averaging 5 per cent or more have restored confidence and a measure of dynamism to businesses and banks, if not to the impoverished majority.

Once again elite Nigerians dare to hope – as they did after independence from Britain in 1960 – that the country from which one in five Africans hail could lead the continent on to the global stage. “The economy has woken up,” says Kola Karim, an up-and-coming Lagos entrepreneur, who argues that it is not just the soaring price of oil – on which Nigeria still depends for 95 per cent of exports – but changes in the way Nigerians are using the proceeds that are fuelling the recovery.

Foreign investors too are waking up to the new opportunities.

Once again, however, it is Nigeria’s political system that is the greatest potential obstacle. The government may have been working better in some respects at the federal centre since the end of military rule. But at the periphery the weakness of many of the 36 states remains palpable.

Nowhere is this more apparent than in the oil-producing Niger Delta. There, state governments have failed to capitalise on the greater share of revenues they now receive by delivering benefits to the people. In turn, the threat has escalated from well-armed militant and criminal gangs demanding a share of power and wealth.

In the past year the gangs have interrupted the production of about a quarter of the 2.9m barrels of oil per day upon which the government and economy still depend. When world oil prices are $70 a barrel, this may not keep Nigeria’s rulers awake. But what happens if the violence in the delta worsens or prices fall?

The stock market in the past year has been among the world’s top performers. In scattered pockets of the country there are signs of a middle class re-emerging, according to Panos Varelas, chief executive of PZ Cussons, a manufacturer of consumer goods.

Umaru Yar’Adua the victor of the April elections, has inherited perhaps the healthiest balance sheet of any new Nigerian head of state since independence, following the reduction by more than 90 per cent of a $36bn foreign debt, and the build up of $47bn income from oil in reserve.

Even Nigerian writers are on a roll again. In June, Chimamanda Ngozi Adichie, a talented 29-year-old, bagged the prestigious Orange prize for her depiction of the 1960s Biafran war. Shortly afterwards, Chinua Achebe, author of the best ever selling African novel, Things Fall Apart, won the Man Booker Prize for a lifetime’s service to literature.

But the malaise they have both portrayed so powerfully in their writing remains grimly present in today’s polity. The elections – which saw Olusegun Obasanjo relinquish power in Nigeria’s first transition from one civilian president to another – were deemed by both international and local monitors not to be credibole.

Instead of signalling that better governance is here to stay, they highlighted some of the same flaws that have divided the country in the past and led to coups. In the aftermath of the vote, investment bankers in Lagos and abroad joined western diplomats in a refrain familiar to other flawed African elections. At the end of an imperfect day, they argued, the result, at least at the presidential level, broadly reflected popular will.

There is, however, a sense that this smacks of wishful thinking from those who have already bet that Nigeria is on the mend. It is certainly the case that many of those who observed the poll closely believed there was no clear way of telling whether the majority of votersd.

“It is not sustainable. There is an arrogance about it which is very galling,” says a veteran of several Nigerian governments – civilian and military - unwilling to predict how much of the ruling People’s Democratic party administration will survive the many legal challenges it now faces in the courts.

Nigeria’s potential as a motor for Africa’s revival has always been there, underpinned by its natural resources, its population size - now 140m - and its critical mass of talent, at home and in a Diaspora that is itself 17m strong. It is the capacity to realise it that has been absent.

Mr Yar’Adua, the new president hails from the political aristocracy of the predominately Muslim north. The first Nigerian head of state with a university degree, he won a reputation for personal integrity during two terms as an elected governor.

In the coming months it will become clearer whether he can forge a government from the mass of supplicants at his doorstep, capable of overcoming the crisis of legitimacy infecting Nigeria today.

The man himself projects himself as quietly reassuring. In an interview with the FT he said he was determined to end the zero sum game politics that have often divided Nigeria along ethnic, religious and regional lines.

He says he wants to forge a consensus on the policies necessary to deliver Nigerians from poverty and from the margins of global trade. He will plough ahead with market reforms initiated by his predecessor, Olusegun Obasanjo, he says, putting additional emphasis on entrenching accountability and institutional procedure.

“I accept there are lapses in our electoral process,” Mr Yar’Adua told the FT. “Once we reform the electoral process and it becomes credible, then we need to separate competition for power from the attempt to build a modern, industrialised nation.”

The man himself however, is not the current problem. It is the process that brought him, and many ruling party officials now taking office at state and local levels to power, that is fuelling doubts.

These centre on whether the new president will be strong enough to appoint the calibre of people Nigeria needs to stand up to powerful vested interests against reform, and resist perceived efforts by Mr Obasanjo to remain the power behind the scenes. After seven weeks of horse-trading and only a preliminary cabinet list, it is still not clear he is.

“The stock in trade of Nigerian politicians is to scare anyone elected into thinking that without them they cannot rule in peace,” says a senior official in the outgoing government. “If he (Yar’Adua) brings all of them in to the table to chop (eat) he will end up with a government full of political contractors,” he adds.

With so much money now swirling around, both from fresh petrodollars and past flight capital returning home, few politicians or even former generals have an interest in pushing Nigeria to the brink.

“People are now keeping their capital in this market,” says Bolaji Balogun, a Lagos-based investment banker. “For a lot of guys here there is now a lot at stake,” he says, arguing that at the end of the day Nigeria’s politicians will close rank.

In the absence of an obvious alternative to champion a less iniquitous state, many ordinary Nigerians also appear willing for now to give Mr Yar’Adua the benefit of the doubt.

Longer term they will judge him on his ability to deliver. In some respects the easier reforms at a macro level have already been carried out. But critical failures in power generation, education, primary healthcare, transport, law and order are all holding Nigeria’s economic and social development back. Only the first and fifth are the responsibility of the federal government. Many state governors meanwhile, have evolved into feudal barons, with budgets in some cases far larger than some west African countries. There is almost unanimous agreement in Nigeria on the importance now of reining them in and improving governance at the level of their states.

On this, as well as the oil price, may hinge the ability of Mr Yar’Adua to restore stability to aggrieved communities in the Niger delta, and to better livelihoods beyond the lobby of the Abuja Hilton.

Copyright The Financial Times Limited 2007

CAPITAL MARKETS: Betting bus-loads of cash

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By Matthew Green

Published: July 12 2007 10:49 | Last updated: July 12 2007 10:49

Keen to dispel doubts about Nigeria dating back to army rule, the promoters of the Lagos stock exchange have found a potent catchphrase to lure investors – “the highest returns in the world”.

Some banking stocks have trebled in the past six months alone – the most spectacular sign of the shift in the country’s status from marginal emerging market play to star performer.

Driven by a combination of government reforms, debt relief and high oil prices at a time of heightened appetite for new types of risk, the gains have revealed a glimpse of untapped potential and looming hazards.

“We’ve made a bus-load of money betting on this market,” says Bolaji Balogun, managing partner at Chapel Hill, an advisory firm in Lagos. “There’s a massive number of Nigerian investors who are investing their capital here. That’s what’s attracting a lot more of the international money.”

Some analysts expect soaring stock prices to suffer a correction in the next year, although many operators believe strong local demand has reduced the chance of a crash.

A history of military rule put Nigeria largely off limits for foreign investors until a few years ago, when the government of former president Olusegun Obasanjo embarked on a programme to overhaul what could be Africa’s economic powerhouse.

Nigeria slashed $36bn in external debt in 2004 to $3.5bn today, improved monetary stability through reforms backed by the International Monetary Fund and accumulated robust foreign exchange reserves, although domestic debt has risen sharply.

A tougher line on money laundering and a newly-awarded BB- sovereign debt rating added to the allure at a time when global funds were turning to Africa as an antidote to dwindling returns in established pastures.

The sheer size of the country’s debt and equity markets has enticed hedge funds that worry about liquidity in smaller sub-Saharan countries, while strong domestic buying insulated Nigeria from a global sell-off in March.

Violence and rigging rendered April elections that brought President Umaru Yar’Adua to power illegitimate in the eyes of many Nigerians, but investors see the first civilian-to-civilian handover since independence as a sign of stability.

“Three years ago, I would not run into a room and meet JP Morgan and Morgan Stanley,” says Ike Chioke, deputy managing director of Afrinvest West Africa.

“But now I would easily expect that if I go to any of the big hotels in Lagos and just sat around the restaurant I would see three different investment banks all having lunch.”

Foreign interest has focused mainly on bonds in the last two years, though a fall in yields on government paper has switched investor attention to frenzied activity in the banking sector.

The central bank fired the starting gun in June 2004, when it raised the minimum capital requirements for banks more than tenfold. A wave of initial public offerings and mergers followed as bigger fish swallowed the minnows. Guaranty Trust Bank brought Nigeria back to the international capital markets for the first time in a decade this year by offering $350m of five-year eurobonds, but the eye-popping action has been on the Nigerian Stock Exchange (NSE). The NSE all-share index has almost doubled to 51,000 points in the past year. Total market capitalisation has increased to N7,8000bn from N2,9000bn in the same period, with banks making up more than half the total.

Despite signs of interest from hedge and private equity funds, Niwgerian money is the driver. Pension reforms are creating an estimated $2.5bn of new savings each year, a big catalyst in channelling local funds into the market.

A flood of new retail investors from within the country and the wealthy diaspora have also joined the scramble for banking stock offers, spurred on by advertisements with “share hotlines” suspended above ubiquitous traffic jams in Lagos. Since the start of this year, Fidelity Bank and First City Monument Bank shares have jumped more than 300 per cent, while stocks such as Zenith Bank, Oceanic Bank International, Diamond Bank, and Access Bank have all risen more than 100 per cent. Other sectors have recorded more modest gains, apart from Dangote Sugar and UTC in the food and beverages sector, which more than doubled in value this year.

The obsession with banks may not be healthy. The rush has made it harder for sectors such as food and beverages or oil and gas to raise money on the market for investments needed to stimulate wider economic growth. With the country still crippled by power shortages and a lack of basic services, with the oil-producing Niger Delta still volatile, and with the new leadership still untested, there are also question marks over more optimistic assumptions on Nigeria’s growth prospects.

Short-term risks may be even higher. A growing herd of private investors is taking bank loans to buy more banking stock using yet more banking stock as collateral. Already, analysts at Afrinvest estimate that about 10 per cent of the total market capitalisation on the stock exchange may consist of loans leveraged into equity, a higher figure than on many comparable markets. A shock such as a corporate scandal or a plunge in oil prices could cause a stampede to get out, straining banks who extended credit to speculators

“It could lead to a meltdown,” says Bismarck Rewane, director of the Financial Derivatives Company Ltd. “The most conservative people that I know are saying ‘unload my entire portfolio, I want to go into the equity market.’ My sister-in-law doesn’t know the difference between a stock and a bond, yet now she’s sold property to go into it, she’s going to start crying.”

Copyright The Financial Times Limited 2007

THE NEW OLIGARCHS: Mega-rich deploy wealth closer to home

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By William Wallis

Published: July 12 2007 10:49 | Last updated: July 12 2007 10:49

When the military ruled Nigeria, it was the generals who boasted most of the fattest bank accounts. They were careful to keep these far offshore. By contrast, eight years of civilian rule has seen the emergence of a cabal of business tycoons whose net worth amounts to hundreds of millions of dollars and in some cases far more.

The temptation for taking short cuts on the road to riches has often been as great for entrepreneurs as it has for state officials. Now, according to a former senior government official, with the state starting to relinquish control of the commanding heights of the economy, there is a greater rapprochement between the two, with money from both public and private sources blending together.

Big business and some of the banks are heavily invested in the political system, just as politicians and government appointees are invested in the Nigerian banks and businesses making money, he says. There are significant changes, however, in the way Nigeria’s newly mega-rich are deploying their wealth. In the past, the wealth was hoarded in banks abroad. Today, it is mostly being poured into business enterprises within Nigeria.:cheers:

Transcorp, a holding company set up with government support, epitomises the process. Both politicians and business magnates have shares in it. Ndi Okereke-Onyiuke, the head of the Nigeria Stock Exchange, chairs the Transcorp board and former president Olusegun Obasanjo has his own stake held in a blind trust, his spokeswoman recently admitted.

Since its creation in 2005 the group has accumulated oil exploration blocks, the Hilton hotel in Abuja, state telecoms company Nitel, and, most recently, shares in two oil refineries. Mr Obasanjo unabashedly promoted a blend of raw capitalism and economic nationalism using import bans and other forms of government largesse to promote select Nigerian businesses and industries. One donor official says his most effective finance minister used to return from trips abroad to find fresh Customs duty waivers had been granted in her absence.

The environment to make fortunes at home has rarely been more propitious. The oil price on which Nigeria depends for about 95 per cent of exports has been at record levels, giving the government its strongest balance sheet in years.

Meanwhile, the global tightening of money laundering laws has meant that more questionably gotten gains are now circulating within Nigeria and a slew of state assets and oil exploration licences have been on the block.

Mr Obasanjo, whose own ties to big business have come under local scrutiny – and whose chicken farm may have benefited from a ban on poultry imports imposed in 2002 – says he drew inspiration from Asia.

“I was in South Korea in the 1980s and the people who grew the South Korean economy were about six: the Daewoos of this world, the Samsungs. But they allowed it to percolate down,” he said in an interview with the FT shortly before he stood down on May 29. He added that there was no reason why, within 10 years, there should not be a Nigerian among the richest three people in the world.

“Why are the others making it and we are not making it? What makes the Russians’ oligarchy or whatever you call it in China in India, more different?” he asked.

Among those Nigerians already in Africa’s big league, five names regularly crop up, led by the merchant-turned-industrialist Aliko Dangote. When complete, the many cement factories his Dangote group is building – or has bought from the state – will give him overwhelming dominance in domestic and potentially regional markets. Mr Dangote also dominates the distribution of sugar and salt and the manufacture of flour products. He was among the beneficiaries of the sale of the two dilapidated state-owned oil refineries in the days before Mr Obasanjo relinquished power.

Also in that deal was Femi Otedola. A licence to import and distribute diesel has given his company, Zenon, control over a commodity on which businesses depend to run generators in the absence of reliable power from the grid. Two bankers close to Mr Obasanjo, Jim Ovia of Zenith bank and Tony Elumelu of United Bank of Africa, also feature among the super-rich. Their banks have wrestled for the largest slice of government business and for ascendancy in the top industry tier.

A fifth tycoon, Mike Adenuga, had rockier relations with the former president. Since Nigeria’s Economic and Financial Crimes Commission began investigating him last year, he has overseen his business empire – which includes Globacom, a telecoms company, as well as a bank and oil interests – from London.

A host of other operators have climbed some way up the ladder with or without state support. In political circles it is thought unlikely that the incoming administration will challenge directly the ascendancy that Nigeria’s richest businessmen have gained in various sectors. For one, many of the companies they control have listed stocks. Ordinary retail investors therefore have an interest in their continued strength.

But with most Nigerians still living in poverty, Umaru Yar’Adua, the new president, may require a gesture from the principal beneficiaries of the boom. In an interview with the FT, he says he has asked a group of “around five” tycoons to finance a low interest N50bn micro-finance fund. This will be aimed at promoting the enterprise of the little man, starved to date of credit.

Copyright The Financial Times Limited 2007

EXCLUSIVE INTERVIEW: Quiet man takes charge at Asa Rock

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By Matthew Green and William Wallis

Published: July 12 2007 10:49 | Last updated: July 12 2007 10:49

Umaru Yar’Adua, Nigeria’s new president, says he wants to forge a consensus on reforms that will spread the benefits of renewed economic growth under his predecessor to the country’s impoverished majority.

In his first in-depth interview since taking over in May, Mr Yar’Adua pledged to continue the reform programme begun by former president Olusegun Obasanjo. This will include land reform, increased accountability and plans to help poor farmers.

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“We are on the right path,” says Mr Yar’Adua, speaking at the Asa Rock presidential palace in Abuja, the capital. “These reforms are necessary, and they will continue.”

While seeking to unite opponents behind a non-partisan programme, Mr Yar’Adua has arrived in office bereft of the kind of popular mandate that would help confront powerful vested interests opposed to reform.

Violence and rigging robbed his victory in April elections of much of its credibility, while many Nigerians believe Mr Obasanjo continues to manipulate national politics from his position as chairman of the ruling People’s Democratic Party (PDP).

After weeks of wrangling with opposition parties to try to bring them into a unity government, the new president is still without a cabinet to tackle priorities such as crime and power shortages.

Speaking in relaxed, measured tones, he says he is seeking to rally support by casting himself as a “servant leader” who will end the winner-takes-all power struggles that have divided Nigeria since independence.

“I accept there are lapses in our electoral process,” he says.

“Once we reform the electoral process and it becomes credible, then we need to separate competition for power from the attempt to build a modern, industrialised nation.”

While the core of Mr Yar’Adua’s programme represents broad continuity with the liberal reforms introduced by Mr Obasanjo to stabilise an economy ruined by decades of military rule, the two men could not be more different in style.

An ex-general, Mr Obasanjo was a flamboyant and often impulsive ruler. As elected leader, he never quite lost the instincts he developed as military ruler in the late 1970s.

He kept a mountain of documents on his desk for approval, sometimes dismissing senior officials and taking over their jobs.

Mr Yar’Adua is a former chemistry lecturer who, although from the northern Muslim aristocracy, has followed a leftist tradition of politics.

He has a reclusive tendency, according to a family friend, and has rarely travelled abroad. He is the first university graduate to become Nigeria’s head of state. “You can’t run the country all by yourself,” he says. “I will delegate as much responsibility as is allowed by the law and then use my office to supervise and ensure that the right thing is done,” he says.

Mr Yar’Adua’s reputation for personal integrity in his home state of Katsina, where he served as governor for the past eight years, also contrasts with the allegations of nepotism that swirled around his predecessor.

Projects such as schools, roads and clinics completed under his tenure won the respect of Katsina’s inhabitants in a country where many of the 36 state governors have stolen public funds and allowed services to slide into ruin.

Seeking to project his reputation on to the national stage, he became the first Nigerian president to declare his assets last month, putting them at N875.7m.

An emphasis on personal probity chimes with his pledges to help the mass of Nigeria’s 140m population reap the benefits of economic growth, in particular by changing laws that prevent the average farmer raising money from his land.

“He can only mortgage a property developed on the land, but not the land itself, and that really limits the capacity of millions of Nigerians,” Mr Yar’ Adua says.

Another scheme to turn poor people into businessmen hinges on plans to create a N50bn microfinance fund with the help of a small group of corporate leaders who made fortunes through their close links with Mr Obasanjo.

While a lack of capacity has hindered the implementation of similar ventures in the past, Mr Yar’Adua’s plan signals his independence from a clique of about five tycoons seen as symbols of favouritism under his predecessor. “I told them they must have a social responsibility because of the boom they have enjoyed over the past four years,” he says.

The sale of two state refineries to some of these men shortly before Mr Obasanjo stepped down played a role in prompting a general strike last month by trade unions who said the move would do little to ease fuel shortages.

Asked whether he would investigate the sales, Mr Yar’Adua says his government would probe any action by officials that appeared to have contravened due process. While many Nigerians have detected the hidden hand of Mr Obasanjo in the nomination of cabinet ministers, Mr Yar’Adua dismisses suggestions that the man who anointed him will seek to dominate him in office.

“I become surprised when people express these kinds of views.” he says. “He’s a party member, he’s a party leader, and I expect a greater quality advice from him than anybody else in the party…I think on many issues, I will need to consult with him.”

FREE TRADE ZONES: ‘Resort’ is designed to keep business at home

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By Alan Beattie

Published: July 12 2007 10:49 | Last updated: July 12 2007 10:49

A country famous for exporting mainly oil, Nigeria’s trade has long been subject to the vagaries of the international price of crude and the political and criminal turbulence in its volatile Niger Delta region. More than 95 per cent of its export earnings are from oil and gas, and the country has struggled against tough competition from abroad to broaden its export capability.

Like many developing countries, a big part of its strategy has been the use of “free trade zones” where normal tax, labour and regulatory rules are suspended. In Nigeria’s case, those zones often play a role in facilitating imports as well as promoting exports, but in doing so they can also run into problems with the government’s traditional heavy-handed intervention in trade.

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In the eastern port city of Calabar, on the inland delta of the Cross River, a traditional industrial free trade zone (FTZ) encountering some familiar challenges is being joined by a more innovative, but as yet untested, version. The traditional Calabar Free Trade Zone (CFTZ), which started more than a decade ago and gained full operational flexibility to attract manufacturing, trading and services in 2001, has 57 companies employing about 3,000 workers.

Mauro Ronchini is head of La Mandria, an Italian company which makes parquet flooring from local wood for export to western Europe. “The big attractions are the good port and absence of import duty for equipment and export duty for the product,” he says, along with help with temporary immigration of European employees for technical assistance. But though the zone has preferential access to electricity supply, power, as for manufacturers outside the zone, remains a problem.

Apart from being able to import anything duty free to be used in manufacturing exports, companies in the zone also receive an incentive to sell into the Nigerian market. Import duty is charged only on the raw materials, not the finished goods, of anything that passes into the domestic market – a benefit that causes resentment among local manufacturers who say they are undercut.

In 2004, in response to a rising chorus of complaint about competition from China and elsewhere, the government of Olusegun Obasanjo extended import bans across a range of products, including textiles, garments, shoes and building materials to protect domestic producers. Such attempts at “import substitution” have a long tradition in Nigeria and elsewhere.

One Italian company, Socomi, packed up and left when the bagged cement it produced went on to the forbidden list. Some of the current denizens of the zone have threatened to follow, but R.T. Famodile, general manager of the CFTZ, says: “I would like to think they are mainly trying to send a message to the new [Nigerian] president about import restrictions. None has actually closed or disinvested”.

The previous government did in fact make encouraging noises about lifting the import bans later this year. Still, as long as the threat of sudden extensions of import bans remains, companies may well be chary of investing in the free trade zones to get into the Nigerian market.

In a novel free-enterprise twist on import substitution, Calabar’s other free trade zone, the newly-opened Tinapa Business Resort, is designed to keep Nigerians spending at home rather than keeping out goods from abroad.

In contrast to traditional industrial parks, it is designed as a mixture of wholesale trading and retail with a leisure component – the “resort” tag reflects the hotel, cinema, bowling alley and restaurants in the zone. The aim, apart from capturing shopping and leisure business is to create a trading hub so that even goods banned from import into Nigeria can be warehoused in Tinapa for distribution around the rest of west Africa. Other west African countries such as Senegal are trying similar schemes.

The zone has only just opened and the management is cagey about who is investing, though it says about half the slots are already filled. Some well-known retail companies are already on board to anchor the shopping centre, including Shoprite, the South African supermarket chain.

“This is a different model to the traditional one where the government takes oil tax revenue and looks for projects to spend it on to spread it around,” Mr Ndem says. “Instead the lower and middle-class workers benefit directly from working [at Tinapa] and the government can take tax from them.”

He also rejects the traditional criticism of free trade zones, that they involve giving up government revenue for nothing by waiving corporate taxes. “Tax collection is so bad anyway that whatever you lose on [corporate] tax will be minuscule compared with what you make back in taxes on income, freight clearing charges and all the rest of it.”

Nigeria’s traditional manufacturing-heavy FTZs, though they have attracted a fair number of investors, have not made a significant change to the pattern of the country’s trade. The Tinapa experiment is at least another route to try.

Copyright The Financial Times Limited 2007

LNG: A critical role in world energy


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By Dino Mahtani

Published: July 12 2007 10:49 | Last updated: July 12 2007 10:49

The production of liquefied natural gas is expected to become critical to world energy needs and Nigeria’s performance will be in the spotlight.

It holds the world’s seventh-largest reserves of natural gas and wants to more than double its exports of LNG to be near the top of world export tables within five years. Global demand for LNG is set to rise by 9 per cent a year during the next decade and any delays to Nigerian projects could have significant repercussions on international gas markets.

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European countries are turning to importing gas from the likes of Nigeria as they increase efforts to diversify away from a reliance on Russia, which last year cut supplies to Ukraine. The US is also looking to secure steady supplies from the Atlantic basin, from where gas extracted by Nigeria is sourced.

Government officials say they expect gas revenues to rise to a level that is more than 50 per cent of oil earnings in the next few years, based on the completion of at least two LNG export terminals. The Nigeria Liquefied Natural Gas (NLNG) project at Bonny, Africa’s biggest capital project – which has built five segments or “trains” with plans to expand to eight – has already put Nigeria on the global map for LNG production.

But doubts are starting to surface as to whether Nigeria and its consortium partners will make good on their targets to complete two LNG plants, at Brass and Olokola, on time.

Peter Robinson, a senior gas executive in the local unit of Royal Dutch Shell – a joint venture partner in NLNG with Nigeria’s state-owned NNPC, Total and Eni – says “the scale, funding and security” aspects of LNG projects are what determine their success. Energy consultants say the big long-term problem is securing enough gas for the projects. Multinational executives say privately that the problems securing adequate supply stem partly from the government’s annual shortfall in meeting its commitments with joint venture partners to build up the gas-gathering networks that could feed the plants.

In what had an almost surreal feel to it, Olusegun Obasanjo, Nigeria’s outgoing president, nevertheless inaugurated both Brass and Olokola just days before he left office and before the projects had seen a final investment decision. The $10bn Olokola is being built by Shell, Chevron and BG in a joint venture with NNPC and is expected to deliver more than 20m tonnes a year by 2012. But the joint venture partners have been bogged down in negotiations with NNPC’s favoured contractor, chosen without a public tender, to reduce costs.

PROFILE: First Bank in race to win over the little guy

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By Matthew Green

Published: July 12 2007 10:49 | Last updated: July 12 2007 10:49

Nicknamed the “Elephant Bank” for its tusker symbol, Nigeria’s oldest finance house is seeking a share of the country’s newest market: 140m Nigerians. Big banks have traditionally relied on corporate customers or servicing government contracts for most of their earnings, but seismic changes in the industry in the past few years have prompted a race to win over the little guy.

“We see a huge opportunity in the retail market,” says Jacobs Ajekigbe, managing director of First Bank, in his office in a skyscraper overlooking the Lagos Marina. “This elephant can dance.”

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Nigeria’s financial industry has been transformed since the central bank took the drastic step of raising the minimum capital requirement for banks by more than 1,000 per cent in mid-2004, forcing many smaller lenders to merge and driving others out of business.

A fitter crop of survivors has sprung up in search of new markets. Dominant operators such as First Bank, Union Bank of Nigeria, Zenith Bank and United Bank for Africa suddenly found themselves facing smaller but equally ambitious rivals.

In the belief that improved economic growth in the past few years will continue under new President Umaru Yar’Adua, lenders, including Access Bank and Diamond Bank, are also scrambling to gain a foothold among a small but growing middle class. First Bank hopes to lead the charge. With a large branch network, a well-known brand and a dependable-looking beast on its letterhead, the company is making a N100bn naira share and rights offer – Nigeria’s biggest – to fund expansion. Part of the money will go towards adding another 100 branches to its existing 409 and doubling its number of ATMs to 1,000 within the next year.

Share placements by other banks have already propelled stellar gains in the Nigerian Stock Exchange in the past six months, a symptom of heavy buying by speculators seeking quick profits as well as faith in long-term earnings potential.

Promoters of banking stock often point to the phenomenal profits reaped by entrants into Nigeria’s mobile phone market in recent years, arguing that retail banks could replicate their success by capitalising on the country’s sheer scale.

But even Mr Ajekigbe points out that opening an account is a more complex commitment than buying a phone, particularly in a country where people have traditionally viewed financial services as the preserve of a tiny elite.

Fear plays a part. Nigeria has weathered repeated banking crises in the course of the last century, instilling a certain degree of scepticism among many potential depositors, though First Bank hopes its longevity will prove reassuring.

Set up by shipping magnate Sir Alfred Jones with a head office in Liverpool in 1894, and initially known as the Bank for British West Africa, the bank’s modern-day descendant makes much of its venerable history in its corporate branding.

As Nigerian banks strive to lure new depositors, they will also have to tread carefully themselves as they expand into relatively uncharted consumer territory. Nigeria lacks a credit-rating system for individuals, making it more difficult to spot potential defaulters, though a consortium of banks is attempting to plug the gap. First Bank has also purchased risk management software from a company in India, where mass market banking for poorer customers has evolved far beyond Nigeria’s level.

Skilled personnel will be even more important. The sudden surge in interest in the financial sector has already cost First Bank some talent poached by rivals, and Mr Ajekigbe admits finding enough managers to staff its growing network is a challenge.

Finding innovative products, and ways to deliver them, may prove equally important.

Despite the competition, First Bank aims to more than double the share retail investors hold of its total loan volume to 65 per cent within the next five years, partly using its new ‘U First’ range of retail products such as car and share purchase loans.

But the lender stresses that it also sees new opportunities in more familiar markets. Nigeria’s government is increasingly striking up partnerships with entrepreneurs to develop infrastructure such as roads and airports, creating potentially lucrative finance opportunities close to the more traditional preserves of Nigeria’s bigger banks.

The region, too, may hold potential. First Bank says it is keen to strike a deal with Ecobank Transnational Incorporation to build a wider African network. For all the hype though, the depth of poverty endured by most people in Nigeria may be the biggest brake on expansion. A 56-year-old man named Ibrahim Ramonu who sells shoe laces, brushes and polish at the foot of First Bank’s tower summed up the reason why the vast majority do not open an account: “No money for bank.”

Copyright The Financial Times Limited 2007

NITEL: Big effort to transform moribund state company

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By Matthew Green

Published: July 12 2007 10:49 | Last updated: July 12 2007 10:49

Just a few weeks after taking on the task of turning around Nitel, Nigeria’s shambolic telecommunications company, Tom Iseghohi is already having sleepless nights. “What keeps me up is the excitement of what we’re about to do,” he says. “I’m like a kid who has to go to bed the night before Christmas.”

Projecting a breezily can-do demeanour even over the phone from New York, the new managing director of Nitel’s majority owner, Nigerian conglomerate Transcorp, faces one of the toughest challenges in African telecoms. Mr Iseghohi has given himself 90 days to devise a plan to transform an almost moribund former state carrier into an enterprise capable of surviving a scramble by multnationals for the continent’s fastest growing mobile market.

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With two decades of experience in “business transformation” in giants such as Pepsi Cola, Ford Motor Company and American Express, Mr Iseghohi may need every trick in the book to revitalise not only Nitel, but its parent, Transcorp.

Created in 2005 by a group of Nigerian businessmen close to former president Olusegun Obasanjo, who wanted to forge Nigeria’s first global conglomerate, Transcorp has suffered repeated corruption allegations and boardroom splits. Mr Iseghohi is already the third managing director in the company’s two years of existence, while the only asset making any money is a stake in a Hilton Hotel.

In theory, the 51 per cent share in Nitel Transcorp bought last year should have been the goose that laid the golden egg, delivering part of the phenomenal surge in Nigeria’s mobile phone market since the government issued GSM licences six years ago. South Africa’s MTN and Celtel, a unit of Kuwait’s MTC, have reaped profits, while Nigerian-owned Globacom is fighting to increase its market share.

Signs of growth are everywhere in Lagos, home to most subscribers. Seemingly endless ranks of hawkers weave through traffic fumes to sell scratch cards of phone credit to drivers stuck in jams, while one company sought to raise its profile by paying actors in skin-tight green alien outfits to stand at a roundabout.

Boasting an unrivalled fibre-optic network, a share in the SAT-3 undersea cable that handles international calls, and mobile business MTel, Nitel should have been perfectly poised to deliver Transcorp a foothold. In reality, Nitel is in such a parlous state that bills go uncollected, lines are broken and staff supplement their income by taking bribes from customers. Industry analysts say MTel has a market share of mobile subscribers of about 1 per cent.

Reviving Nitel would not just provide a boost for Transcorp, but benefit the entire industry. In Saka Tinubu Street on Victoria Island in Lagos, crowded with new telecoms companies taking over old buildings, operators say Nitel’s fibre-optic network would help improve services and cut costs – if it ever actually worked.

One company, Medallion Communications, that routes calls from one mobile network to another, was set up last year in a former Shop and Save supermarket, and had to build a satellite dish in the forecourt because Nitel’s links were unreliable.

“People are investing billions of dollars in this industry to grow it. They’re not going to say ‘lets wait for Nitel to catch up’,” says Ikechukwu Nnamani, president of Medallion Communications. “Whatever their problem is, it’s got to be fixed.”

Industry insiders agree that Nitel needs three things: a new plan, an infusion of expertise, and a big injection of capital. None will be easy to find. Declining at this stage to give details, Mr Iseghohi says he is exploring the idea of repositioning the company as a “carrier’s carrier,” turning competitors into customers by renting infrastructure to rival operators.

Given the frustration of callers who often struggle to get more than a few beeps signalling congestion when they try to reach someone on existing mobile networks, carriers might find a reinvigorated Nitel a viable partner. The company would need much more expertise than it has to make that happen, but Transcorp’s early advances to technical partners have been clumsy. BT Group, of the UK, pulled out this year and a replacement has yet to be found. Raising much-needed capital to settle Nitel’s debts may also be tough. Transcorp failed to raise the money it needed to fulfil an initial pledge to buy 75 per cent of the company, in the end spending $500m on a 51 per cent stake.

With Umaru Yar’Adua installed as president, it is also unclear whether the company will retain the same close links with the new government. Fuelling controversy surrounding Transcorp further, the Nigerian newspaper This Day reported that Mr Obasanjo himself owns a $200m stake, though the company says it has seen no evidence that he personally has a holding. He also denies any wrongdoing.

Finding a foreign telecoms company keen to find a way into Nigeria’s lucrative market may be the most likely option for garnering funds, though any big company might be reluctant to take a minority stake.

South Africa’s Vodacom has reportedly been interested in buying Mtel, while Nigerian, South African and Kuwaiti operators were all keen on bidding for Nitel before Transcorp snapped up its stake.

Given Nitel’s performance since then, finding suitors to help Transcorp turn its acquisition into an asset may yet cause bouts of managerial insomnia.“We’re betting our futures on it because we believe this can be done,” says Mr Iseghohi. “When we’re done, everyone will look back and smile.”

Last but not least: although this is not a directly business-related article it is nevertheless pleasant to read ´cos it is so true what is said. A Brit that has at least taken an effort to understand Nigeria:)

GUEST COLUMN: Nigerians are filled with warmth, resilience and humour

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By Keith Richards

Published: July 12 2007 10:49 | Last updated: July 12 2007 10:49

Anyone who has worked in Nigeria for a few years often gets asked ‘what’s it like doing business in Nigeria?’ The question is inevitably loaded with the many negative stories concerning security, corruption and ‘419’ (the penal code for fraud usually associated with the advance fee variety). The reply depends not just on the personality of the expatriate but on the sector in which he or she works. For the average oil industry executive the answer is one of compound life. Security is tight even in Lagos and, by necessity, an obsession the closer one gets to the Delta kidnap zone.

Business is conducted in air-conditioned, modern offices and Nigerian colleagues are inevitably western educated, urbane and articulate. There is no reason to stray outside the “Manhattan” of the best residential areas without an escort. For the manager in a consumer facing business, the reality is very different. Here there is a need to get out there in the market place and understand the drivers and patterns of consumer behaviour. This is when the vitality and diversity and the challenges of this huge country and its people hit you.

Lagos is one of the world’s mega cities and its 14m people live in a disjointed conurbation famous for its infrastructural problems, its security issues and, above all, its traffic; the infamous go-slow. It seems that to reach consumers, retailers and distributors it is necessary to shut one’s eyes, hold your nose and take the plunge but in reality the unique joy of doing business here is to experience the sensory experiences that are on offer.

Despite the cultural diversity of the Nigerian people there are many characteristics in common; warmth, resilience and, above all, humour. To spend an hour in the company of one of the female market traders is to enter a different world. Don’t be fooled by the humble surroundings, maybe a small gaggle of broken chairs in the doorway of a beaten up and over stocked warehouse, this is a million dollar turnover business.

“Mama” will greet you warmly, often with a close and slightly damp hug, with ‘what can I offer you’? Her formal education may have been rudimentary and her accounts kept in a small school exercise book but she knows exactly what her margin is, which brand is gaining share and whether your last advertising campaign met its objectives.

However, before you can get to her, there are the various forms of transport to battle with. Starting from the bottom in terms of size, intelligence and life expectancy we have the “Okada”. This is a motorbike taxi. You can find them congesting cities all over the developing world. Their speciality when squeezing past is bending your wing mirror back so it eventually falls off. Next up are battered yellow taxis. This was once a luxurious form of travel; hence the nickname “oko asawo” meaning it was only call girls with rich clients who could afford them.

Danfo, the VW style minibuses and Molue, the bigger buses, are the next in scale. Their drivers are especially trained at pulling over with no signals, blocking bridges and parking on roundabouts. Their conductors are a work of art. I have yet to know any expatriate who can understand what it is they are shouting. “Obalende”, “Ajegunle” or “you are welcome to enjoy a safe and comfortable journey to a destination of your choice” all sounds like “Obannnaaayyaggghoya” to me. The Molue is often called ‘the people’s parliament’ because of all the arguing that goes on in its crowded interior.

People will always ask about the corruption. Western style codes of conduct will seem a remote concept when handling the plethora of deliberate administrative barriers; from petty Customs officials to local police. However, it is amazing that, with a smile and the suggestion you are not “fresh fish” most of such are easily ignored.

The inevitability of the less than subtle hint from the traffic cop that he hasn’t been paid should be balanced by the realisation that it is probably true. An inspector with about 15 years service will, in any case, only be taking home about $200 a month. A far greater threat to mortality is avoiding the “siren” boys, whether they are escorting some politician, a van carrying cash or just late for tea, they thrash through the traffic waving rifle butts and insist you somehow make room. When I first arrived I tried to do the British thing and remonstrate politely through the window with a police driver who had just wedged us between two other vehicles. “Excuse me officer, where do you expect us to go?”……” comot, ya scrap fo rod. Dis yo driva I go beat am die”. Of course I didn’t understand a word but I got the message!

Great News. Nigeria's economy is definitely booming, and by 2020, the economy should be overflowing with Billions of dollars.

Another is here, I wish to highlight a few basic macro-economic facts:)

ECONOMY: Recovery has failed to reach all the poor

By William Wallis

Published: July 12 2007 10:49 | Last updated: July 12 2007 10:49

From a macro-economic viewpoint Nigeria has been looking in better shape than at any time since the oil boom of the 1970s.

But, given how far it fell in the intervening 30 years and how far most Nigerians fell with it, there may be grounds to pause before uncorking the champagne.

According to a recent World Bank study into poverty, income per capita has only recently started returning to levels reached in the 1970s.

Moreover, 54.4 per cent of Nigerians are still living in poverty.

Some non-oil sectors of the economy – in particular financial services and to a lesser extent agriculture – have burst out of stagnation, contributing to average growth in gross domestic product of about 6 per cent in the past five years.

But the country still depends on oil for as much as 95 per cent of export earnings.

Soaring world oil prices combined with debt relief and reforms in the public management of funds have put federal finances in a healthier position, providing a succession of surpluses, and a record build-up of $50bn in foreign exchange reserves.

This has helped steady the value of the naira against world currencies, and, along with the consolidation of the banking sector, buoyed the stock exchange.

A slew of privatisations has meanwhile reduced the government wage bill as well as the overall role of the state in the economy.

In turn, there has been a paradigm shift in the way richer Nigerians use their own money.

Where once they could be expected to wire most of it offshore, now they are more likely to invest it at home.

“The train has left the station. The new government would not be able to stop it even if it wanted to.

They would only be able to slow it down,” says Kola Karim, managing director of Shoreline Power, which is building an independent power plant to service industry.

An up-and-coming Lagos entrepreneur, his company recently swallowed UK construction company Costain’s interests in Nigeria and its share price has shot up since.

Mr Karim’s belief that he can absorb the assets and brand names of other big European companies retreating from Africa reflects broader confidence within the business community.

Encouraged by this, foreign investment is also returning.

In 2004 foreign direct investment (FDI) stood at $4.1bn, of which only $700m went into non-oil sectors of the economy.

Last year, FDI reached $9.1bn, of which $4.1bn was in non-oil sectors.

Investment banks have caught the bug. Goldman Sachs has placed the country on its global list of 12 emerging economies to watch. Charles Soludo, the central bank governor, claims that if reforms and investment continue apace, transformational growth will deliver Nigeria’s economy into the world’s top 12 by 2025.

For anyone with knowledge of the many obstacles businesses still face or even a passing acquaintance with the painful realities endured by the majority of the population, this sounds distinctly optimistic.

The past eight years have seen significant improvements in macro-economic management at federal level.

This helped Nigeria secure Paris Club debt relief of $18bn in October 2005.

After the government used petrodollars to pay down much of the rest, foreign debt has declined overall from about 60 per cent of GDP to more like 3 per cent.

Technocrats in the government acknowledge, however, that there has been slippage in macro-economic management during the recent election period, and a steady build-up of domestic debt.

If fiscal discipline at the centre is restored, economists say Nigeria would be better equipped than in the past to weather a shock in world energy prices, or an escalation in violence in the oil-producing Niger Delta.

About a quarter of the potential 2.9m barrels produced every day has been shut in recent months due to the activity of militant groups.

But to make real inroads into poverty reduction, the new government will also have to find a way of improving the performance of state and local governments that control the delivery of services, including health and education, and together control 50 per cent of government revenue.

“Nigeria has done a good job at the macro level. That was necessary but not sufficient. It has to be supported by much deeper reform at the state level if it is going to touch the life of the average Nigerian,” says a senior donor official.

“In a sense what they have done so far was the easy part. Now there is a need to improve the capacity of the civil service to implement policy. So far social service delivery has not improved at all,” he says.

President Umaru Yar’Adua says the priorities are to restore law and order, invest more money in power generation, and deepen administrative reforms at the state level so that more Nigerians benefit from higher growth. Many Nigerians have come to expect less from the government.

Bolaji Balogun, managing partner of Chapel Hill advisors, a boutique investment bank in Lagos, says that to sustain momentum it would be enough if the new administration focused on three main areas where the lack of progress has put a cap to date on potential growth: power, transport and education. “If things start to work or even half work, even poorly implemented policies have a multiplier effect because the market is so big,” he says.

Great collections from FT.It's interesting articles about the position of nigeria!I don't know Finacial times published so many articles about Nigeria.

Naija, Financial Times always releases country reports annually about emerging markets worlwide in Asia, Eastern Europe, Latin America ...and now also Africa!

Matthias

FT has been writing Reports on Nigeria since 1990. At first, they used to be negatice reports, then in the mid 90s, the began to be a kind of mixed bag. Then from 2002, the reports began to be more positive.

Adebayoa,

Are you sure that FT released business reports in the 90´s from a country that was considered a pariah state at that time? I doubt it!

Nevertheless, I got the report of 2007 at home, it is rather thick (12 pages!!) and surprisingly pretty positive!

Very interesting articles thanks for posting!

Ahh! Nothing beats a pleasant-newspaper reading as one boards an aircraft!

I was boarding KLM from New York to Amsterdam and literally two steps to the aircraft door, spotted that "NIGERIA SPECIAL" on the cover of Financial Times.

It sure made for fantastic reading / time-killing, considering the aircraft was number 16 for departure!

I found the articles very balanced, but was a little disappointed because everything in there was not news to me. Obviously, this article is targetted at potential investors and curious souls everywhere. For once, Nigeria got (partially) good press. I especially liked the article about the buoyant Nigeria Stock Exchange, which is presumably one of (if not the most) profitable stock markets in 2007!

Looking forward for more specials on Nigeria, especially from The Economist, FDI Magazine, etc. Also if it would interest you the journal "The Banker" has dozens of recent articles and interviews on the rising Nigerian bank/bonds industry...

Yes Mathias there was in the 1990s. However, it was very negative and basically a warning for nvestors to steer clear. Please tell me when this report was released (Date). I will like to go and view it in the library

It was the July 12 copy.

Looking forward for more specials on Nigeria, especially from The Economist, FDI Magazine, etc. Also if it would interest you the journal "The Banker" has dozens of recent articles and interviews on the rising Nigerian bank/bonds industry...


Zexyworm,

thanks for the info, I will look it up!:)

read through this article and i am happy that Nigeria has received impartial coverage as opposed to the usual rubbish we often read from CNN and company. Clearly there is a lot more positive things happening in Nigeria and these must be recognized and its about time that the western media sees past their stereotypes when reporting on Africa.

read through this article and i am happy that Nigeria has received impartial coverage as opposed to the usual rubbish we often read from CNN and company. Clearly there is a lot more positive things happening in Nigeria and these must be recognized and its about time that the western media sees past their stereotypes when reporting on Africa

I couldn´t have said it better!:cheers: Africa is certainly more than the Western media SOLELY takes a develish delight/pride in protraying: Aids, war, famine, dictatorships that suck their countries dry, Whites that are chassed off the land (in the case of Zimbabwe) or whatever!

I am so much in favour of a pan-african media organ run by professional and spirited Africans that broadcasts in English, French and Portuguese with subtitles . When will this happen? When ?????:gaah: :gaah:

Excellent report on Nigeria. At last Financial Times has began to perform a balanced report on Nigeria.

Interview transcript: President Umaru Yar’Adua


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Published: July 10 2007 20:04 | Last updated: July 10 2007 20:04

Nigerian President Umaru Yar’Adua wants to prove he has the legitimacy needed to drive economic reforms despite the rigging and violence that rendered April elections less than credible in the eyes of many Nigerians. The new president has attempted to broaden support by offering opposition parties a place in government with the ruling People’s Democratic Party (PDP), but the parties are themselves divided on whether to accept. Mr Yar’Adua has yet to appoint a cabinet since the government of former president Olusegun Obasanjo stepped down on May 29. Many Nigerians suspect Obasanjo is still trying to exert influence on the national stage, having hand-picked Yar’Adua as his successor.

Nigeria’s new president, Umaru Yar’Adua, spoke to William Wallis, FT Africa editor, and Matthew Green, West Africa correspondent, in the presidential offices in Abuja on July 6.


Financial Times: A lot of people both in Nigeria and abroad still find you a bit of an enigma. Can you give us an idea of what kind of a leader you’ll be?

Umaru Yar’Adua: Well I have said it: a servant leader, that summarises everything.

FT: By that you mean you’ll be serving the people?

UY: Yes, I will be serving the people. I will try to act in such a way that the concept of leadership as we know it will go through to the people, that leaders are there to serve, and that service is hard work and also a sacrifice.

FT: We just discussed your predecessor’s desk when he first took over, which was a mountain of papers. He was a bit of micro-manager, he liked to control and see everything that was going on as far as possible. Are you the same sort of man or can we expect something different from government under your leadership?

UY: My predecessor said that no two people are the same. Of course you are going to have to find different approaches to the same issues because of differences in personality, experience and background and so on. So clearly you expect to see differences for that simple reason that really no two people are the same, and different people are expected to have different outlooks and different perceptions on the same issues.

FT: But will you be more of a delegator? Will you have more of a collegiate type of government?

UY: I don’t know about my predecessor, but that is what a president has to do, because you can’t run the country all by yourself. Definitely that is what the cabinet is there for. I will delegate as much responsibility as is possibly allowed by the law, and then use my office to supervise and ensure that the right thing is done and that the law is respected.

FT: Some people think that the circumstances of your election and how you came to power have divided Nigerians enormously. How do you plan to overcome that legacy? And some people also believe that you’ve been significantly weakened at the outset by this, and forced into making messy political compromises.

UY: I don’t think there are political compromises as such. We have had a culture of disputing almost any election at any level in Nigeria. Any election that has taken place right from 1963, it has always been disputed in such a violent manner. We don’t have a culture of accepting defeat. And I have tried to really determine why this is so. I followed the history of formation of political parties in Nigeria. The first political parties that were formed, they were formed to oppose the colonial government and fight for independence…So you find all these institutions, political parties, the media, the labour unions in Nigeria have a history of opposition to government and constituted authority because they were diametrically opposed to the colonial government in the struggle for independence. And I think this attitude and history tend to shape their actions, so that since independence, any political party not in power will think it is only there to oppose the government in power and try to sabotage and undermine it, no matter whether it is doing anything in the national interest…So this move that I’m making, trying to bring other political parties, really I’m making it in an attempt to change that attitude…I accept there are lapses in our electoral process. Let us work together to reform the electoral process…so that during general elections, let us compete for power with a credible electoral process. After the competition, then let the political parties…support whichever government is formed by the party, when there is a major national issue. For instance, I’ve told them, now this government, if we are going to try to find a solution to the Niger Delta problem, we expect all the other major political parties to come together with the PDP-led federal government and try to solve the problem.

With their attitude, the situation is such that while the party in power is trying to solve the problem, other parties…try to see that the situation in fact becomes worse. So in that way the national interest is being hurt, while actually the political parties are mistaking it for political opposition…

FT: It’s a tough job though, because you can’t actually appease all the political forces in this country.

UY: Of course, there is no way you can do it. But the important thing is that you get them to accept that really we need to compete. Once we reform the electoral process and it becomes credible, then we need to separate competition for power from the attempt to build a modern, industrialised nation which will require effort…because when you want to transform the nation to become a modern industrialised nation under the rule of law, you cannot do it just within one or two terms. It has to be a long-term learning process. And there is a need for…the major parties to agree so that whichever party comes to power, we’ll continue with the major policies that are critical to the attainment and achievement and accomplishment of this objective.

FT: From where you’re sitting, what are your priorities to achieve those objectives?

UY: Well, law and order, rule of law, security, because nothing can happen positively without this background.

FT: So can we expect you to have a very close look at the way the police force operates?

UY: In fact, yes, I think I’ll need to… try to completely reform…the entire police force because that is key to maintenance of law and order… Because you have a situation where once people commit a crime, after six months you go and find that nobody is investigating to find who has committed the crime, so people can commit crime and just walk away because they know there is no attempt to find out who has committed the crime and sanction them… Then we’ll try to look at the critical infrastructure that will assist greatly the economy to grow.

The most critical one we think is power and energy, then education, which is the development of the necessary capacity to manage a growing economy that you hope will transform.

We have in terms of economic policy…(to get) the state to (be) ‘hands off’ (from) production and put the private sector to drive the growth of the economy, and make conditions conducive for investment. We are on the right path. The reform measures that have been taken in that direction, what we need to do is to continue to sustain these measures, so that we have a private sector-driven economy, with government providing the necessary legislative, conducive environment and other necessary infrastructure for this growth to take place. We have the right policies in place and I think all the necessary legislations have been passed. The remaining that have not been passed we are working on them to pass them soon to forward them to the national assembly for enactment into law so that we continue to sustain these reform measures.

FT: Do you see a need for more attention to procedure and more transparency within the system? For example there are still parts of the NNPC (Nigerian National Petroleum Corporation) which are very opaque.

UY: There is the need for that. It’s a continuous process. For instance, you find, I think, the reforms have not up to now touched the petroleum sector, it has touched the energy sector, producing power and steel and so on…But the petroleum sector, the NNPC and so on, really there is a need to reform the sector, make it much more open, much more transparent in its action, and try to reposition it along the philosophy of the reforms, so that the NNPC itself just becomes a national oil company that will compete with other upstream and downstream operators, so that it becomes efficient. Even its joint venture undertakings…let it go and capitalise and go to the capital market.

So these reforms are necessary, and they will continue. All areas that have not been touched, we will reach them with the reforms, in the same spirit using the same philosophy.

FT: If you look at the last few years, Nigeria’s macroeconomic performance has improved considerably and there have been a lot of reforms at the federal level. But isn’t the real problem that you face at the state level, and it’s at the state level that you have the basic delivery of services to Nigerians, which is still failing?

UY: It’s a process, it’s not a one time exercise. What has happened, is the federal government really is in charge of economic policy, and the states if you like, they are more like service providers, to try to…take care of the educational needs of the people, the health needs, the social services needs, provide rural and semi-rural and urban infrastructures….

FT: But that’s where the system’s failing.

UY: This is what I am saying, because the preoccupation with the major economic policy drives within the past eight years, now as we’re finishing that and stabilising that, we’ll move to the states, try to get to the states to be more efficient.

FT: Will you have to lift the immunity of governors, for example, as part of that, to make them more accountable when they’re in office?

UY: You see I don’t think so, I don’t think that is necessary. What is really necessary is for the system to be improved. There are checks and balances, if the state houses of assembly will do their work, there is really no need to lift their immunity… If you are unlucky, especially with the kind of opposition politics played in Nigeria, every move of the governor will be challenged in court…I know in Kaduna…one single individual sued the local government I think 54 times…The danger is that, if you remove the immunity, with the current opposition politics in Nigeria, the chief executive and the government would be completely paralysed. Any move they are going to make, other people can go to court and get a court injunction and so on and so forth and there would be a terrible chaos, but the important thing is to get to the state houses of assembly. There are enough checks within the system to check the excesses of the chief executives at state level.

FT: It’s just a question of making the system work?

UY: Precisely.

FT: Obviously in this last period there’s also been a tremendous amount of wealth generation in Nigeria, but it’s been concentrated in very few hands. How are you going to make sure that there’s a less iniquitous distribution of wealth during this period, that more Nigerians feel the benefits?

UY: I have asked all those major business concerns who have benefited from the boom of the last few years to set up a micro finance fund, that they will underwrite the administrative cost, and build-up to, in the first instance, about 50bn [naira]… without interest, [or] with just about two percent interest. Because I told them they must have a social responsibility because of the booms they have enjoyed over the past four years.

FT: How do you select them?

UY: I asked the Ministry of Finance and the Central Bank, they know them.

FT: Are we talking five people or thirty people?

UY: I think for now about five…Then the issue of transforming the micro finance sector. Even yesterday we just met with some other government agencies in charge of micro financing, to try to see how we [can] strengthen the institutions for micro financing at the micro level, so that small businesses can be helped to develop capacity, and then to access finance…You find over the past four years or so, the policies have placed a lot of money in the banks for micro finance, through various initiatives, but nobody is using it…So there is almost about 200bn [naira] still there, but you find utilisation is less than 20 per cent because there is no capacity at the various levels. Even those who want to set up businesses and who have small businesses, they don’t know how to structure businesses, they don’t know how to make proposals, they don’t know how to access the funds. This is now what we’re going to try to work out to ensure that in every state and in every local government we build capacity so that people can be able to develop business plans and be able to access these funds. I’m sure this is going to help a great deal, because the more we develop this microfinance capacity and expand it, the more you’ll find the benefits of the reforms going down, instead of just being concentrated with big business, it will go the small businesses, medium businesses and small-scale farmers.

The other thing that we are going to do that will help a lot, we are going to try to educate people to participate in the stock market. A lot of people in the state level, the local government level, some who have some savings, they just don’t know what to do with it, so they keep it at home, very few of them keep it in the bank. A lot of the money is just sitting there in the informal sector, so that they don’t know how to better their lives and get more income by participating and taking part in the market…We need to do that to get more people to benefit. And then the other thing that we are going to have to do is to try as much as possible to effect land reform.

FT: To get rid of the land use decree?

UY: Well yes, because…really it is a constraint. If you have a peasant farmer who has his farm, he cannot use it to access credit anywhere in Nigeria. That is an asset, but you can’t bring it into the market, because that asset does not belong to him, it belongs to the government, so it cannot be mortgaged to the bank, he can only mortgage a property developed on the land, but not the land itself, and that really limits the capacity of millions of Nigerians.

FT: So that’s an early priority in legislation?

UY: That has to be an early priority in legislation. This will help a lot of people. People get on and go into business, where do they get their money? Nobody uses their own money, they use other people’s money to do business…No matter how good your idea is [in Nigeria], you cannot use your land to access money. And this I think is going to dramatically improve the situation of a lot of people at the lower income levels.

FT: Can we expect some reversals in the contracts that were signed in the dying days of the last government, for example, on the refineries? Was sufficient procedure followed for you to accept those contracts, or can we expect some inquiries into them?

UY: We are not going to probe any actions of the government. If in the process you see there is need to look into any action taken that has contravened any procedure or regulation, then we’ll look into it, and if it needs to be reversed to conform with regulations and existing procedures, it will be reversed to conform with it. Any action, not only the contracts given or signed immediately, any action that really is not done in the correct way. This is something that anybody can do, either by mistake or because somebody somewhere in the ministry neglects to do their job properly.

FT: People still see the hand of your predecessor, for example, in the formation of the ministerial list you’ve just put to the senate, and they fear he’s going to try to influence you and the presidency during the coming months, and it’s clear that he is still very present in the party, for example. Is this going to create some kind of collision course between the two of you, or do you think you can manage it?

UY: I become surprised when people express these kinds of views. Let me say, for instance, in the formation of the cabinet, the selection of the people to come into the cabinet as ministers, it’s a political process, of the party…The constitution says, for instance, we must have one minister from every state. Now if you take Oshun State for instance, I have to depend on the PDP leaders in Oshun State to recommend who will be appointed a minister to serve in this government. At best is to get three names so I can look at their CVs, and whatever decision I have to take I have to seek their advice because I don’t know these people, they are the ones who know them. The information I have to take a decision, from state to state, depends on our party members and leaders in the state.

The party is an organised body. To do this, the easiest way to do it is through the organisation, not to follow individually. These are processes that are well known, in any government, in any civilian government, that has known democracy, that is what is done here. It’s not like the US for instance, where…virtually you move into government with half or more of the campaign team immediately. So this is a process which is done, and this is the normal way of doing it. The former president, he is a party member, he has been the leader of the party for eight years and you expect him to give more inputs, and more quality advice, than almost all the people in the party…because of the experience he has had over the past eight years. And I think on many issues, I will need to consult with him, even on issues that I’ll come across in the course of executing my responsibilities. Some of the issues I’ll need to know the background of how they happened and what happened in the past before I’m able to take a good decision.

On some of the issues I need to consult him, and on some I need to seek his advice, on some I need to consult others and seek their advice. For instance on some issues that may affect the FCT [Federal Capital Territory], and so on, before I take a decision, if there is something I need to seek advice [on] I can call the former minister of FCT…and say ‘look this is before me and so on, what happened, what is the background?’ He is in the best position to give me information and quality advice that will help me take a decision. I think these things they are natural things, they are the right thing to do. The former president has a role to play in providing quality advice to this administration.

FT: Can we expect continuity in foreign policy, or has the engagement of China in the continent really shaken things up in Africa and requires now a new type of direction in foreign policy?

UY: I think you can expect continuity in foreign policy.

Copyright The Financial Times Limited 2007