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Discussion Starter · #1 ·
Heady excitement damped by doubt
By William Wallis and Matthew Green

Published: June 23 2008 17:47 | Last updated: June 23 2008 17:47

When the oil price is standing far above $100 a barrel, it is tempting to think Nigeria is one very large part of Africa on which the world can safely bet. Its once formidable external debt is written off. Foreign reserves have expanded more than 10 times in as many years. A total of $55bn in oil earnings flowed into the treasury last year. As much as $76bn is anticipated in 2008. This is despite a slowdown in production caused by investment shortfalls and violence by militants vying for more power and wealth in the oil-producing Niger Delta.

If a shortage of funds were Nigeria’s problem, there would be grounds for a sigh of relief. The country from which one in five black Africans hail is undoubtedly in a better financial position than it has been for generations to rehabilitate its creaking infrastructure, revive state institutions corroded by prolonged misrule, and fulfil its promise as a continental leader.

Moreover, in those parts of the economy where the state has relaxed its grip since the military handed power back to civilians in 1999, the private sector has mostly flourished. Demand for services, such as mobile phone lines and bank accounts, and goods from televisions to cement, has far exceeded expectations – proof to businessmen that statistics recording the extreme poverty in which more than half the population of 140m live, tell only part of the Nigerian story.

The flip side, they contend, is a business community buoyed by a steady trickle of professionals returning from the diaspora and a record flow of home-grown funds. The private sector is seizing opportunities regardless of the federal, state and local governments’ more questionable capacity to do the same.

“Even when oil was at $50 [a barrel] people were optimistic. We are at two-and-a-half times that and there is no sign of a drop. You can’t ignore that, even if we waste a third,” says Atedo Peterside, chairman of the recently merged Stanbic IBTC bank in Lagos.

Excitement about Nigeria’s prospects, broadcast by its fast expanding banks and amplified by the competition between Asia, Europe and the US for its market and resources, has proved infectious.

It has been transmitted by private equity groups such as Britain’s Actis, which has in Nigeria its largest portfolio of investments outside India, and other fund managers who have carved out lucrative niches on the – according to most analysts – now overvalued Lagos stock exchange.

When hopes for Kenya foundered in the bloody aftermath of a flawed election this year, Renaissance Capital, among the more bullish foreign investment banks tapping into sub-Saharan African growth, was quick to point to Nigeria as a healthy counterweight. That could be interpreted as wishful thinking, or as the sign of a remarkable image makeover for a country perceived until 10 years ago as an international pariah, hovering on the brink.

Yet it is hard to reconcile talk at investment conferences of Nigeria’s irrepressible ascent into the ranks of the world’s big, emerging economies, with the mood of uncertainty pervasive that has returned to some quarters of the business, intellectual and political elite.

While Nigeria has so far survived its own elections – more flawed in many ways than Kenya’s – the strains within society have similar roots to those that fuelled violence on the other side of the continent: a political and electoral system hostage to venal members of the political elite and an economy expanding – unevenly, with huge regional imbalances and a growing gulf between rich and poor.

Adding to anxiety in political circles is speculation about the health of the president, Umaru Yar’Adua. He suffers from a chronic illness and was rushed to hospital in Germany for 10 days recently, but insists that he is fine.

With a Supreme Court ruling still pending on the legality of his election, there is ample motive for Nigeria’s multitude of political schemers, who smell an opportunity. By most accounts they are plotting round the clock.

When weighed against these pressures, the pace of change under the year-old government has begun to some Nigerians to seem precariously slow. “I’ve heard it said that this is not just a ‘go-slow’ [the name given to the notorious traffic jams in Lagos]. It is a road-block,” says MD Yusuf, a veteran politician and former inspector-general of police, reflecting on a perception taking root that the enigmatic president has pressed the pause button while wrestling with political demons and – on the economy – working out just what to do.

For those who pin their hopes mostly on oil and gas, this might not matter. With prices as high as they are, there is no shortage of grease with which to oil the wheels of the patronage system on which political stability tends to rest. Yet given the legacy of decay associated with the country’s turbulent, coup-ridden past, Nigeria cannot afford to drift.

Hundreds of thousands of students graduate each year from the country’s under-funded universities. In the absence of sufficient jobs, many resort to crime. Cash so far has proved an insufficient answer. Despite billions of dollars in investment under the former government of Olusegun Obasanjo there is scarcely more electricity in 2008 than there was 10 years ago on the national grid, which by some estimates meets only 5 per cent of potential demand.

The economy should be growing this year at 11 per cent, says Aderemi Babalola, minister of state for finance. The continuing power crisis, together with the problems in the Niger Delta, will shave off at least 2.5 per cent of that, he says.

More worrying, says Dele Cole, a veteran diplomat and politician in a guest column in this report, is the effect of criminality “choking the goose that lays Nigeria’s golden egg”. On a bad day, more than 200,000 barrels of oil are stolen by militant gangs, who ferry it out to tankers plying their illegal trade on the high seas. The proceeds, which by some accounts may now run beyond $10bn a year, he says, have a similarly corrupting effect on security services and institutions as the narcotics trade in other countries and militate against a resolution to the Niger Delta crisis.

In the crumbling and congested oil city of Port Harcourt and the nearby states of Bayelsa and Delta, where more than half the country’s oil is pumped, all pretence at providing public services appears to have been abandoned by state governments, comments one northern industrialist who visited recently for the first time in years.

His part of the country has its own woes. Swathes of the rural north, once home to the world’s largest groundnut crop, survive now on subsistence farming.

Mr Yar’Adua, who cuts a quiet, ascetic figure in contrast to his domineering predecessor, has promised a new kind of government: one that sticks firmly to rules, respects the constitution and brings a sense of service to public office.

So far, the focus of both his government and the National Assembly has been on investigating what went wrong in the immediate past. It has also been on reforms to the oil industry which, if successful, could curb corruption and promote greater investment. But they will need to be handled carefully to avoid spawning further worry in a country that is already one of the most challenging places for energy companies to operate.

For much of the past year, Nigerians have waited, distracted by a slew of investigations into the deal-making that took place under Mr Obasanjo and seemingly prepared to give his successor the benefit of doubt. But there is mounting impatience at the absence of a more forward-looking agenda.

“The PDP [ruling People’s Democratic party] leadership is acutely sensitive that time is running out for us to join the league of developed nations. It has been said so many times that 50 years ago our GDP was higher than the Asian tigers. There is now a sense of urgency,” says Ojo Maduekwe, the foreign minister. It is a view repeated among private sector businesspeople who, sensing the opportunity Nigeria has, hope the momentum is irreversible but are frustrated by delays.

There is no choice but to continue pushing forward with reforms if the country is to avoid decline, says Larry Ettah, managing director of UAC Nigeria, a diversified conglomerate. “It’s a marathon, but it has to be approached in the spirit of a sprint.”

15,148 Posts
Discussion Starter · #2 ·
The economy: Oil wealth fails to dent pervasive poverty

The economy: Oil wealth fails to dent pervasive poverty
By Matthew Green

Published: June 23 2008 17:47 | Last updated: June 23 2008 17:47

Record oil prices, booming banks and the fastest-growing telecommunications market in Africa give foreign investors plenty of reasons to believe Nigeria’s economy is primed to slip into high gear.

But businessmen battling the daily grind of blackouts, bureaucracy and bribe-taking say it will be the government’s ability to deepen the liberal agenda begun under its predecessor that will decide whether growth surges, or continues to simmer.

“There’s a confidence deficit,” says Larry Ettah, managing director of UAC Nigeria, a diversified logistics, food and property group. “We either reform the economy, or we decline and decay – there’s no mid-house between the two.”

After decades of on-and-off army rule, marked by a precipitous decline in living standards, the government has had considerable success in implementing western-backed reforms since Olusegun Obasanjo, the previous president, took over in 1999.

The boxes he ticked turned Nigeria from a virtual pariah for foreign investors to a widely-touted frontier market: clearing external debt; cracking down on money-laundering; winning a sovereign rating; embracing privatisation; consolidating the banking sector; sanitising public finances and steadying the naira.

With oil prices hovering above $130 – leading to a big increase in revenues for Africa’s biggest crude exporter – the stage appears set for Umaru Yar’Adua, the president, to preside over even faster expansion.

Total real growth in gross domestic product has averaged more than 6 per cent for the past three years, according to official figures. The International Monetary Fund projects real GDP will expand by 9 per cent in 2008.

But the numbers hide an inescapable fact that determines the quality of life for Nigerians, both rich and poor: the country is essentially two economies, running on different tracks. The first is founded on oil. Income from crude exports makes up 80 per cent of government revenues, and is projected to rise from $55bn last year to at least $76bn this year, according to Standard Bank.

Trickling to federal, state and local governments through the financial system, the windfall gifted by high prices has helped drive the exponential increase in capital in the banking sector. Lured back by the rapid growth in the financial and telecommunications industries, thousands of foreign-trained Nigerians have swelled the ranks of a small middle class in Lagos, shopping at new malls, or patronising growing numbers of fast-food chains.

In a measure of improved consumer confidence, Mr Ettah says average spending has risen in the past year at UAC’s 272 counters – including the Mr Biggs franchise. Property prices in Lagos are rocketing, and the “Nollywood” film industry has won fans in much of Africa.

Nigeria’s second economy looks much more like other developing countries: dominated by agriculture, which accounts for 37 per cent of GDP, it supports only a tiny manufacturing sector, hobbled by a lack of reliable electricity. In spite of the growth in banking, small businesses struggle to gain access to credit.

Reliable statistics can be hard to find in Nigeria, but the latest official living standards survey says that, in 2004, 51.6 per cent of the population lived on less than a dollar a day. The United Nations Development Programme puts the figure closer to 70 per cent.

For Nigeria to achieve broader-based prosperity, Mr Yar’Adua will have to provide the power stations, roads and schools that will marry the two economies: harnessing income from oil to create the public goods needed for other sectors to prosper.

“The greatest problem for Nigeria today is infrastructure,” says Sam Ohuabunwa, chief executive of Neimeth International Pharmaceuticals. “The economy is crying out for big-ticket investment.”

Mr Yar’Adua, who says he has focused on planning during his first year in office, has yet to unveil guidelines to govern private-public partnerships in infrastructure, or declare a promised “state of emergency” in the power sector. While such measures are promised soon, there is growing impatience.

Unlike Mr Obasanjo, who built up considerable savings by ignoring constitutional provisions entitling Nigeria’s 36 states to share oil wealth, Mr Yar’Adua has given the states their dues. Questions remain about their capacity to spend such money effectively, and the president’s ability to ensure fiscal discipline.

“Policy choices over the next 12 months will determine Nigeria’s future for the following decade,” says Michael Hugman, emerging markets strategist at Standard Bank in Lagos.

“If a balance can be found between spending and saving, with reforms in support, then this growth can be sustained. If not, then the inflation and waste of previous oil booms could be repeated.”

The national assembly has set the benchmark price for oil in the budget at $59 a barrel this year, against an initial proposal of $53, contributing to a projected increase in government spending by almost 40 per cent, Standard Bank projects. That could push headline inflation – which stood at 8.2 per cent year-on-year in April – towards double digits.

The government has mitigated some of the impact of global food price increases by suspending import duties on rice, although soaring costs for the diesel used to power generators – which unlike petrol, are not kept artificially low by government subsidies – are also hitting businesses hard.

With unrest a risk in the Niger Delta, the outlook for oil production is uncertain.

Output could rise well beyond its current 2.1m b/d if the state borrows more money from oil companies to plug gaps in funding for joint ventures, and violence subsides.

Nigeria would, however, have to negotiate an increase in its Opec quota of 2.16m b/d if production shows a significant rise.

For business, the biggest morale boost would be to see Mr Yar’Adua – who some call “Baba go-slow” after Nigeria’s notorious traffic jams – starting to deliver.

Mr Ettah says: “It’s a marathon, but it has to be approached in the spirit of a sprint.”

15,148 Posts
Discussion Starter · #3 ·
Politics: Struggle between king and kingmaker

Politics: Struggle between king and kingmaker
By William Wallis

Published: June 23 2008 17:47 | Last updated: June 23 2008 17:47

Until their own differences pitched them into civil war, Nigerians once mocked the rivalry that developed between British colonial officers posted to the arid and predominately Muslim north and those sent to the creeks and jungles in the south.

“The officers of the north were lean, lanky and brown while those of the south were flabby and white. While those of the north galloped on horseback ... the ones in the south were carried along the bush paths, across crocodile-infested rivers by natives bearing hammocks,” Kole Omotoso records in a humorous take on Nigerian history.

Distant echoes of those distinctions separate the style of President Umaru Yar’Adua from that of his predecessor Olusegun Obasanjo. But as political undercurrents surge again with regional and personal rivalries, few Nigerians are laughing.

Born into a dynastic Muslim family, Mr Yar’Adua, a chemistry lecturer and once committed leftwinger, was raised in courtly surroundings in the northern savannah state of Katsina. He was governor there until he became head of state in May last year. Mr Obasanjo grew up poor but canny in the steamy south-west state of Ogun. He led Nigeria’s federal army to victory in the Biafran civil war and was a military ruler in the 1970s.

Relations between the two former allies have clouded, with repercussions still playing out 13 months after the handover. On his chicken farm outside Lagos, Mr Obasanjo is brooding, his record under attack.

As president he was domineering and impulsive. His urge to pull strings brought him into frequent conflict with the National Assembly. Although he cultivated a home-spun image, he proved far more astute at dealing with proverbial crocodiles than his backers suspected in 1998, when he was plucked from political imprisonment and elected to guide Nigeria into a new era of civilian rule.

His legacy is full of paradox, partly as a result of the company he kept. On one side, he had a team of technocrats instrumental in reviving Nigeria’s economic fortunes. On the other, he had a cast of tycoons whose fortunes he helped make. In turn they helped shake up political networks to his advantage and neutralised threats of impeachment. It is this latter side, the deal-making and horse-trading, that is now under investigation, as part of what Mr Obasanjo’s supporters are convinced is a strategy by Mr Yar’Adua to weaken his predecessor and emerge from his shadow.

It was the northern elite that anointed Mr Obasanjo and ensured he won the 1999 elections against the will of his native south-west. The north was hopeful he would serve all Nigerians at a time when its politicians had surrendered their traditional hold on power in the interests of national unity.

The double irony is that it was Mr Obasanjo who handpicked Mr Yar’Adua as his successor in the ruling People’s Democratic party, not members of the northern establishment who proved unable to counter the bruising tactics deployed to get him through.

Widespread rigging during the elections that brought Mr Yar’Adua to power undermined his legitimacy from the outset. Meanwhile Mr Obasanjo’s insistence on retaining influence, as life chairman of the PDP, has fuelled a power struggle between the men.

In an interview with the FT last year, Mr Obasanjo appeared to sense the coming danger: “We have a saying that the kingmaker is the first that the king kills,” he said, adding that he would be sure to get out of the way. He may have failed to heed his own advice.

Mr Yar’Adua is hard to read. He cuts a soft-spoken and solitary figure, rare in Nigeria’s animated political arena. If he is guiding the agenda of the National Assembly, he is doing so in subtle ways – even those who think they know him well are not quite sure. But it is the National Assembly that has led the probes now tarnishing Mr Obasanjo’s reputation.

A more direct sign of rivalry became evident when Mr Yar’Adua pushed through his own candidate as secretary-general of the PDP, against Mr Obasanjo’s.

“Obasanjo tilted so much to the south, part of what Yar’Adua is trying to do is to reverse some of the excesses of that imbalance,” says Clement Nwankwo, a human rights lawyer.

There are other circumstances, however, complicating the incumbent’s task. His health is one. Some northern politicians, already resentful that he is not exactly their man, are concerned he might not be fit enough to see out a full four-year term.

The vice-president, Goodluck Jonathan, also Mr Obasanjo’s choice and a former governor from the southern state of Bayelsa, is next in line. Should he become president in the next seven years, it would disturb an unwritten entente that power rotates between Nigeria’s three main regions. It is supposed now to be with the north.

Mr Yar’Adua and his aides dismiss speculation about his health, but not convincingly enough to make the intrigues go away.

By all accounts, these are intensifying in the run-up to a decisive Supreme Court ruling on the legality of last year’s presidential elections that is due soon. Seven state governors and a host of legislators at national and state level have had elections overturned at tribunals. Mr Yar’Adua won his first case. The stakes are now higher.

There was a time when the military might have been tempted to step in at such a point. But a further legacy of Nigeria’s best-known chicken farmer was his effort to de-politicise the army. At this stage in history, Mr Nwankwo says, no officer could be sure of the outcome of a coup.

15,148 Posts
Discussion Starter · #4 ·
Foreign policy: Emerging world powers vie for influence

Foreign policy: Emerging world powers vie for influence
By Matthew Green

Published: June 23 2008 17:47 | Last updated: June 23 2008 17:47

In the new scramble for Africa, the big powers do not get to make the rules. With its energy reserves coveted by the US and Europe, Russia and India, Korea and China, Nigeria expects the rest of the world to treat it with a little more respect. “We have woken up from sleep, we are big boys, we know what we want,” says Ojo Maduekwe, Nigeria’s foreign minister, in an interview with the FT. “Standards that are not acceptable in your own countries, in Britain, or Holland or America, will not be acceptable here.”

As the leaders of industrial civilisation begin to wonder where they will find the oil and gas to power growth in future decades, Nigeria – which has plenty of both – believes it can demand more of its partners.

While countries such as Russia and Venezuela have exploited the shift in money and power, brought by rising energy prices, to take a more aggressive approach to foreign companies, all Nigeria wants is what Mr Maduekwe calls a more “adult” relationship.

Specifically, it wants western majors to make the kind of investments that will provide more jobs in Nigeria, a long-standing desire of successive governments. He also says there would be no more of the kind of infrastructure-for-oil deals pursued by Asian companies which have promised multi-billion dollar investments in return for energy exploration rights.

With Umaru Yar’Adua, the president, still seeking to stamp his authority on Nigeria’s fractious political scene after a year in office, some analysts question whether the government has the cohesion needed to exert more leverage in its foreign relations.

But the way Nigeria’s relationships evolve could have implications not just for established companies such as Royal Dutch Shell, ExxonMobil and Chevron, but for the global competition for energy security.

The US, in particular, is banking on Nigeria’s sweet, light crude to reduce its dependence on the Middle East. Nigeria’s 36.2bn barrels of proven oil reserves dwarf those of Angola, its nearest sub-Saharan rival, with only 9bn. And the country’s export terminals lie straight across the Atlantic, free of the kind of choke points such as the Strait of Hormuz that make military planners fret.

In a growing measure of West Africa’s strategic importance, the US Navy launched an open-ended training mission for the region’s security forces late last year by starting a continuous rotation of ships. The exercise is a model for the kind of co-operation the Pentagon’s new Africa command, Africom, seeks to forge with African governments. Mr Yar’Adua has called for US assistance to set up a Gulf of Guinea force to help West Africa protect its energy installations.

Such assets belong largely to US and European majors, which Mr Maduekwe says should plough more money into industries such as power or petrochemicals to boost Nigeria’s economy, rather than just shipping resources abroad.

“We want to remind those who are interested in oil and gas in 2008 that they were those who were interested in our cocoa and groundnuts, in 1958, and we don’t see much difference,” he says. “We think that our friends should now look at Nigeria, not in terms of how much more oil they can take out, or gas, but how much they can add to the value-chain.”

He says the government is also keen to distance itself from the kinds of deals cut with Asian companies by Mr Yar’Adua’s predecessor, Olusegun Obasanjo, who sought to swap exploration rights for pledges of investment in big infrastructure projects. “There will be no behind-the-scenes kind of deals,” says Mr Maduekwe, who served as transport minister under Mr Obasanjo, and supported the previous president’s unsuccessful bid for a third term. “Just because we badly want the energy sector to develop, we’re not going to change the goalposts about the process of getting involved with the oil blocks.”

China, India and Korea each won preferential access to exploration acreage during the last few years of Mr Obasanjo’s tenure, partly by promising big investments in projects such as gas pipelines, railways and refineries. But with no effective mechanisms to ensure the pledges were met, none of the projects has been delivered.

China has revived its offer of a $2.5bn loan made to the previous administration to finance a railway, but Nigeria has sought better terms than the initial proposal. Officials emphasise the loan is not linked to any new oil blocks. Mr Yar’Adua told the FT in an interview in mid-May that he did not believe relations with China had grown closer during the year he has been in power.

The future may spring other surprises for western governments. Moves by Gazprom to establish itself in Nigeria have raised fears that the Russian gas monopoly will gain an even tighter grip over supplies to Europe, although much of the country’s gas lies in blocks already controlled by western companies.

Perhaps aware of such concerns, Mr Maduekwe is keen to reassure the Americans and the Europeans that, provided they avoid “predatory” actions and build a partnership, they are likely to have the edge over the new entrants.

“The traditions of the west, over the years – rule-based culture, strong judicial systems – are even more likely to produce those kind of players,” he says. “Those whom we are used to are more likely to fit into these criteria.”

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1,575 Posts
Power shortages: Electricity cuts create ‘state of emergency’

If Nigeria’s economy is a runner, poised to start a race, then the country’s power crisis is a ball and chain turning a would-be sprint into a shuffle.

“We’re bleeding,” says Godwin Oteri, chairman of the Ikeja branch of the Manufacturers Association of Nigeria in Lagos.

“We have to spend so much on generators that we may as well roll up our money and smoke it.”

Umaru Yar’Adua, the president, has pledged to liberate the country from the crippling impact of constant blackouts by declaring a “state of emergency” aimed at quadrupling generation within the next three years.

Should he do nothing else during his tenure, such a feat would win him the affection in a nation where, for most people, the act of switching on a light is a rarely-savoured treat.

It could also open up a potentially huge market to private investors and foreign power companies, deterred until now by the high level of risk.

Everyone applauds Mr Yar’Adua’s ambitions. But experts warn that the act of bridging the chasm between the parlous state of the grid and massive pent-up demand will involve meshing a complex series of projects with clockwork precision.

Precision has not, however, been the speciality of Nigeria’s power generation authorities, where decades of underinvestment has left the country with, in the estimate of one report, enough capacity to power one light bulb per person.

Putting the scale of the task in perspective, consultants say that the state-owned Power Holding Company of Nigeria (PHCN) has about 6m customers out of a population of 140m, and only actually supplies them with electricity about a fifth of the time. Nigerians are perhaps justified in reading PHCN as “Please Have Candles Nearby”.

From hotels to banks, apartment blocks to breweries, almost every business is forced to run a generator, spending between N40 and N60 per kilowatt hour compared with the PHCN’s tariff for industrial users of N8 per kilowatt hour.

City streets are dark at night. The thrum of diesel engines is the wearing soundtrack of urban life.

As with so many problems in Nigeria’s public sector, the issue is not so much lack of money, but management. Olusegun Obasanjo, the previous president, sought to tackle the crisis by lavishing savings made from a surge in oil revenues to start building 11 power plants.

Mr Yar’Adua summed up the verdict of many Nigerians when he declared that more than $10bn had been devoted to the sector under his predecessor with no visible result.

The National Assembly launched an inquiry, revealing a trail of questionable contracts that caused public outcry, but did little to advance the debate on what to do next.

Mr Yar’Adua, who has made proper planning one of the mantras of his administration, has adopted a two-pronged approach. First, he wants to inject an emergency infusion of cash to provide an immediate boost in capacity. Second, he aims to create the kind of policy framework that will encourage private sector investment.

With the first plank, Mr Yar’Adua wants to spend at least $5bn on making quick running repairs and finishing the projects started by Mr Obasanjo. Mr Yar’Adua’s advisers believe such an investment could boost the output of about 2,500MW to closer to 10,000MW within three years.

They will, however, have to overcome the kinds of management and skills shortages that have hindered public sector project implementation in the past.

The second prong of the plan aims to put the sector on a commercial footing.

The problem up to now has been that the state has kept tariffs for customers so low that power plants run at a loss. It simply does not make business sense to build them.

The government wants to change that by introducing a subsidy of N176bn ($1.5bn) over the next three years to allow distribution companies to maintain low tariffs while still covering their costs.

The new system – known as the Multi-Year Tariff Order – is due to come into effect next month.

The plan is to phase out gradually the subsidies until the sector can run on a purely commercial basis.

Tariffs have been fixed over the next five years, with stepped increases from an average of N6 per kilowatt hour through to N10 from July 1, 2011.

A separate policy for the gas sector aims to ensure power stations can buy cheap energy.

Some experts question whether the subsidy will be enough to encourage private sector investment, arguing that it would be better to leave commercial power providers and customers to agree their own pricing, rather than leaving it to a regulator.

The government may also be making a big leap of faith in assuming that the public institutions that have failed in the past will be able to make the new system work.

As things stand, PHCN struggles even to collect cash from its customers.

Theft and non-payment of bills are rife. Pre-paid meters are helping, but the task of effectively billing millions of (largely unhappy) customers is daunting.

John Heath, an independent consultant with the Nigeria Infrastructure Advisory Facility, a project funded by the UK’s Department for International Development, says restoring cashflow is the key.

“Once the customers start paying in full for a decent service, investors in the power sector will start to queue up in earnest,” he says.

Mr Yar’Adua is in the process of appointing an interim team to carry out his plans. Given the task, Nigerians are hoping he chooses the brightest of sparks.

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The judiciary: Judges start to carve out independent role

The judiciary: Judges start to carve out independent role

Anyone still confused as to the central theme of Umaru Yar’Adua’s presidency must have been enlightened during his recent two-hour appearance on state television.

His default response to a host of issues raised by a panel of prominent Nigerian journalists was the need to establish the “rule of law”, and obey to the letter “established rules and regulations”.

This might seem an integral, even banal part of any government’s role. But in Nigeria, it is an almost radical proposal. Rules, if not exactly made to be broken, have often been so, from the biggest one – the constitution – overturned in half a dozen coups, down to smaller technicalities, for example the payment of electricity bills.

A seasoned politician and businessman laments that, over decades, an unquantifiable proportion of Nigerian ingenuity has been channelled into creating the kind of loopholes and bottlenecks that bureaucratic entrepreneurs use to generate cash.

He cites the proliferating agencies operating at the ports by way of an example. “Bureaucratic inefficiency has always been the godfather of graft,” he says.

Mr Yar’Adua has probably hit on the biggest impediment to Nigeria’s evolution as an efficient and more prosperous nation. The task, however, of turning the system around is vast.

“The rule of law is central to the reform agenda. But there is a danger that it becomes a slogan with no institutional and legal support systems to back it up,” says Olisa Agbakoba, president of Nigeria’s bar association.

In some areas, there has been progress since the military handed power back to civilians in 1999 and with it a new constitution. This removed the executive’s role in appointing and paying judges and has led to the growing independence and authority of the judiciary, even if poorly paid magistrates are still susceptible to bribes, according to Mr Agbakoba.

The judiciary has begun to carve out a central role in regulating politicians, overturning rigged elections at state and national assembly levels. On the verdict of the Supreme Court, due as early as September on the legality of Mr Yar’Adua’s own election last year, his whole project to establish “rule of law” may yet hinge.

The record so far of his year-old administration in meeting its own goal is mixed. The removal of Nuhu Ribadu, head of the Economic Crimes and Financial Crimes commission and the scourge of state governors responsible for laundering billions of dollars in ill-gotten gains, raised eyebrows, particularly abroad. Mr Ribadu’s co-operation in tackling cross-border fraud was lauded by officers in London’s Metropolitan police.

On the other hand, Mr Yar’Adua has gained considerable political capital at home by respecting the constitutional limits of his own role and allowing the National Assembly and state governments a freer rein to develop theirs. This is in marked contrast to his predecessor, Olusegun Obasanjo, who, in the rush to get things done, often rode over constitutional provisions guiding the National Assembly and state governments.

Adopting with enthusiasm the president’s new mantra, the National Assembly is leading a slew of investigations into privatisations, land sales, public procurement contracts and other deals that took place under Mr Obasanjo. Government departments are joining in opening another can of worms with an inquiry into oil block allocations.

Several prominent business allies of Mr Obasanjo pulled out of a $700m deal struck in the last days of his administration to buy state-owned refineries, soon after Mr Yar’Adua took over.

More recently, the sale of the Ajaokuta steel mill to GIHL, the international steel company, was cancelled amid claims, vehemently denied, that GIHL was stripping it of assets.

Many other ventures have been frozen. The concession awarded to the Nigerian company, Airline Services (ASL), to develop and run Abuja’s international airport, is one. ASL won bidding in an open tender with backing from the International Finance Corporation, the World Bank’s private sector lending arm.

Sickened with revelations of immense fortunes made through crony capitalism, the Nigerian public has mostly welcomed the idea of a stricter line, even if sounder ventures are being swept up in the crusade. The dilemma posed, however, by the proliferating review process is that, by the losers’ definitions, the government itself may be violating the sanctity of contracts, contravening law and ultimately scaring off new investment.

It may also be generating a different kind of bureaucratic inertia deriving from fear that, in the future, projects developed today may themselves be torn up or scrutinised.

“There is too much emphasis on the past and not enough on going forward. Yes, we want to catch the thieves, but not at the expense of progress. We want to set examples but not by reversing policies,” says one Lagosian entrepreneur, whose own business is in suspended animation.

Sitting at an expansive desk strewn with a paper trail of works in progress, including a huge analysis of import duty waivers, subsidies, and tariffs, Aderemi Babalola, minister of state for finance, urges patience.

“We are having a radical change in the way we do business,” he says. “By the grace of God, when we do get these things right, they will be much more enduring.”

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Gas: Masterplan seeks to supply domestic market first

Some ends up at Lake Charles in Louisiana. Yet more goes to Cove Point in Maryland, or works its way down to Altamira in Mexico. The rest finishes its journey in the ports of Spain and Turkey, Korea and Japan.

With so much of Nigeria’s natural gas exported, it is perhaps no wonder that the country’s leaders are seeking ways to put more of it to work at home.

Umaru Yar’Adua, the president, wants foreign energy companies to invest at least $20bn in the building of the pipelines and processors needed to harness Nigeria’s deposits for fuelling the power stations, chemical plants and factories of the future.

That looks like a tough sell. Shipping Liquefied Natural Gas (LNG) – gas supercooled for easier transport – to Europe, the US and Asia is highly profitable for western majors; selling within Nigeria is not.

The government, however, senses an opportunity. Nigeria’s reserves – the seventh largest in the world – will play a pivotal role in meeting the fast-growing global demand for LNG. Nigerian officials say that of all the world’s exporters, only Qatar is building capacity faster.

With newer entrants from Britain’s BG Group to Russia’s Gazprom jostling for a foothold alongside established majors such as Royal Dutch Shell, ExxonMobil, Chevron and Total, Nigeria’s leaders should be in a stronger position to demand that locals also get their share.

“The master-servant relationship is sort of in flux, if you will,” says Jason Ambrose, managing director of Palantir Solutions, the oil and gas consultancy. “I think a country with the potential of Nigeria sees for itself that it really doesn’t necessarily need to cater to these oil companies, it can plot its own policy and chart its own course.”

The new gas masterplan, unveiled this year, declares in no uncertain terms that the government will be seeking to prioritise domestic use of its 182,000bn cu ft (bcf) of proven reserves over export.

With big gas producers such as Indonesia and Russia cutting foreign sales to fuel their own economic growth, Nigeria’s sentiments might sound like bad news for tight global LNG markets. The country’s sole LNG plant, owned jointly by the government, Shell, Total and Eni, already accounts for about 10 per cent of world supply and is likely to expand. If possible LNG projects at Brass and Olokola get the go-ahead, then Nigeria’s weighting in the calculus of global energy security could increase further.

Privately, however, Nigerian energy officials say the last thing they want to do is threaten exports. A long-awaited West African pipeline to supply gas to Ghana, Togo and Benin is due to open this year. The government is also seeking investors for a pipeline to carry gas across the Sahara to export terminals on Algeria’s Mediterranean coast. Nigeria has so much gas, the argument goes, there is enough to satisfy both local and foreign demand.

Gas is indeed so plentiful that western companies have had few qualms about burning it as a waste product during oil extraction. The country is estimated to flare as much as 2.5bcf of gas a day, an amount second only to Russia, and almost as much as Nigeria exports as LNG. Only 0.5bcf is supplied to the domestic power sector, where gas shortages are one of the biggest culprits behind Nigeria’s near-constant blackouts.

The government’s failure to devise a pricing policy to make investment in domestic gas infrastructure commercially viable is partly to blame. The masterplan envisages setting up just such a mechanism to ensure domestic industries – in particular power stations – can buy at affordable rates. But the price for suppliers is likely to be well below what they could earn exporting as LNG.

Western majors, obsessed for decades with Nigeria’s oil, have shown more recent signs of progress towards harnessing gas, mainly for export, but also for some power projects. The amount flared is falling, though the government has threatened tough action to ensure faster progress towards a total ban.

Perhaps reflecting frustrations with their traditional partners among the big oil companies, the government says it will seek to break their “stronghold” over gas. Nigerian officials speak in glowing terms about overtures by newcomers, in particular, Gazprom, the Russian energy giant.

Gazprom has offered to make a multi-billion dollar investment in gas gathering projects this year. The company is also mulling participation in the planned trans-Sahara pipeline. “Those people who are already there would prefer to have it all to themselves, but times have changed,” says one senior Nigerian energy official. “There is room for more players.”

With other newcomers such as Centrica of the UK and Germany’s Eon also seeking deals, the next few years could mark a significant reshaping of Nigeria’s energy landscape.

For the country’s 140m people, the big question will be how fast the government can ensure that gas ends up improving their lot, and not simply cushioning the lives of consumers half a world away.

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Telecoms: Explosive growth and a radical transformation

David Mark, Nigeria’s senate president, famously said when he was still a colonel in the army, that telephones were not for ordinary people. For nearly a decade his remark stood the test of time.

Nigeria at the turn of the millennium had one of the lowest ratios of telephone lines per capita in the world, on a par at 0.3 per cent with Papua New Guinea. The vast majority of the population had never even used a phone, let alone owned one.

Some Nigerians therefore rate the explosive growth of the mobile phone industry since 2001, when the award of three GSM licences lit the fuse, as one of the most radical transformations in society since independence from Britain in 1960.

From barely 450,000 connected lines in 2002 – most of them fixed – the country now has 40m mobile subscribers, the fastest rate of expansion in the world. An array of telecoms companies are competing for what some of them believe, given that tariff cuts are beginning to make services more affordable, is about the same again in potential demand.

The impact has been multifarious. By some estimates, including that of Mo Ibrahim, the Sudanese telecoms mogul whose former company, Celtel, is one of Nigeria’s top three GSM providers, increased economic activity associated simply with being able to communicate within the country and beyond contributes a percentage point to gross domestic product growth each year.

This may even have lightened the notorious traffic in the commercial capital, Lagos, given that it is no longer necessary to cross town in order deliver messages, or speak to someone.

There have been associated improvements in government efficiency. It is now possible to speak directly to officials for example, without first being told by one of the myriad public sector receptionists of old to “call back later, he is not on seat”.

Another secondary effect has been to light the way for other service companies, including the banks, which may have underestimated consumer demand within the country.

“The fixed line network is also enjoying tremendous growth which shows me that the average spend of the average Nigerian must be higher than we thought,” says Keem Belo’Osagie, chairman of Emerging Market Telecommunications Services, which recently acquired a fifth GSM licence for $300m.

As more operators have entered the market, marketing strategies ever more inventive – a far cry from the days when Germany’s Siemens had a near lock on supplies to Nitel, the monopoly state provider, and only the elite had phones.

One glamorously dressed young lady, introducing herself as Ugochi at a British High Commission cocktail party for the Lord Mayor of London last month, turned out to be a sales woman for Visafone, a mobile and fixed wireless telecoms company started recently by Zenith Bank. She launched her pitch before quickly circulating to the next guest.

According to the Nigerian Communications Commission, the regulator, the federal government has raked in $2.5bn in licence fees. The sector overall has absorbed more than $11bn in investment over the past six years. That is now set to rise again.

Atedo Peterside, chairman of the recently merged Stanbic-IBTC in Lagos, says his bank has recently organised $2bn in financing for MTN, the South African company and current market leader in Nigeria with a turnover of N350bn last year.

The investment, he says, is not so much towards increasing market share but to improve service quality, something that Nigerians grumble about, given that calls often fail to connect. This also explains why 40m subscriptions do not necessarily translate into 40m Nigerians with mobile handsets. Bigshots sometimes juggle four phones with four different lines, to be sure that at any point one might work.

“MTN and others first went for what brings in the revenue [subscribers]. Now they are worrying about fine tuning,” says Mr Peterside. “All that MTN has to do now to triple its revenues is to make all the calls on their network work,” he adds.

Globacom, a Celtel and MTN competitor, showed that, by providing a slightly better service, it could eat away at market share and quickly expanded its subscriber base to about 15m, overtaking Celtel even though it was a late starter in the business.

This example encouraged Mr Belo’Osagie of EMTS to form a joint venture with Etisalat, the Emirati telecoms company and Mubadala, the Abu Dhabi sovereign investment fund, to launch the fifth GSM company.

“We will concentrate on newcomers, for example the young. We also hope to have a much better network, with higher service standards that will draw high-end users,” he says.

Back in 2000 when companies were estimating potential demand in Nigeria at about 5m subscribers, the big international players decided that entering the market was too big a risk.

One of them was furious with a senior employee for merely expressing the company’s interest in the GSM licensing round without approval. “He was nearly sacked. In hindsight, it would have been the best deal he ever did,” says Mr Peterside.

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The new middle classes: Market forces create a local infrastructure for aspiration

Olisa Adibua calls himself a “lifestyle engineer”. For 10 years, he has presented The Road Show on the Lagos-based commercial radio station Cool FM. His audience is Nigeria’s new middle-class.

“With the way the economy has been restructured, with banks able to give you loans for cars and houses, there is now a middle class,” Mr Adibua says. “That is the meat you need: the young guy, just out of university working in a bank or a telecom company. He’s got a bit of money. He’s happening.”

Mr Adibua’s typical listener is a Nigerian, about 27 years old, hooting his way though Lagos afternoon traffic in a tokunbo, a “fairly-used” car probably brought in from Benin and bought with a loan, the repayments spread out over the next few years.

A few years out of university and working as a junior executive – in one of the banks, the telecom sector, oil industry or the many spin-off ventures around these – he could be earning as much as N3m ($25,000) a year. Rising up the corporate ladder, he could earn up to five times that amount.

He invests as much as a third of his salary in the stock exchange. With four months’ savings, about N500,000, he can buy a Danfo, one of the yellow commuter minibuses, from which he will make an additional N75,000 a month. Or maybe he can open a DStv sports bar in Ajegule or Oshodi, employ a relative to run it and exploit the public’s fanatical interest in the English Premier League.

Together with these side investments, he may well earn about $40,000 a year.

This is the new Lagosian, a creature of market forces and a decade of civilian rule. Analysts have a name for him: the emerging professional. “Markets threw them up. They never existed before,” says Bayo Adekanmbi, strategy director at DDB Lagos, an advertising agency.

“They are the real Nigerians, the sons and daughters of the very poor people,” says Mr Adekanmbi. “What drives them is clearly a sense of ambition and a strong optimism. Every day is lived to break out of their old worlds into their desired world. They live on their imagination. They know how to turn ordinary things into big things. Interestingly, in most corporations they are the most brilliant young chaps because they have grown up in the midst of adversity. They have lived true to their environment. They have learned both structured and unstructured knowledge. They understand both the high and the low.”

Before the return of civilian rule, today’s “emerging pro” could very well have been yesterday’s illegal immigrant, hanging on to the idea of a better life as he juggled temporary jobs in south-east London. With banks and other private-sector players aggressively recruiting Nigerians both locally and internationally, many young professionals now aspire to building their careers at home rather than abroad. And there is, among them, a renewed sense of “Naija-ness”.

This is perhaps best reflected in renewed interest in Nigerian music. “Every Nigerian is now conscious of who they are,” says Olisa Adibua. “Our music and our films are dominating Africa. Five years ago, you couldn’t go into a club or bar and hear Nigerian music. Today, if the DJ doesn’t do at least a one-hour set, people will ask him what’s wrong.”

On FM radio stations, Nigerian popular music, a homegrown version of American hip-hop and R&B, strongly appeals to this class of upwardly mobile urban Nigerians.

“But there is a false dimension to the emerging pros,” adds Mr Adekanmbi. “They mimic a lot of internationality. They are the most ‘enlightened’. They will tell you all the hotels in London, even if they have never been there. They’ve read it on the internet.”

This market, feeding at once the desire for western popular culture and the need for things homegrown, has opened opportunities for franchising and reinvention. A few years ago, Mr Adibua partnered with friends to set up Storm Vision, a media company that has had much success in reproducing western reality TV shows for the Nigerian market. Over the past four years, the company has produced Big Brother Nigeria, Dragon’s Den and, most recently, Apprentice Africa.

“We’re at the arrow-point of creating trends,” says Mr Adibua. “We’re part of the coolness.”

It is similar in the retail sector. Mall culture arrived in Lagos four years ago with the opening of the Silverbird Galleria, a stunning dome-shaped mall on Victoria Island with chic boutiques, unisex hair salons, a fast-food franchise, a sports bar with flat-screen TVs, and “Il Bagno”, offering the latest imported toilet and bathroom designs.

On the top floor of The Galleria is a multiplex cinema, Nigeria’s first. Silverbird Cinemas, like the more recent Nu Metro Cinemas, a South African franchise located in the Palms Mall, screens Hollywood movies that have just been released.

“We wanted it to be a place where kids can hang out,” says Jonathan Murray-Bruce, general manager of Silverbird Cinemas.

Ben Murray-Bruce, chairman of the Silverbird Group, is already building similar cinemas in Abuja and Port Harcourt, with plans to expand into Ghana, Kenya and Zambia. “I want to build the biggest movie theatre chain in Africa,” he says.

The Silverbird Group made a name for itself in the early 1980s by staging Miss Nigeria and bringing acts from the US such as Shalamar and Stevie Wonder.

After a lull during the military years, it rejigged its operations. Now, along with The Galleria, the Group owns a TV and a radio station.

“A Nigerian will always invest in Nigeria. The problem is, we never had leadership that encouraged this,” says Ben Murray-Bruce.

For the upwardly mobile “emerging pro”, the infrastructure for his aspirations is being put in place.

“Maybe he has never been outside Nigeria,” says Mr Adibua. “Now, he doesn’t have to. You don’t have to run away to London for a good life. Now, you can have it right here.”

1,575 Posts
Banking: No time to lose in quest for sophistication

First came the hawkers, thrusting flyers through car windows. Next it was musicians, gyrating atop carnival floats in the city’s gridlocked streets. Finally, the battle of the banks took to the sky: a lone helicopter buzzing overhead in the most extravagant share-marketing ruse of all.

For much of last year, it was impossible to cross Lagos without being bombarded by invitations to buy a stake in one of the fastest-growing banking industries in the world. But with stock prices starting to shed some of their J-shaped gains, and many Nigerians getting their first taste of a falling market, investors are taking a cooler-headed look at the sector’s potential pitfalls.

In April, US regulators fined United Bank for Africa, one of Nigeria’s biggest banks, $15m for “recklessly” disregarding anti-money laundering laws at its newly-opened branch in Rockefeller Plaza.

UBA says it has since strengthened internal controls, but its trouble in New York cuts to the core of the biggest question hanging over the sector: can Nigeria’s banks handle the risks posed by their explosive growth?

Capitalisation has expanded exponentially since the central bank conducted a consolidation exercise in 2005, cutting the number of banks from 89 to 24. The sector raised more than $10bn during last year’s stock market frenzy alone. Share prices have risen so fast that JP Morgan rates some of the leading institutions – UBA, Intercontinental Bank and First Bank – as more than 40 per cent overvalued.

But the bulls say that traditional methodologies miss the point. Nigeria, they argue, is unique. Nowhere else, the theory goes, is the gap between the current size of the banking industry and the potential demand for financial services so big. According to Afrinvest, the investment bank, total loans as a share of gross domestic product was just under 11 per cent in 2006, versus a global average of 130 per cent, leaving plenty of room for growth. Nigeria’s surging oil revenues make the picture look more compelling.

“A lot of money will be made by clever and careful investors,” says Bolaji Balogun, chief executive of Chapel Hill Denham Group, an independent investment banking firm in Lagos. “There’s real value in the top dozen in the sector.”

Executives at the top-tier banks cite the oil and gas industry and Africa’s biggest telecommunications market as the focus for the corporate business. By some projections, Nigeria could need as much as $600bn for infrastructure finance during the next 15 years alone. Nigerian banks and foreign counterparts anticipate big deals to fund road and power projects.

In a country where perhaps 10m to 15m people out of a population of 140m have accounts, banks are scrambling to tap what could be a huge retail market. Consumer credit, car loans and mortgages have only recently started to take off.

And bigger banks believe they can challenge South African rivals in markets across the continent. Most of the top Nigerian institutions are already present in neighbouring Ghana. In the latest move abroad, Access Bank has just announced it has acquired stakes in banks in the Democratic Republic of Congo, Rwanda and Ivory Coast.

But to exploit such opportunities, the banks will need to acquire a level of sophistication in their systems, skills and management that has been absent in the past. With lending to the private sector up almost 100 per cent last year, there is no time to lose.

Nigerian banks relied for years on handling government deposits and the archaic practice of charging fees for basic services to clients – known as commission on trade – rather than supporting growing businesses.

As competition across the sector intensifies, relatively inexperienced lenders may succumb to the temptation to book increasingly risky credits at lower returns to maintain market share. The proportion of non-performing loans, which has been falling, could again start to rise.

The structure of lending, too, may heighten the banks’ exposure to political risk. Some institutions have a large proportion of their loans tied to a small number of large companies, often led by chief executives who have used government connections to prosper.

Several leading banks were named last year in money-laundering charges against former state governors. Large quantities of loan volume tied up in shaky stock market positions is another potential weak spot.

Tayo Aderinokun, chief executive of Guaranty Trust Bank, says fears over systemic risks are overblown. His bank’s capital has grown from N12bn ($102m) to N170bn ($1.4bn) in four years, a rise not uncommon among its peers. “I can make 10 mistakes and I’m still in business,” he says. “With all this capital now, there’s more room to experiment.”

Such experiments include rapid roll-outs of new branches and ATMs to capture the retail market; new territory for most operators. Nigeria, however, lacks the kind of credit bureau that banks in more advanced economies use to assess an individual’s credit-worthiness.

Penetrating other African countries is expensive, and potentially distracting at a time when Nigeria itself is still a highly-contested market.

For all their global ambitions, the combined capital base of Nigeria’s 25 banks is still only about the size of the smallest of South Africa’s big four. And in the US and Europe, where banks such as UBA and First Bank are targeting Nigeria’s large diaspora, regulatory requirements are tougher.

Tony Elemulu, UBA’s chief executive, describes the US fine as a “baptism” that holds important lessons: “We want to take our plans to the next level where compliance for all becomes second nature.”

Today, there is widespread anticipation in the market that the banks’ rush for scale will trigger a second wave of consolidation, creating perhaps five national champions, and cutting the overall number of banks into the teens.

Last year, the senate president criticised banks for deploying young women to try to entice clients.

Banks that want to emerge as long-term winners will have to come up with more convincing methods for assuring investors they offer more than an attractive façade.

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The film industry: A documentation of the African experience

In a presentation to the minister of information in 2004, Femi Odugbemi, Nigerian filmmaker and president of the Independent Television Producers Association of Nigeria (ITPAN) at the time, outlined the problem with Nollywood: “[While] Nigeria purportedly ranks as one of the largest producers of ‘film’ in the world, courtesy of about 20 home videos it produces every week, the industry has yet to take a proper shape [nor is it] accorded any serious respect internationally.”

The criticism masked much deeper issues of control and ownership that were affecting Nigeria’s booming film industry and have persisted ever since. In a decade and a half, Nigeria’s video film business has grown from a trickle of experimental productions to a multi-million dollar industry. Releasing between 600 and 900 films a year, Nollywood – the term first used in a 2002 article in the Washington Post, entitled ‘Step Aside Hollywood, Bollywood, here comes Nollywood’ – is the third biggest film industry in the world.

It employs thousands of people and reaches millions more across the continent and the diaspora. Nollywood actors are now household names across Africa. DStv, the South African continental pay-TV network devotes an entire channel to it. In the Nigerian press, a cult of celebrity has sprung around them, the minutiae of their lives dissected daily before a star-struck public.

Nollywood films, with their everyday themes of success, failure, love and religion have resonated strongly with ordinary Africans who, until recently, often only saw themselves when they were being caricatured in western film.

There have been criticisms. “We haven’t yet done films about events, the Nigerian civil war, or about our heroes – Nnamdi Azikiwe, Queen Amina of Zaria, Prince Opobo,” says Lagos radio personality, Olisa Adibua. “You can only take so many black magic movies. I think Nollywood’s vision is blinkered. It is a case of ‘this formula works so let’s stick with it’.”

Nollywood’s films, however, are made for a mass audience. The deliberate melodramas borrow heavily from traditional theatre; the stories speak of the aspirations and fears of ordinary Nigerians.

“We all migrate to Lagos to make it,” says acclaimed writer and director, Don Pedro Obaseki. “When we don’t, we attribute it to all kinds of things – extra-terrestrial forces, withcraft. That’s what Nollywood is about.”

“The language of our films is local,” says Mr Odugbemi. “They are consumed by people who share our experience. Nollywood has become a documentation of the African experience.”

Produced fast and cheap, Nollywood films arrived in Nigerian households through an informal but highly efficient distribution system set up by Igbo electronics traders selling video cassettes and recorders in Nigeria’s giant markets.

As sales rocketed, the traders began financing the productions themselves. But there were no real guarantees on how their monies were being used. When they realised that some filmmakers were double-dealing, getting funding from multiple traders for a single film, they decided to assert themselves.

“The marketers started insisting on following the filmmakers,” says Mr Obaseki. “They would give, say $10,000 and accompany you on location to make sure the money was being used judiciously. Then they started appointing friends and relatives to oversee production.”

Buoyed by the success of the industry they also turned their hand to filmmaking. “These guys who had the money now became decision-makers on location,” he says. “There was a gradual erosion of the authority of the pioneering filmmakers, the creators of the industry.”

Over the years, the filmmakers have tried to wrest back control of the industry. In late 2002, filmmakers went on strike. No film was produced for three months, after which a glut of films was released, mostly by the traders-turned-filmmakers, and with disastrous results.

“When the production hit 40 films a week, the retail shops became inadequate,” explains filmmaker Amaka Igwe, one of Nollywood’s pioneers. “Consumers couldn’t buy 40 films a week. So they began renting the videos. There was a boom in piracy. Every barbershop and hair salon was selling Nollywood. The marketers tried to increase sales by merchandising – all kinds of gimmicry. But the simple truth is that the market was saturated.”

Sales flattened out, a situation not improved by the influx of cheap Chinese DVDs. The latest attempt to bring order to the industry has been to fashion a new distribution network with government backing. The Nigerian Film and Video Licensing Board is set to license, at different levels, film distributors and sellers. The initiative has already received federal government backing and awaits legislation at the state level. If put in place, it will do what many filmmakers are now crying out for: regulate the industry. The plan involves the creation of central clearing houses in every state, all of which will have clearly identifiable distributors authorised by the NFVLB.

“We need to grow distribution beyond Idumota, Iweka Road and Pound Road,” says Mr Igwe, referring to the main film distribution markets.

But it is unlikely that the marketers will give up without a fight. The struggle for control of the industry started at Nollywood’s inception. It has never been clear, for instance, which came first, the pioneering artist or the blank videotapes in Kenneth Nnebue’s electronics shop in Idumota, Lagos.

According to the story, which has become Nollywood myth, Mr Nnebue, an electronics dealer, agreed to finance a film from a script delivered to him by a young writer, Oke Okunjofo.

Mr Nnebue was saddled with a huge backlog of empty cassettes. Videos had recently become popular as import restrictions were lifted. Traders were making a killing importing and distributing second-hand video recorders.

At the same time, public TV had suddenly dropped a number of popular indigenous soap operas in favour of cheaper Mexican dramas. Actors, writers and directors from those soaps, all of whom had become household names, were now out of work.

Seizing on the popularity of the defunct soaps, Mr Nnebue hired one of the directors and many of the actors for the new project. The resultant film was called Living in Bondage. It sold about 50,000 copies and spawned an industry.

Fifteen years on, says Mr Obaseki, “Nollywood is on pause. It’s a point that every movie industry gets to. Before, the industry was based on selling. It was developing as a trade rather than an art and a business. A business must have a lifespan. A brand must breathe and live.”

3,127 Posts
Financial Times, a world respected and acclaimed Newspaper have taken a look into Nigeria's Past, Present and Future and they came up with a special Report on Nigeria. They know things have changed and are changing for the better. Never have FT written extensively on Nigeria talking about positive changes...they used to just write about the negatives on Nigeria but now it's changing and it is for good. I shall tell you guys when I finally relocate to Nigeria to do my bit for the country I have always love so much.

All we need to do now is to support the man Yar a dua...he is a man of vision, his critics say he is slow but he is fighting some relentless underground battles with powerful cabals and cartels around Nigeria who are trying to halt his changes for their own selfish good.

It is time for the crawling Giant to walk upright!!

5,047 Posts
By James Blitz and William Wallis in London

Published: July 11 2008 21:31 | Last updated: July 11 2008 21:31

Gordon Brown faces strong resistance to his plan to help Nigeria restore order in its main oil-producing region, with Britain’s defence chiefs fearing it would further stretch their resources.

The UK prime minister, who is to meet Umaru Yar’Adua, the president of Nigeria, in London next week, said he wanted to assist in protecting pipelines and shipping lanes in the Niger Delta.

He is considering offering maritime training for the Nigerian armed forces to make oil installations less vulnerable to looting.

The plans do not include deployment of British troops in significant numbers, but the country’s defence ministry is said to be resistant, warning it might further stretch military resources.

“This idea is not about sending in more troops, but it would still mean gifting the Nigerians with stuff, giving them kit,” said a senior Whitehall official. “As a result there is a bit of a spat going on over what the prime minister wants to give and what the MoD is willing to do.”

Mr Brown believes it is important to shore up security in the region because of the impact of lawlessness on Nigeria’s oil supply. Unrest in the delta has cut its capacity to pump oil by a quarter in recent months, helping to drive up world oil prices.

However, the idea of boosting maritime training for the Nigerian armed forces must overcome several hurdles if it is to be realised, not just the MoD’s resistance.

British officials admit it is far from clear whether Mr Yar’Adua would accept such an offer. “We want a conversation with him where we say that we want to help and look at a range of things on offer,” said a Downing Street official.

The plan has received a mixed response in Nigeria, where one official said the authorities were hoping for help in curtailing an international cartel trading in stolen Nigerian crude.

“The networks compromising security in the delta now go beyond our national boundaries. There is an international dimension to this,” the Nigerian official said.

Every day more than 100,000 barrels of Nigerian oil are illegally tapped and traded, the proceeds of which help to finance the insurrection, which compromises the state’s ability to restore order.

Mr Yar’Adua last week called for the creation of a system to track crude oil that would be similar to the Kimberley process set up to curb the trade in conflict diamonds.

On Thursday, the Movement for the Emancipation of the Niger Delta, the main group vying for a greater share of wealth and power in the region, called off a unilateral ceasefire and warned that if Britain stepped in to assist the government, “UK citizens and interests in Nigeria will suffer the consequences”.

Defence experts believe any action in Nigeria would further stretch UK forces. Sir Jock Stirrup, air chief marshal and chief of the defence staff, said last month that Britain’s military was already “very stretched”, with thousands of troops on tour in Iraq and Afghanistan.
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