Nigeria has the biggest economy on the African Continent, a large and youthful population, is resource-rich, but has a problem in the north that has dented the reputation of this sizeable emerging market. Boko Haram was founded a dozen years ago as an extremist group that fights against western education.
Military operations launched against the federal government starting five years ago have changed the game for President Goodluck Jonathan who is seeking a second, four-year term during elections that were pushed back until March 28 due to the unrest.
To date, Boko Haram’s insurgency has been limited to Nigeria’s north, where poverty is the deepest in the states of Borno, Adamawa and Yobe. But international investors have questioned how determined President Jonathan is to rooting out the scourge of terrorism.
“When I see investors it is usually the first or second thing we talk about,” admits Uche Orji, Chief Executive of Nigeria Sovereign Investment Authority, which was founded in 2012. “The reality is we have a fairly large sized economy and fairly large sized area and it has not, in my opinion, led to any drop off in the interest for people to invest with us, “ he added while attending the National Bank of Abu Dhabi’s annual financial forum.
Orji had just finished a closed door VIP lunch where he sat next to larger peers in the sovereign fund universe from China, Korea and Abu Dhabi. Sovereign fund managers have a gravitational pull for safe returns in limited risk environments, so they go through their own internal “push and pull” of weighing fast growth versus security risks.
“On the one hand I am not trying to make it sound insignificant the issue of Boko Haram, but I would say this, it has not affected the appetite of investors,” he said.
Recent evidence suggests the verdict is not completely out on the impact. Nigeria was the number one African destination in total foreign direct investment in the last six years according to UNCTAD, raising $44.5 billion in that time frame. But foreign direct investment fell sharply the last two years, according to the UN organisation, due to perceived political instability and lack of security.
This investment scenario will likely worsen with oil prices tumbling over the past nine months. The latest government figures show that revenues fell 28 per cent between July 2014 and January of this year, and oil — despite the push for diversification — still represents 90 per cent of export earnings.
It is difficult, however, to ignore a near half trillion dollar economy. Even though it has slowed down from its peak of 8 per cent in the fourth quarter of 2010, it is still earmarked to expand 5.5 per cent this year.
Despite the recent oil price collapse, Nigeria sits on the second largest proven reserves in Africa of 37 billion barrels, according to Opec, of which the country is a member.
The oil sector, electricity generation and gas processing have traditionally topped the list for investors seeking steady returns, but as the middle-class expands so too do sectors to choose from, which include consumer facing industries such as health care, banking and telecommunications.
Consultancy Ernst & Young describes two very different views of Nigeria. The firm uses words like ‘exciting’ and ‘dynamic’ while capturing the regional opinion of the country, but says from afar it seems ‘unstable’ and ‘uncertain’.
I asked Orji how he persuades international investors to close that gap. “You come and see the opportunities in the country”, he said from the terrace of the Emirates Palace Hotel. “You might have your impressions changed and in my case and in the case of some investors who have come to see us, who we have taken around, their view changes dramatically once you are in the country.”
Privately, government sources in Nigeria don’t wear such a brave face and suggest the election at the end of the month will be much tighter as a result of the double-barrelled threat of Boko Haram and falling oil revenues. After five years of triple digit oil prices — averaging $100 or more per barrel — Nigeria could have taken a page out of the playbook of the regional Gulf sovereign funds and saved for a rainy day.
Foreign investors like the idea of a big population and expanding middle-class, but Nigerians deserve both security and better services — something that Goodluck Jonathan has been accused of not delivering heading into the polls.
The writer is Emerging Markets Editor and Anchor at CNN International.
