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Nigeria: Welcoming Investors with Open Arms

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Thinking of starting or expanding a lucrative business in a fast-developing country renowned for its potential in human and material resources?

Look no farther than Nigeria, Africa’s largest economy and largest market with a population of over 200 million underserved consumers of all manner of goods and services. The Federal Government of Nigeria under the leadership of President Muhammadu Buhari has provided investment lavish incentives for bona fide investors ready to exploit the opportunities in many sectors of the economy. The incentives were so effective that the country’s position on the World Bank’s Ease- of-Doing-Business ranking was firming up before it was suspended.

Nigeria’s rising population with an incredible 75% of the populace under age 30 and an excellent regional distribution of eight “anchor” cities each with populations exceeding one million suggests a healthy growth for any well-conceived business.

Most significant, Nigeria is rapidly developing its physical and industrial infrastructure, in terms of transportation, communications, electricity and water supply. Extensive road repairs and new construction activities are gradually being implemented across the country. The rail lines are being resuscitated to improve passenger and freight movement, just as the ports and airports are getting major makeovers and upgrading. These ongoing investments are creating the vaunted enabling environment for businesses to thrive in the country’s economic space.

OIL AND GAS SECTOR
Nigeria’s oil and gas sector, traditionally the mainstay of the economy, still offers great investment opportunities for both foreign and local investors in spite of the official aim of diversifying the economy. There are enormous investment openings in the upstream, midstream and downstream segments of the oil and gas value chain. For instance, investment opportunities are available in pipeline engineering design, procurement and construction, terminal operations, pipe mills, fabrication of pressure vessels, storage facilities, pipe transportation and laying equipment, refineries and central processing facilities.

The new Petroleum Industry Act (PIA) has installed a new culture of transparency and efficiency in the industry and streamlined operations along best practices by implementing strategic reforms at every layer of the sector. The goal is to continue delivering a more competitive, attractive and profitable industry, operating on commercial principles and free from political interference.

Blessed with an estimated 37 billion barrels of crude oil and 202 trillion cubic feet of natural gas in reserves, Nigeria’s oil production capacity is rated 10th in the world and 8th among the Organization of Petroleum Exporting Countries (OPEC); while it is 9th on the natural gas table. This immense potential is yet to be fully tapped.From 2018 through 2025, an estimated $194billion is expected to be spent on capital expenditure in oil and gas activities in Africa out of which Nigeria stands to receive about $48billion.

Nigeria’s current inadequate refining capacity is also an outlet for investment. The country’s three refineries are currently producing at less than optimum capacity leading to a huge petroleum product import bills. Investors with deep pockets will surely find a receptive environment for building new refineries even as Dangote Refinery is on course to commence operation in 2023.

According to the Nigerian National Petroleum Company (NNPCo) which maintains a list of investment opportunities in the oil and gas sector, Nigeria has opportunities for investors in the following areas:

Upstream
l Surveying – tropical and planimetric; and sea bottom survey

l Civil Works- mud pit construction, concrete works at rig sites

l Seismic data acquisition and interpretation
l Drilling operations
l Pipelining
l Crude oil transportation and storage
l Exploration and production of oil and gas products

l Manufacturing of consumable materials in exploration such as explosives, detonators, steel casting, magnetic tapes etc.

l Search for development of local substitutes for items such as medium pressure valves, pumps, shallow drilling equipment, drilling mud, bits fittings, drilling cement etc.

Downstream
n Refined mineral oil, petroleum jelly and grease

n Bituminous-based water / damp proof building materials such as roofing sheets, floor tiles, tarpaulin, and building of asphalt storage, packaging and blending that may export these products.

n Establishment of chemical industries such as distillation units for the production of Naphtha and other special boiling point solvents used in food processing.

n Linear Alkyl Benzene, Carbon Black and Polypropylene producing industries.

n Development of Phase II (Phase III to commence later) in Nigeria’s Petrochemical Programme.

n The Nigeria Liquefied Natural Gas (NLNG) Projects.

n Small-scale production of chemicals and solvents such as chlorinated methane, Formaldehyde, Acetylene etc. from natural gas.

n Crude oil refining with efficient export facilities.

n Companies with the technology can undertake turn around maintenance of refineries. There is a tremendous scope for small-scale joint venture manufacturing concerns with foreign technical partners. Such ventures can start warehousing arrangements that will ensure continuity of supply at competitive prices.

n Products Transportation and Marketing Associated with products distribution and marketing is a chain of manufacturing and maintenance businesses, such as Lubricating Oil reprocessing, LPG bottles and accessories, oil cans reconditioning etc.
There are also investment opportunities in gas-based industries such as Fertilizer, Methanol, Liquefied Natural Gas (LNG), Liquefied Petroleum Gas (LPG) and Compressed Natural Gas (CNG).

Surely, Nigeria’s petroleum sector, with its high quality low-sulphur oil offers one of the best returns on investments in the world.

MINING SECTOR
Nigeria is also richly endowed with a variety of solid minerals. Unfortunately, years of exclusive focus on oil sales has meant scant attention to the vast potential of these mineral deposits scattered all over the country which have remained largely untapped.

With the solid mineral deposits estimated to be in millions of metric tons, it is a viable sector for investors. Since the inception of the Buhari administration, the mining sector has been restructured for growth. The idea is to reposition the country as a serious mining destination in the international mining community. The Ministry of Mines and Steel Development has been working to develop the sector, ensure stronger regulatory framework and create an enabling environment for investors.

Nigeria mining sector has opportunities for investors in the following areas:
Coal: Nigerian Coal is rated as one of the most bituminous in the world owing to its low sulphur and ash content and, therefore, environment-friendly. There are nearly 3 billion tonnes of indicated reserves in 17 identified coalfields and over 600 million tonnes of proven reserves. Coal can be found in Enugu and Kogi states.
Kaolin: An estimated reserve of 3 billion tonnes of good kaolinific clays has been identified. It has been discovered in almost all the states in Nigeria.

Bentonite and Baryte Ore: These are the main constituents of the mud used in the drilling of all types of oil wells. The Nigerian baryte has specific gravity of about 4.3. Over 7.5 million tonnes of baryte have been identified in Taraba and Bauchi states. Large bentonite reserves of 700 million tonnes are available in many states of the federation ready for massive development and exploitation.

Lead/Zinc: Over 10 million tonnes of lead/zinc veins spread over eight states of Nigeria have been discovered in Plateau, Bauchi, Gombe, Nassarawa and Ebonyi, amongst other states of the federation.

Tantalite: Large deposits of tantalite are known to occur in Nasarawa, Gombe and Kogi states as well as the Federal Capital Territory (FCT). The deposits are both alluvial and primary in the numerous pegmatite bodies that infest these areas. Grades of well over 50% Ta2O5 are found. Private investors are invited to stake concessions for the development and mining of tantalite in these areas.

Gypsum: Gypsum, found in commercial quantities in Nigeria, is used in the production of cement. It is also used for the production of Plaster of Paris (POP), classroom chalk etc. Gypsum needs ramping up to sustain existing plants and meet future expansion. Current cement production is put at 8 million tonnes per annum while the national requirement is 9.6 million tonnes.

Rock Salt: The national demand for table salt, caustic soda, chlorine, sodium bicarbonate, sodium hypochlorite and hydrogen peroxide exceeds one million tonnes. A colossal amount of money is expended annually to import these chemicals by various companies including tanneries, food beverages, paper and pulp, bottling and other industries including the oil companies. There are salt springs at Awe (Plateau State) and Uburu (Imo State), while rock salt is available in Benue State. A total reserve of 1.5 billion tonnes has been indicated.

Gold: There are proven reserves of both alluvial and primary deposits of gold in many parts of the country. At present, exploitation of alluvial deposits is being carried out mostly by artisan miners in a few places in the country. A number of primary deposits, which are sufficiently big for large scale mechanized, mining, have been identified in the northwest and southwest parts of the country. Private investors are invited to stake concessions on these primary deposits of relatively high grade and at shallow depth. Proven deposits have been discovered in Osun and Kwara, amongst other states.

Bitumen: The occurrence of Bitumen deposits in Nigeria is indicated at about 42 billion tonnes almost as twice the amount of existing reserves of crude petroleum. When fully developed, the industry will no doubt meet local requirements for road construction and also become a foreign exchange earner for the country. Ondo State and its environs are known to be awash in the mineral.

Iron Ore: Over 3 billion tonnes of iron ore are in Kogi, Enugu, Niger, Zamfara and Kaduna states. Iron is currently being mined at Itakpe (Kogi State), which is more or less at the centre of the region of crystalline iron deposits. The large deposit of iron ore in Kogi and Enugu states are yet to be fully explored.

Talc: An estimated reserve of over 100 million tonnes of talc has been obtained in Niger, Osun, Kogi, Kwara, Ogun, Taraba and Kaduna states. There are only two medium size talc processing plants currently operating in Nigeria and both are located in Niger State. The colour of the Nigerian talc varies from white through milky-white to grey. The talc industry represents one of the most versatile sectors of the industrial minerals of the world. The exploitation of the vast talc deposits in Nigeria would therefore satisfy not only local demands but also that of the international market as well.

Limestone: An estimated reserve of 2.3 trillion tonnes has been discovered. The product can be found in the following states: Kogi, Ogun, Cross River, and Sokoto, amongst other locations.

Granite: The granite deposit in Nigeria is estimated to be in billions of metric tonnes. They are found in Ogun, Oyo, Osun, Ondo, Plateau, Cross River and most other states of the federation.

Diatomite: Over 200,000 tonnes deposit of the product has been found in Borno State.
Lignite: Lignite deposits of 72 million tons have been discovered in Delta State.

AGRICULTURAL SECTOR
Agro-industrial ventures benefit from a five-year tax holiday, an agricultural credit scheme guaranteed by the Central Bank of Nigeria (CBN), subsidized fertilisers and zero import duties on raw materials used to make livestock feed.

No sector of the economy has gotten more attention than agriculture, Nigeria being basically an agrarian state that got lucky with vast oil deposits. The Federal Government’s aim is to make the country a productive, food self-reliant economy. To achieve this goal, the fiscal and monetary authorities were called into a collaborative venture to grow the agricultural sector’s contribution to GDP. The result was a slew of interventions that may be the most audacious in history of Nigeria. One of such initiatives was the central bank’s Anchor Borrower’s Scheme that made funding available at concessional rates to bona fide investors in the production of such staples as rice, wheat and tomatoes.

The sector is still very much open to large-scale farmers interested in producing widely consumed food crops that were traditionally imported at great cost to the economy. Besides, the country is blessed with hectares of arable land for investors in the production of cotton required by the textile industry and used by the beverage industry.

The livestock sub-sector should be closely watched as government is committed to addressing the age-long problem of itinerant herders and open-grazing in the country. The Federal Government is experimenting with ranching to replace the controversial peripatetic nature of herders from the Northern part of the country.

When fully operational and adopted by many former pastoralists and investors, the potential can only be imagined as livestock rearing has been a great income earner for many families in the North as well as dealers in such animal products as beef and other useful materials derived from the large population of cattle, sheep and goats in the country.

MANUFACTURING SECTOR
Areas of industrial investment which receive the bulk of government industrial incentives include:
u Industries which can source their raw materials for the food and beverage industry locally e.g. in the agro and agro-allied sub-sectors for which there are abundant natural resources in Nigeria: fruit drinks, cereal milling, feed mills and vegetable oil processing;

u Industries, which support food production programmes through local manufacture of chemicals, equipment and light commercial vehicles in particular, and chemicals as well as petrochemical-based manufacturing industries in general;

u Industries with multiplier effects such as flat sheet mills, machines tools’ foundries and engineering industries for spare parts;

u Metal fabrication; pharmaceuticals; food processing; leather and leather products; textiles and wearing apparel; non-metallic building materials, e.g. bricks, ceramics and glass.

BANKING AND FINANCE SECTOR
Another good place for the smart investor to take the plunge is the financial sector, notably the banking sub-sector where recent reforms, restructuring and effective regulation have turned honest, hardworking investors into winners. The best attestation of the banking sector’s potential comes from no other than the International Monetary Fund (IMF) whose assessors recently pronounced the sector as “well capitalised, liquid and profitable.”

Banking in Nigeria has benefitted from the work of the Nigeria Deposit Insurance Corporation (NDIC),which attributes the performance of Nigerian banks to improved capitalisation, stricter regulation and supervision as well as the salutary effects of the work of the Asset Management Corporation of Nigeria (AMCON).

Amid huge global and domestic economic challenges, the banking sector has remained stronger than the overall national economy, with profits and capital adequacy liquidity ratios remaining above regulated limits.

Nigeria’s banking sector has gradually strengthened over the more than two decades since the return to democratic rule. The number of banks was whittled down to create a smaller, better capitalised pool of 23 institutions through a process of mergers, acquisitions and higher capital and reserves requirement from the CBN.

The largest African country by population clearly can do with many more banks as the gap in retail banking shows as all banks are technically barred from undertaking non-banking activities directly or indirectly. Regulators insist on licensing banks into various separate entities and categories: Regular and merchant banks are licensed in different categories, as are specialised banks (microfinance, mortgage, non-interest banking and development financial institutions). Islamic banking, which has recently taken root in Jaiz Bank can use more players in a country with a large Muslim population. The CBN has given the green light with its fair comment about the banking system’s soundness. It justifies its optimism by disclosing that total industry assets grew by 20.97% in the year to April 2022, to N64.32 trillion.

TELECOMMUNICATIONS SECTOR
Nigeria is without doubt has the most vibrant lucrative telecommunications market in Africa. The sheer number of players in the fast-growing sector more than says it all. The consumption levels of data for internet-based social and financial transactions are weighing on telecoms infrastructure in Nigeria. The growing smartphone adoption rate coupled with increasing demand for high-speed Internet service is a challenge for operators, which at the same time holds business prospects for existing and new investors.

The number of active Internet subscriptions has exceeded 143 million as of February this year, as broadband penetration stands at 40.9 per cent for a population of over 200 million people.

Sadiq Abu, Chief Executive Officer of Absa, Nigeria, believes that “the outlook for growth in Nigeria’s telecoms industry is strong” and “the gaps in last-mile telecoms infrastructure are largely untapped”. In his opinion, the telcos are already strategically developing useful business vehicles to take advantage of emerging opportunities in the industry.

With the ongoing implementation of the Nigerian National Broadband Plan (NNBP) 2020-2025 by the Nigeria Communications Commission (NCC), which aims to increase broadband penetration to 70 per cent by 2025, it is the time investors aligned with the plan, take advantage of the incentives for network expansion and infrastructure upgrades as the race from 3G through 4G, and finally to 5G tech breakthrough heats up.

MARITIME SECTOR
In 2005, a forward-looking concession policy made the Nigeria Ports Authority (NPA) landlord of ports rather than direct operators. The agency ceded operating rights in Nigerian ports to the private sector, while its management retained responsibility for licensing operators and regulating their activities.

Today, all the 25 terminal operators in the country are private companies which emerged from the concession exercise. The good news is that there is room for more. The enabling law also allows the NPA to engage private entities to carry out its statutory responsibilities of pilotage, towage, and security of the ports as well as maintenance dredging.

Furthermore, opportunities are available for investors in support services such as power, telecommunications, computerization and equipment leasing, without prejudice to openings in the upgrading of port infrastructure and the development of new deep seaports.

REAL ESTATE SECTOR
Investing in real estate in Nigeria has proven to be one of the most popular business ideas in Nigeria over time and there are local investors and entrepreneurs in this space. Nigeria’s housing deficit especially in the fast-growing cities is said to be in the tens of millions of units.

Foreign investors with innovative ideas in modern affordable housing for the mass market will do well to exploit the opportunities Nigeria’s huge and growing population presents. They may also be interested in commercial buildings for shopping malls, conferences and entertainment hubs.

HEALTH SECTOR
There are also massive opportunities in Nigeria’s health sector where some doses of private capital could help close a funding shortfall. The latest report by the Oxford Business Group (OBG) identified investment opportunities in different areas of the Nigerian health sector, including health infrastructure provision, local production of consumable items such as syringes and needles, medical technology, and the pharmaceutical industry.

According to the report, with Nigeria’s large and young population, the longer-term prospects for private sector investment in the health care sector are promising, and the COVID-19 pandemic has created new opportunities for expansion and innovation. It added that private investors could provide high-quality medical services at new and existing facilities. This could help overcome the limitations of the public system and may ultimately lead to more Nigerians remaining in-country when seeking treatment.

AVIATION SECTOR
The Nigerian aviation sector is also replete with opportunities. According to the Ministry of Aviation, airport concessions, starting with the five international airports present excellent opportunities for investments. The five international airports which have been designated as free zones are Abuja, Lagos, Kano, Port Harcourt, and Enugu.

Besides, the Nigerian aviation sector is strategically positioned to take advantage of the expected growth in the African market due to its proximity to Europe, the Middle East and the rest of Africa. Most of West and Central Africa was within a four-hour flying time from Nigeria with no clear dominating airline present. The Nigerian Aviation market is therefore huge, yet untapped. Investors can fully tap Nigeria’s potential and fully harness the available opportunities within the 21 airports managed by the Federal Airports Authority of Nigeria (FAAN). Experts believe that such investors will surely reap huge returns of their investments.

Open-arms welcome for investors
As Nigeria runs through a difficult patch in its development history, it will be trite to say that the Federal Government will do anything to attract investment into the country to complement its spirited effort to grow the economy.

A few weeks ago, the Aviation Ministry, in conjunction with FAAN, delivered on its promise of handing over the management of the international airports to the private sector. It announced the names of preferred bidders for the concession deals for three top airports to the applause of critics and economy watchers. The move proved once and for all time, that Nigeria is really prepared to make the private sector the engine of economic growth in tune with global best practice.

This fits perfectly with President Buhari’s recent shuttle of the world’s economic and financial centres on a sales offensive to assure genuine businesses and investors that they would be “welcome with open arms”.

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