Reasons you should invest in Nigeria, by Access Bank boss
At the recently held Nigeria International Investment Forum, Access Bank Managing Director, Mr. Aigboje Aig-Imoukhuede, indexed the Nigerian economy as a growing economy. Besides, he gave reasons investors should invest in the country. Excerpts.
The size of the Nigerian market
The reality is that if you’re selling a detergent, jean or mobile phones, and you’re counting consumers of your product, one out of every four Africans you come across is a Nigerian. This is a market within one geographical mass largely homogenous. We have various ethnic groups and choice and preferences are pretty much the same.
Something that is going for us is that a huge percentage of our population is young. It is largely on the back of this market that companies both local and foreign who have followed the Nigerian investment market have emerged lions and lionesses of the global investment scene. The market in itself in Nigeria like India and China provides extremely strong opportunities for investors.
Fastest growing economy
We have driven at 7percent over the past 3 to 4 years depending on the chart you’re looking at, placing us at 3rd- 7th in the world. One thing that is particularly more important for a number of the 10 world’s largest growing economies if you look at their GDP base they are not in the same scale as the scope of Nigeria apart from China and India. When you have a 400 billion plus economy growing at 7 per cent with a population of 160 million people growing at 2 per cent you can begin to understand the power of this economy; this is an investor’s dream.
The thing about investing in Africa is typically that you find an attractive market from a population size stand point, and it’s young and it’s resource rich, you tend to have the problems of volatility and macro-economic instability.
In Nigeria we have walked that dream, over the past 5 years we have shown remarkable macroeconomic resilience, inflation mainly appeared high at 12 per cent today but we have positive real interest rates. Gross external reserves stand at over 40 billion dollars.
Debt to GDP ratios are extremely attractive both in the local and foreign sense, and so we do not have any pressures that could cause us to reach or make arrangement to run to creditors.
Also very important is the fact that we have an autonomous Central Bank. One of the other concerns that make investors come into emerging and frontier market is the question of monetary policy independence and whether of course you come to the market in strong and positive conditions, and soon veer off due to interference. Things change overnight and that is not the case in Nigeria since we started with democratic dispensation. So you have a robust economic indicator, one of the 10 fastest growing economies of the world and you have Africa’s single largest market.
Several years ago when we started the economic advocacy for Nigeria as members of the banking community, this was an area where we found it a bit more difficult to articulate the opportunities in Nigeria when you’re trying to sell a huge economic case with political constraints. But I can tell you now that since 1999 the picture is very different; we’ve had uninterrupted democratic governance and not just that we’ve had a growing maturity of the democratic system so much so that in 2012 we have had elections that are not just fair but sometimes even surprise the candidates themselves on how fair they can be and I speak for example on a recent election of the state that I’m from which is Edo State and it is a state that is not controlled by the party at the centre; the party that elected the president.
There was so much agitation as to whether the centre will allow the state conduct an election without interference and I can assure you that the incumbent governor who is from an opposition party really went to town to register his impressions and I think the first person he had to congratulate when he won, was the president, for ensuring that the election was free and fair and these are the types of things you want to hear as an investor.
Probably one of the most robust things in a political economic situation is the role of the media and the Civil Society. We need them and we should allow them the power to really go to town, and that’s very important not just for the political or social process but also from an investor’s stand point. As long as the courts are there and they work and justice is not just fair but its dispensation is becoming quicker you have the voice of the people to ensure that your interests are protected.
In this context I’ll like to give you a case study of banking; what has happened over the past five years in Nigerian banking and it denotes what has happened in a few other sectors such as telecom. If we start our journey from 2005, I just picked that because it marked a significant turning point in the Nigerian banking system; that was the deadline for all banks to reach a capital level of N25billion, people termed that period consolidation.
The Nigerian banking industry has enjoyed significant growth probably one of the fastest and most successful banking sector stories globally and I think I like the sense of Nigeria as an investment destination in a global context which is the theme of today’s forum and we have this regulatory driven consolidation and the mergers of 24 banks from 89 banks and you can look at the logos of the top 5 banks and see that they have changed somewhat and having raised quite a lot of money in the capital market there was a dramatic increase by the Nigerian banks to expand into sectors locally and also into other African markets and a few of us into the UK.
You can see also in line with the Commonwealth Business Council’s geography and area of focus you can see that the Nigerian banks can be described as Commonwealth-like banks. It’s a global world we live in and the Nigerian banks were also affected by the 2008 global financial crisis and in 2009 we had a significant and major regulatory intervention to basically assess the banks, clean them up and ensure that the banks did not colour the rest of the industry and cause investor and depositor confidence problem. In this area I think that several regulators around the world and investment communities around the world can borrow a leaf from what Nigeria did. The government both at the fiscal and monetary side acted very decisively, a number of introductions such as AMCON and several others and I must say that one of the prime actors in the solution set that solved very quickly the Nigerian banking problem is the incumbent minister of trade, Olusegun Aganga, who was then the minister of finance and we went into a second wave of consolidation and we had M and A activity; what is termed the nationalisation of certain banks.
Arising from this process, are much stronger banks, better regulatory environment and much more capable of assisting an investor make a success of his/her investment in Nigeria. The Nigerian banking system is poised for a new era of competition.
I was going to a global investor conference with about 1000 investors in attendance. I like to do a lot of financial analysis and I remember doing an analysis on the top 10 European banks and juxtaposing our bank against the top European banks in terms of size, liquidity and so on. I did that analysis recently and I looked at the top 5 European banks and the top 5 Nigerian banks over the past 5 years.
If you go back 5 years the total profits of the top 5 Nigerian banks was $386 million and that of the top European banks was $60 billion and if you take that to 2011, the top 5 banks in Nigeria had a profit of $1.6 billion and the top 5 European banks had $52 billion.
I don’t want to project 2012 because a lot of people are talking about the wealth Nigerian banks are creating for their shareholders. The growth rate of the top five banks in Nigeria is expected to double and the top five European banks is expected to remain static. You’re looking at a situation where in 2012 the top five Nigerian banks will account for something close to greater than 5 per cent, tending towards 10 percent of the profits of the top five banks in Europe and that is not insignificant; this is exactly what is happening in telecoms.
Good return on investment
The reason Alhaji Aliko Dangote the entrepreneur behind Dangote Group now ranks among the richest men in the world, the reason why MTN is one of the most successful telecoms company and the reason some of the Nigerian banks are now moving and emerging amongst the top 400 banks in the world is largely why you must invest in Nigeria.
The reality is, if you have a good product you have a sensible business model and you’re disciplined, all you need to do is locate your business in Nigeria and you will thrive. With all sense of humility whilst I think that Nigerians make some of the best bankers, in so far as we don’t mismanage our institutions, just based on the demographics and economic realities, Nigerian banks will thrive and similarly no matter the kind of business you do here, it will equally thrive. I believe that there are bright clouds on the horizon.