Nigeria’s New Direction
BY: AMY JADESIMI
Muhammadu Buhari’s inauguration on May 29, 2015 has taken Nigeria in a new direction, one that is so far characterized by national pride and international confidence. Off the back of Buhari’s win, Bloomberg and the Financial Times reported that the Nigerian Stock Exchange Share Index had become the best performing index in Africa after an 8% jump, telling Nigeria’s naysayers that its “unfilled potential” could finally be about to be tapped.
Certainly, our story still has its villains – from Boko Haram crippling Northern Nigeria through terrorism, insurgency and fear, to corrupt officials d coffers from their desks in Abuja or Lagos. The fuel crisis that has now spilled into July, combined with low oil prices and underwhelming economic growth (about 4.5% this year), all add to a challenging situation.
However, the optimism in President Buhari’s new direction is well founded and unwavering. The president has a proven track record of sweeping away Nigerian villains and he hit the ground running, starting with the toughest problems – Boko Haram and the U.S. $70 billion oil and gas sector. Within days of his inauguration the President moved the army Head Quarters to Maiduguri, the state hardest hit by Boko Haram. This action sent a strong signal to the Nigerian people and to our allies in the region, who immediately lined up behind a Nigeria-led coalition.
Even prior to the NNPC Board being dissolved on June 26, 2015, an investigation had already started into the petroleum sector. Within weeks Nigerian refineries, which previously had not been fully operational for years, are now coming online.
President Buhari isn’t driving this “new direction” alone: for the first time in Nigeria’s history, its growth is now being funded largely by its private sector. Billions of U.S. dollars that were being siphoned abroad are now being invested in railways, pipelines, oil blocks and power stations. The most powerful people in the country have now tied their fortunes to sound economic growth policies, stability, job creation and training in Nigeria.
International investors have never had a higher appetite for Nigeria. Abuja and Lagos are swarming with teams from top private equity and equity funds, analysing a growing list of investment opportunities. Razia Khan, Africa Chief Economist and Regional Head of Research at Standard Chartered Bank, noted to Business Day recently that private equity interest in Nigeria “is just extraordinary.”
Northern Nigeria also has tens of billions of dollars in untapped resources. Safer cities and villages will bring significant investment, leading to jobs and economic opportunity, drawing people away from jihadism.
There is now considerable pressure on the President to make public policy statements and fill key posts, thus confirming that he is going to be able to build the governing team he needs to maintain this new momentum.
Nigeria has the dubious honor of being one of OPEC’s worst performers when it comes to its petroleum sector’s contribution to GDP – below 11%.
Essentially Buhari’s challenge is to turn that 11% number to Nigeria’s advantage. The 11% shows the extent of untapped potential Nigeria has. The local market must increase five-fold just to service the needs of the petroleum sector.
Very few countries have such a huge, untapped yet easily accessible market, as well as a local population with significant financial resources and human capital.
A perfect example of the marriage between good governance and private indigenous investment is the LNG sector. Historically, Nigeria only pursued large LNG projects, less than U.S. $5 billion. These have been plagued by huge cost overruns and delays. But now the Nigerian private sector is building small LNG plants and monetizing gas assets in small on and offshore fields, driving local financing, cheap power and job creation.
Similarly, Nigerians are taking over onshore oil blocks which are not reliant on foreign technical expertise. For the first time Nigeria has a 100% indigenous Deep Offshore Logistics Base in Lagos, whose 24/7 operations are 50% cheaper than the bloated government funded monopoly that used to be the only option.
These changes tell the new story of Nigeria, one which is led by local private investors, backed by their own capital, creating state-of-the-art local solutions that are building Nigeria into an industrial power house.
In the 1980s Nigerian novelist Chinua Achebe once said, “Nigeria is what it is because its leaders are not what they should be.”
Today, President Muhammadu Buhari is seen by many as Nigeria’s answer to Singapore’s Lee Kuan Yew and South Korea’s Park Chung-hee. Buhari’s New Direction is almost certain to succeed in the Nigeria of 2015, where he needs above all to concentrate on his key areas of strength – security and good governance – while the Nigerian private sector works with international investors to do the rest.
As the President told a rapt crowd at his inauguration speech, “We have the opportunity, let’s take it.