NIGERIA’S INVESTMENT CLIMATE AND OPPORTUNTIES

Presentation By

Engr. Mustafa Bello, FNSEExecutive Secretary/CEO

NIGERIAN INVESTMENT PROMOTION COMMISSION

At the Nigeria Business Investment Forum

November 20th 2009, Bern Switzerland.

Presentation OutlineStructure of the Nigerian Economy

Drivers of the Nigerian Economy

Economic Targets

Nigeria’s Competitiveness

The Nigeria Business Environment

Basic Investment Legislation

Investment Opportunities

Conclusion

SITUATING NIGERIA IN AFRICA

4

NIGERIA – PROFILE: GOOD PEOPLE GREAT NATION

Official Name - Federal Republic of Nigeria

Location - West Africa, AfricaGovernment - Democratic

since 1999Land Area - 923,768sqkmPopulation - 140million

(2006 Census)

Official Language - English Capital City - Abuja Currency – Naira (N) International Time Zone - +1GMT

5

STRUCTURE OF THE NIGERIAN ECONOMY

• Capital-intensive oil sector– 95% of foreign exchange earnings, and – about 80% of budgetary revenues

• The Non-oil sector – Major contributors of the non-oil activities are

• Services– moderately driven by technology – Private sector-led– Telecommunications industry with growth rate between 26

– 29% per annum• Agriculture sector

– employs 66% of workforce – highly subsistence farming system

6

ECONOMIC INDICESGDP Growth Rate - 6.2% (2007) and estimated 6.8%

(2008)Sector Contribution

Oil & Gas - 23.7% (2007)Agriculture - 42.2% (2007)Industry - 19.4% (2007)Services - 16.1% (2007)Utilities - 3.5% (2007)Transport - 2.7% (2007)Finance & Insurance - 3.8% (2007)Inflation Rate - 15.1% (2007)

Purchasing Power Parity - US$294billion (2008)Foreign Reserve - US$52.82billion (Dec, 2008)

US$48billion (March, 2009)

Source: CBN, Abuja

7

REAL GDP GROWTH RATE (%)2000 - 2008

0.00

2.00

4.00

6.00

8.00

10.00

12.00

Real GDP Growth

5.30

10.60

6.00 6.206.60 2000

2004200620072008

2006 2007 2008

Source: CBN, Abuja

2000 2004

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DRIVERS OF THE NIGERIAN ECONOMY• Rule of Law

– anchored on Good Governance, Transparency, Accountability, Zero-Tolerance for Corruption

• Empowerment of the Private Sector– Public Private Partnership (PPP) initiatives

• Commitment to creating Enabling Business Environment– Port and Customs reform– Infrastructure concessioning and regulation – Land Use reform – Financial and Insurance sector reform – Business Entry procedures – The Civil Service reform– The sustenance of the Image Project– Amnesty Programme of Rehabilitation and Re-integration in the

Niger Delta Region Low External Debt― US$38billion (2006)― US$3.5billion (Feb 2009)

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ECONOMIC TARGET

• The 7-Point Agenda targets the following– Proactively maintain competitive macro economic

indices • Single digit inflation rate • Average GDP growth rate of 7% >10% >12%, 2009-2011-2015• Ensure stable exchange rate against major currencies

(currently $1 = N150±)

– Building and expanding economic infrastructure • Generate 6,000MW of electricity by Dec 2009• Increase rural infrastructure by 40%

– Increase the GDP of agriculture sector by 15% to remove parity with GDP and assure Food Security

10

NIGERIA: 19TH RECIPIENT OF GLOBAL FDI INFLOW 2007-2008 (BILLIONS OF DOLLARS)

22

12

27

32

23

56

24

25

22

108

35

44

111

54

28

55

183

84

158

271

18

20

22

23

24

25

38

42

44

45

45

47

60

63

66

70

97

108

118

316

0 50 100 150 200 250 300 350

Tur key

Niger ia

Mexico

Singapor e

Japan

Ger many

Saudi Ar abia

India

Sweden

Canada

Br azi l

Ausr al ia

Belgium

Hon Kong, China

Spain

Russian Feder ation

Uni ted Kingdom

China

Fr ance

Uni ted States

2008

2007

NIGERIA: TOP 10 RECIPIENTS OF FDI INFLOW IN AFRICA, 2007-2008 (BILLIONS OF DOLLARS) - UNCTAD

11

1210

12

6 52 2 2 2 3

20

16

9 9

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5

10

15

20

25

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co20072008

12

Nigeria’s Output Growth versus Peer Countries Average  2000 – 2008 (%)

13

THE REAL GDP GROWTH RATE CONSISTENCY OFNIGERIA WITH SELECTED COUNTRIES (2006-2009)

-2

0

2

4

6

8

10

12

14

Nigeria South Africa Ghana Cote dÍvoire Tunisia Ethiopia Cameroon

2006200720082009'

Sources: CBN, SA Reserve Bank, World Economic Report (2008)

2009’ Data projection

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THE NIGERIAN BUSINESS ENVIRONMENT

Macroeconomic and political stability;  

Public fiscal management, and creditworthiness

Growth in Non‐Oil Exports: $1.8b and $1.9b in 2007 and 2008; $900m realized in the first 9 months of 2009Governance; Rule of Law; Legal and regulatory frameworks

Commitment to Reforms; Pro‐Private sector, investor‐friendly policies

Capacity to Deliver

Prowess of local financial institutions and development of markets

Achievements 

THE NIGERIAN BUSINESS ENVIRONMENTChallenges:

Widening Income Gaps and Wealth Distribution, aggravated by: Dependence on Oil Exports, which finance Overdependence on Imports

High cost of Infrastructure = retards competitiveness of business, promotes poverty

Completion of sector regulatory agenda (several bills to be passed)

Rapid scaling‐up of Capacity, esp in PPP management

Increase long‐term funding for infrastructure investments

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BASIC INVESTMENT LEGISLATIONS

• The Nigerian Investment Promotion Commission Act 16 of 1995; – Investment Protection Guarantees

– Non-expropriation of Investment: The NIPC Act No. 16 of 1995 guarantee that ‘no enterprise shall be nationalized or expropriated by any government of the federation

– 100% ownership of investment in any sector (except ones listed in the ‘negative list’) irrespective of nationalityGuarantee of unconditional transferability/repatriation of funds through an authorized dealer, in freely convertible currency

• The Foreign Exchange (Monitoring & Miscellaneous Provisions) Act 17 of 1995– Repatriation of Profit

– Under the Act 17 of 1995, investors are free to repatriate their profits and dividends net of taxes through any authorized dealer in freely convertible currency.

• There are other sector specific regulatory legislations.

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INVESTMENT OPPORTUNITIES Investment Opportunities exist in all sectors of the economy, especially:

Power/Energy Oil & Gas (extractive and non-extractive)Agriculture & Agro AlliedWaste Management etcMaritime, Shipping and PortsSolid MineralsBanking & Financial servicesTourism / Hospitality ManufacturingPharmaceuticals and Health servicesInformation & Communication Technology (ICT)Industrial Parks and Clusters as landing platform

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INVESTMENT OPPORTUNITIES: POWERPrivatization/Concessioning of Generation & Distribution companies

Expansion of the transmission grid by increasing wheeling capacity to 16,000mw

Expansion of Gas Transmission Infrastructure

Rehabilitation of existing plants (Thermal, Hydro etc)

Completion of NIPP Projects: Transmission, Generation, Distribution & Gas Pipelines estimated at $3billion

For more information (CLICK)

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INVESTMENT OPPORTUNITIES: TRANSPORTATION

ROAD:Construction of Major Bridges on BOT

PPP of Major Highways on Design, Build, Maintain, Operate and Transfer (DBMOT) of Major economical viable routes

Total Asset Management of Some Core Network

Quarries and Asphalt Plants

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INVESTMENT OPPORTUNITIES: TRANSPORTATION

Aviation:Airport Terminal Concessions and Terminal Development on BOT

Runway Construction and Rehabilitation

Aircraft Maintenance Facilities

Aviation Security and Safety Infrastructure

Aviation Security and Safety Training

Integrated Airport Transportation System

In-Flight Catering Services and Infrastructure

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INVESTMENT OPPORTUNITIES: TRANSPORTATION

Railway:Right of Way Concession

Passenger Coaches

Station building and operations

Branded Cargo lines (e.g. for oil companies, flour mills steel companies, cement companies etc

New Track Construction from Narrow Gauge to Standard on BOT Basis

Inter-modal facilities (Road/Rail/Sea Port)

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INVESTMENT OPPORTUNITIES: TRANSPORTATION

Maritime and Ports:

Greenfield Port Development (Lagos, Port Harcourt and Warri)Water Front Development/Inter-modal Jetties (Lagos and Calabar)Port Infrastructure Expansion and RenewalDredging and Channel MaintenanceInland Container Depots on BOOTDevelopment of River Ports for Inland Water TransportationGreenfield Dockyard.

For more information (CLICK)

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INVESTMENT OPPORTUNITIES: MANUFACTURING

Automobiles industry:

opportunities for establishing local plants abound with:

establishment and provision of automobile service centres

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INVESTMENT OPPORTUNITIES: AGRICULTURE

Contributes 40% to the GDP Investment in dams and irrigation infrastructure development

Large scale factory driven agriculture in identified areas of crops, livestock and fisheries

Investment opportunities exist in research & extension, mechanisation, input provision, agro-processing, storage & market development, bio-fuel

Large scale commercial Agriculture - production & processing with a view to adding value to Rice, Sugar, Wheat, Cassava, Oil Palm etc

For more information CLICK

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INVESTMENT OPPORTUNITIES: WASTE MANAGEMENT etc.

Opportunities:Conversion of waste to wealth

Establishment of waste transfer loading stations

Operation of waste management enterprises

Public Private Partnership – For more information CLICK

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INVESTMENT OPPORTUNITIES: TOURISM

Nigeria’s Home Movie industry the 3rd largest in the world

Audience growing all over the world

Opportunities:Establishment of hotels and resorts near waterfalls, springs etc

Beach Tourism

Heritage/Cultural Tourism Resources Development

Wildlife Tourism Resources Development

Building of tourist lodges – Nigeria will host Football World Youth Championship in 2009

Marketing/Distribution of Nigerian Films

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INVESTMENT OPPORTUNITIES: SOLID MINERALS

Mining now a Government priority (Nigerian Minerals and Mining Act, 2007)New investor friendly minerals policyMining Cadastre Office establishedSector opened to private sector from monopolyOpportunities:⇒ Development of Bitumen, Tarsand in Nigeria⇒ Exploration and Mechanized Coal/Lignite Production

Reserve estimated at 15 billion barrelsCoverage 73 square kilometre

⇒ Exploration and Development of Barytes and Bentonite for the Oil Industry and Gypsum for the Cement Industry

⇒ Exploration and Development of Phosphate Resources for the Fertilizer Industry

⇒ Processing of Iron Ore

For more information CLICK

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INVESTMENT OPPORTUNITIES: TELECOMMUNICATIONS

Fastest growing sector: 26 – 29% per annumSales, installation, repair and maintenance of telecommunications terminal, facilities and equipment; Major Networks in Nigeria – Active SubscribersMTN – 23million Zain – 17millionGlobacom – 16millionProvision and operation of telecommunications services

Cellular mobile telephony, paging and trunked radio; Value Added Network/Data Services (Internet, Voice Mail, Electronic Mail services)

Local Manufacture of EquipmentThe local manufacture of switching and transmission equipment

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INVESTMENT INCENTIVES IN NIGERIAGeneral Incentives:

Vast arable land – over 60% of Nigerian land area is suitable for agriculture and remains under utilizedTrainable, resourceful and cost effective workforce with 60% youthStrategic location – hub of the West and Central African MarketsRelative absence of natural disasters / calamities; i.e. no earthquakes, hurricanes or major floods etc.Highest Return on Investment (RoI) in Africa

― 35% - 45% generally (70 – 100% in some sectors)

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Statutory IncentivesUp to 5 years Corporate Tax Holiday

* Capital Allowances: Research & Development – use of local inputs – 140%

Investment in infrastructure 20% of costs

Minimum local raw materials utilization –20% for 5 years

Very low VAT regime of 5%

…INVESTMENT INCENTIVES IN NIGERIA

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The NIPC is the Government agency charged withresponsibility for promoting and co-ordinating both foreign and domestic investments

Mission: To Proactively Position and Promote Nigeria as the Preferred Investment Haven

Vision: To be the Pre-eminent Investment Promotion Agency in the Emerging Markets

WHO ARE WE?

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OUR SERVICES• Investment Promotion and Generation

– Organise out and in-bound missions (Business and Investment Forum)

– Match-make investors • Private/private sector• Public/private sector

• Investors Relation– Pre and Post investment services – Grant Business Permit and register foreign investments

• Investment Facilitation– Business authorisations/licenses

• e.g. Telecommunications license and Expatriate Quota

• Policy Advocacy– Advises government to enhance the business climate– Champion reforms to create an enabling environment

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THE ONE-STOP INVESTMENT CENTRE (OSIC)

An investment facilitation mechanism

Accommodating 16 relevant government agencies (Additional 22 agencies to join by the end of 2010)

Coordinated and streamlined to provide prompt, efficient and transparent services

guidelines for issuance of business approvals, permits and licensesfast track business entry requirements to reduce the cost of doing business in Nigeria

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CONCLUSION o Government has taken bold steps to do the right thing

;fix power, develop infrastructure, tackle security, fight financial and economic crimes, improve justice system and reform electoral process to be electorate-friendly

o The economic reforms have succeeded in reshaping the investment climate with tremendous inflow of FDIespecially in telecoms, banking, manufacturing and agricultural sectors

o Given the investment friendly disposition of Nigeria, there is no better time than now to invest in Africa’s most profitable economy