Transcript Business Environment and Challenges in Nigeria

Business Environment and
Challenges in Nigeria
Presentation By
Mr Larry E Ettah
GMD/CEO
UAC of Nigeria Plc and Chairman CAP Plc
at the Akzo Nobel Conference
Presentation Outline
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Introduction
Nigerian Economic Overview
Business Environment Challenges
Expectations of Akzo Nobel as Business
Partner
• Conclusions
Introduction
Nigerian Economic Overview
• Nigeria is Africa’s second largest economy in
terms of GDP ($175Bn as at 2008) second only to
South Africa.
• GDP growth has averaged 6-7% since 2003.
• The country is the largest in terms of population
in Africa, with population estimates now
approaching 150 million people!
• The population distribution is weighted in favour
of younger citizens with 52% nineteen years and
below; and over 80% below 40 years of age.
Nigerian Economic Overview (contd.)
• Nigerians are entrepreneurial, dynamic and amenable
to global lifestyles and consumption-oriented.
• Per capita GDP has improved from under $700 in 2004
to $1,418 by December 2009 reflecting economic
growth, but wealth distribution is heavily skewed with
54% of the population classified as living below the
poverty line.
• Telecommunications has experienced a revolution with
tele-density at 58%; 95.7million mobile/GSM;
11.7million mobile/CDMA and 2.7million land lines as
at August 2010, from just 400,000 total lines in 2001.
Nigerian Economic Overview (contd.)
• Nigerian has experienced its longest period of
uninterrupted civilian rule after independence in 1960
since 1999 even though there are questions about the
quality of the electoral process.
• There has also been various economic reforms since
1999, particularly between 2003 and 2007 in
telecommunications, banking, pensions, insurance,
downstream petroleum, mines and minerals etc.
• The current president appears to be resuming reforms
suspended by his late predecessor, particularly in the
power sector and privatisation.
Nigerian Economic Overview (contd.)
• But the macroeconomic picture is weakened by a
dependency on oil which provides over 75% of the
national budget and over 90% of export earnings.
• In addition GDP growth is disproportionately based on
oil export; un-modernised agriculture and trading; with
manufacturing now contributing less than 4% of
national output.
• The major constraint to manufacturing is powernational power generation is around 3,700 MW versus
possible demand in excess of 20,000 MW (including
suppressed demand)
Business Environment Challenges:
Social
• Rising Crime and Insecurity
– Armed Robbery and Kidnapping in Eastern Nigeria
– Militancy in the Niger-Delta
– Recurrent religious and sectarian crisis in parts of
Northern Nigeria
• Education and Health Services have suffered
from under-investment during military rule
• Absence of social protections
Political
• Elevated political risk as 2011 elections
approach
• Regional and ethnic tensions associated with
power rotation
• Political Corruption
• Multiples Taxes, Charges and Levies from
Federal, State and Local Governments and
Agencies
Economic
• Weak Infrastructure, particularly power and
transportation
• Businesses have to provide alternatives to public
services:–
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Alternative Power Generation
Security Services
Courier and Postal Deliveries
Water Boreholes
• Problems associated with export and import
logistics-ports; customs; inspection services; etc
Economic (contd.)
• Mostly Imported Inputs
• Exchange Rate Risk
– In December 2008, the Naira was devalued from
N117/$ to N150/$
– With Falling External Reserves, further
devaluation is a possibility
• High Interest Rates (Prime Lending Rates
around 18%)
• High Inflation (13.7% as at August 2010)
• Strained Financial and Capital Markets
• New law on local content (Game changes)
Expectations of Akzo Nobel as
Business Partner
Conclusions
• Nigeria is a huge potential market which continues to
experience GDP growth averaging 6-7% through the global
recession.
• In spite of its environmental and infrastructural constraints
and challenges, Nigeria remains a high return business
environment, and one which stands poised to experience
economic and social transformation. “Challenges exist, we
don’t mourn them, we don’t complain about them , we
take those into account as reality as we design our business
models”.
• Akzo Nobel can work with UACN/CAP Plc to mitigate some
of the challenges assured that the medium to long term
prospects for our market is very positive.
Thank you for listening!