What is currently the ideal corporate structure and industry in order to make the most of business with and in Nigeria?
The following table gives an overview of the recent growth rates of the different industry sectors in Nigeria:
|
Sector
|
Average annual Growth Rate (%)
|
Share of GDP
in 2004(%)
|
|||
2001
|
2002
|
2003
|
2004
|
||
Agriculture
|
4.0
|
5.0
|
5.0
|
6.0
|
51.5
|
Industry
|
2.0
|
1.0
|
1.0
|
3.0
|
20.7
|
Manufacturing
|
0.0
|
-4.0
|
4.0
|
4.0
|
-
|
Building and Construction
|
6.0
|
6.0
|
4.0
|
4.0
|
2.1
|
Wholesale trade
|
1.0
|
3.0
|
2.0
|
2.0
|
11.0
|
Retail trade
|
4.0
|
4.0
|
4.0
|
4.0
|
28.1
|
Surprisingly, the hydrocarbon industry, the by far largest sector in Nigeria accounting for 80% of the nation’s GDP is not listed, reducing the credibility of the above source. At best the table presented can be used as a general overview of Nigeria’s industry sectors and their general trends since, as Budina et al. state, oil exports account for a historically fairly stable 90% of Nigeria’s total exports. This together with a Bonny Light market contract price of around US Dollar 120 per barrel, compared to around US Dollar 20 per barrel ten years ago, Nigerian total exports are expected to have increased fivefold over a time span of merely ten years.
From a pure money flow point-of-view, the Nigerian oil and gas sector would therefore seem to be the industry to participate in since it also receives by far the majority of FDI. Though the Nigerian law states that precisely this sector does not allow 100% foreign ownership, partnership with a local entity would generate additional incentives and thus possibly offset any potential direct financial drawbacks by partnering with a local business. However, the Nigerian hydrocarbon industry is plagued with unrest and disputes requiring in-depth expertise of the local and regional socio-economical factors to operate successfully operate within Nigeria.
As an example of the upstream oil and gas trade, a SWOT analysis of Shell Nigeria would look like the following:
Strengths:
|
Weaknesses:
|
Opportunities:
|
Threats:
|
Most issues under weaknesses and threats are being faced on a daily basis by hydrocarbon industry corporations all over the world. These issues are not Nigeria specific and thus are part of the common operations of any oil- and gas company, leaving the aspects under strengths and weaknesses to be the deciding factors. Especially the estimated unproven oil and gas resources of the country could swing the economic pendulum into further positive territory, once the framework has been established and will be sustainable.
Many indigenous industries qualify for ‘pioneer status’, a special designation allowing them to take advantage of a tax holiday of up to seven years. Within the hydrocarbon industry sector, the manufacturing of oil well drilling materials, the manufacturing of fertilizers Ammonia and Urea, the re-refining or re-cycling of waste oil, the manufacturing of gas and the distribution thereof, and the mineral oil prospecting and production qualify for the incentive scheme.
In conclusion, I would argue that the hydrocarbon industry is the place to be in Nigeria. With the trade being diversified from large, capital intensive projects, such as oil exploration, to small, specialized operations, such as gasket manufacturing, any corporation should be able to find its prospective niche. Since the oil- and gas trade is prohibited from 1005 foreign ownership, the structure of the company is limited to a joint venture ship of some sort with a local partner.
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