Nigeria part 2

Obviously, one question and answer is not enough for an MBA! So here is part 2:

Is Nigeria currently following appropriate policies to encourage global brands to work with local companies?

The Library of Congress Studies state that in 2008, Nigeria’s age distribution was estimated as follows:

With more than half the population at least approaching a working age, it surely does not come as a surprise that Nigeria ranks 37th out of the 183 economies surveyed for ease of employing workers. Ease of business is further enhanced by English being the official language. In 2004 Nigeria’s adult literacy rate was 69.1 percent on average, with a higher rate for men (78.2 percent) than for women (60.1 percent). Nigeria provides free, government-supported education. In 2007 Nigeria had an estimated labor force of 50.1 million. Unemployment was estimated at 4.9 percent in 2007.

These facts do seem to be beneficial for foreign companies to partner with Nigerian entities in order to reduce import restrictions and to minimize supply chain costs on the one hand, and to find new business opportunities for local organizations on the other hand. Consequences of such partnerships would be the creation of local quality jobs, and a more competitive Nigerian workforce through modern management and skills transfer.

Consequently, Nigeria ranks amongst the three largest FDI recipients in Africa. One could argue, however, that this top three listing is only achieved by being a country rich in natural resources (95% of the state budget is generated by the oil and gas industry).

As the following table shows, the United States of America was Nigeria’s largest trade partner in 2000 with a net trade surplus of close to 16 billion US Dollars. Other main trading partners were as follows:

Country Exports (Mil USD) Imports (Mil USD)

United States 16,615 954
India 5,664 288
Spain 3,390 110
France 2,395 470
Italy 1,615 394
Côte d'Ivoire 1,217 n.a.
Brazil 964 259
Netherlands 366 364
China 203 492
Germany 162 859
United Kingdom 10 1,091
Total: 32,601 5,281

The positive trade balance could indeed be direct result of foreign corporations partnering with local entities. Yet, a few challenges still remain, not the least being the volatility in Nigeria’s inflation history. Over the last thirty years, Nigeria has encountered a 30% yearly inflation on the average, yet the trend seems to be a declining one to a level of the current 12%.

So although the spikes of the 1980s and 1990s seem to be past history, a change ratio of almost 200% in not even a decade makes it very difficult for foreign corporations to plan a suitable financial strategy. The Nigerian government in the form of the Central Bank of Nigeria therefore needs to enforce vigorously stable monetary politics.

If we compare the exchange rate historical data of the Nigerian Naira to the US Dollar over a span of a year, we see that the Naira fluctuates around ± 4% around the mean only. Also, historical data shows that the Naira is fairly stable against the Indian Rupee. Foreign long-term investors should therefore have adequate confidence in a relatively stable currency.

Nigeria currently operates a system called Expatriate Quota for awarding work permits to non-
ECOWAS (Economic Community Of West African States) nationals. Under this system, investors are required to apply for a quota of work permits. However, the website of the Nigerian Embassy in the USA (Embassy of the Federal Republic of Nigeria) states that this system is due to be replaced by a common work permit system under the administration by the NIPC.

Additionally, Nigeria is a member of the World Intellectual Property Organization (WIPO) and a signatory to the Universal Copyright Convention (UCC), the Berne convention, and the Paris Convention. On paper at least, Nigeria is well prepared to protect copyrights, yet, as can be observed in numerous articles, the practical implementation seems to be trailing.

As the Change Nigeria Project reports, it is expected that a number of mainly blue chips companies are in the process of relocating to neighbouring countries. The reasons cited for the relocations are infrastructural decay, poor tariff structure, corruption, and growing insecurity.

Yet, actual trade export and import figures seem to prove the success of the Nigerian model. Clearly the recent spikes in oil prices around the world favour Nigeria’s exports, yet Nigeria’s way of diversifying its portfolio also seems to have the right effect.