Investing in Nigeria

With painful irony, oil-rich Nigeria is unable to supply its own population  with electricity. The country ranked 178th of 185 economies on access to  electricity for new businesses in the World Bank’s latest “Doing Business” publication.
Infrastructure is, not surprisingly, a key to the country’s future  development, as an FT Special Report sets out.
Recurrent power outages have forced more than 90 per cent of industrial users  in Nigeria to install their own (expensive) generators. So reforming the power sector is one of president Goodluck  Jonathan’s top priority. His government has hired Canada’s Manitoba Hydro to  manage the state-owned transmission network and privatisation plans are  encouraging green energy investments.
But the privatisation process has stalled. Jonathan has  flip-flopped, revoking a transmission management contract earlier this month  before changing his mind again. The bidding for the six generation businesses  and 11 distribution businesses has been likened to the privatisations in 1990s  Russia as concessions have been given to local tycoons. But defenders of the  process claim the partnership of local companies with know-how and foreign  companies with expertise makes sense.
Nigeria’s road networks are equally inefficient. The 49km  Lekki-Epe toll road is a model for the country – no potholes and efficient gas  stations – but it is a rarity. The average worker spends up to five hours each  day commuting and deliveries are unnecessary slow. Even the Lekki-Epe toll road  faces problems as the government and concessionaire are at loggerheads and the  introduction of tolls has sparked protest.
These problems of corruption and inefficiency extend beyond  infrastructure. The banking industry was cleaned up with the Nigerian Stock  Exchange suspending and delisting companies for poor compliance.
Now oil and gas is in the spotlight. Efficiency is low and criminals steal over 150,000 barrels  per day every year. An investigation was ordered after an attempt to withdraw fuel subsidies sparked protests in  January, tarnishing Jonathan’s reputation. It found that, between 2002 and 2011,  billions of dollars of royalties went unpaid and gas has been sold at cut  prices. The proposed solutions include simple records of production and Diezani Alison-Madueke’s Petroleum Industry Bill could clean  up transparency and fiscal policy in the industry.
Private investors in Nigeria face the costs of infrastructure and corruption,  plus security threats as the Muslim north and Christian south of  Nigeria clash. But the opportunities remain. Rising consumer spending is drawing in retailers as a rising middle class warms to luxury brands, positional smartphones and imported beer in particular.