Investing In A Developing Economy – A Possible Solution To Global Financial Crisis

INTRODUCTION

If there had been protection issues in Nigeria, no businessman might visit the u . S . To discover possibilities, agencies like Celtel, MTN, Etisalat, would not have ventured into security threat usa to do business. Those who unfold hearsay approximately safety and corruption troubles in Nigeria are announcing to be able to forestall others from creating wealth within the united states of america. Figures do not lie. They are the largest testimonies for a way conducive Nigeria’s environment for business and opportunities are. If you want to do enterprise in Africa and document suitable returns on your investment, I welcome you to return to Nigeria. The political surroundings in Africa, specially in Nigeria is high-quality.

Dr. Hamadoun Toure,
Secretary General,
International Telecommunications Union,
Cited inside the Punch Newspaper, May thirteen, 2008)

US Economy

What is going on currently with the Nigerian monetary machine is far from being affected in any manner with the aid of the global credit score crisis. At worldwide degree presently, the banks are underneath-capitalised, but Nigerian banks are over-capitalised. And I do now not think this is a problem at all. I trust that Nigerian banks are below strain from other economies within Africa continent which can be affected by the credit score challenges.

– Gordon Smith,
Head of Research, Africa and the Middle East, International Consilium,
(Reported within the Punch Newspaper, June thirtieth, 2008).

The foregoing statements aptly connote two understandings of the kingdom of Nigerian economy. These understandings show that, the financial system is one of the quickest growing economies in Africa and within the international. Although Nigeria has had hash economic history, it has gone through and nevertheless present process financial reforms, which might be geared toward making Nigeria the Africa’s economic hub and one of the twenty biggest economies in the world via the yr 2020. Needless to mention that the country has experienced political instability, corruption, and poor macroeconomic control inside the past, this become answerable for unpleasant and cruel financial situation. The authorities relentless efforts to reposition the financial system have translated right into a superb financial increase and development. Several mechanisms had been installed location to sustain this growth and development, able to balancing the pursuits of stakeholders. Perhaps, this view should have stimulated Gordon Smith submission. He described Nigeria because the maximum dynamic marketplace in Africa, that’s under excessive strain from some international locations in Africa to serve as a cushion in opposition to the consequences of worldwide turbulence. He also cited that a few nations like Ghana, Malawi, Mauritius, amongst others had been relying on her at the moment because of international hazard exposure and that the usa’s financial system, led by using the consolidated banks, turned into a long way from being tormented by the global credit score crisis presently rocking the sector’s monetary giants. He pressured similarly that foreign investors, who might be patient sufficient to weigh the Nigerian financial gadget on the credit score chance angle relative to international activities, will discover the nation’s economic region extra thrilling to invest and lift capital from.

Faced with numerous challenges, Nigerian authorities is determined to reinforce, diversify and make the economy attractive and funding-friendly to both local and foreign traders. The government has followed total liberalization and globalization as the economic coverage, instituted privatization and commercialization programmes of public corporations, provided total security for commercial enterprise and those, extended invitation to domestic and overseas investors, abolished legal guidelines inhibiting competition, embraced and excellent-tuned policies to make certain quick cognizance of boom and development of all sectors of the financial system. The attempt is already paying off as Nigeria is now the focus for overseas funding thereby expanded exponentially Foreign Direct Investment (FDI). Scores of economic missions and delegations from developed and developing countries have visited Nigeria, for that reason accelerating the boom of the financial system at a very fast rate.

It will become pertinent to direct the route of this dialogue to include the second expertise of the above statements made through Hamadoun Toure and Gordon Smith. However, it turns into greater pertinent to enumerate the inherent funding possibilities in Nigerian economic system earlier than discussing the problem of safety as raised by way of Toure.

INVESTMENT OPPORTUNITIES AND SECURITY ISSUE IN NIGERIA

No doubt, Nigeria is an investment haven with limitless and beneficial funding opportunities inclusive of oil and fuel, solid mineral, agriculture, tourism, telecommunication, power and metal, shipping, change processing quarter, financial quarter, real property / belongings, manufacturing, recreation and amusement, and fashion industry. Investors have a extensive range of possibilities to pick out from. It is crucial to be aware that the rate of growth of investment is exquisite and exponential in any of those sectors. Investors are at gain of offering their services and products to already-made market taking advantage of the populace of over a hundred and forty million.

In telecommunication, records well-knownshows that cell cellphone users in Africa were approximately 280 million, overtaking United States and Canada with their 277 million customers inside the opening region of 2008. With 70 million connections in 2007, the Continent have become the fastest growing vicinity in the global, representing a boom of 38 consistent with cent, in advance of the Middle-East (33 in step with cent) and the Asia-Pacific (29 consistent with cent).It turned into also found out that the quickest developing markets are placed in northern and western Africa, representing altogether sixty three in line with cent of the whole connections within the vicinity. The document showed that Nigeria, Zambia, Tanzania, The Democratic Republic of Congo, Kenya, Algeria, Tunisia, Ghana and South Africa are pretty competitive markets within the Region. The file similarly contends that -1/3 of Africa’s telephony are in their early phase of development, with penetration costs below 30 according to cent at the give up of 2007.In percentage terms, it turned into noted that Africa is the fastest growing marketplace in the world, but additionally the second one smallest in phrases of connections after Middle-East.

As Nigeria accounts for fifty seven in step with cent of the West Africa cell telephones, the usa is acknowledged because the main and the quickest growing telecom marketplace in Africa. With cell cellphone users at 44,932,181 and 734,444 for GSM and cell CDMA respectively, her contributions to West Africa and Africa’s telecommunication boom can not be overemphasized. While the general financial growth price stands at 7% according to annum, the cell telephony is about 35-50%. Assuming that each of those connections became busy for a minute in an afternoon, the united states of america telecoms market has the capacity to generate over USD 16 million in line with day (USD16, 666,667) and near USD 6 billion in line with year (USD five,833,333,three hundred). This is why telecom organizations such as Visafone and Etisalat speedy joined the likes of MTN, Globacom, Celtel and different telecoms provider companies in exploiting possibilities inside the u . S . A ..

Early this year, one of the fundamental GSM provider companies with a subscriber base of over 15 million introduced a earnings after taxation of USD650 million (78 billion naira) for the yr 2007.Putting all these together, possible easily apprehend Toure’s submission describing Nigerian telecoms marketplace as the first-rate investment destination in Africa.

Recognizing the reality that the Nigeria telecoms industry is substantial and there may be need to similarly exploit the world to its fullest, the Nigeria Communication Commission (NCC) and the Ministry of State for Information and Communications have made their positions clear via extending invitation to international buyers for energetic participation within the region as they may be willing to provide pioneer fame and license for potential applicants for various project inclusive of Fixed telephony, Mobile telephony, Fixed satellite (VSAT),Paging, Payphone, Internet and other cost added services.

With the above statistics, you can properly conclude that Nigerian telecom zone gives notable and lucrative funding opportunities to international traders. And setting into consideration forty% GSM marketplace increase price in the first sector of this year (2008), there is capacity for excessive go back on investment on this region.

Agriculture, the dominant zone of Nigeria financial system, engages approximately 70 per cent of the population directly and presents nearly 88 percentage of non-oil forex profits. It contributes approximately forty one in keeping with cent of the GDP of the u . S . A .. The region recorded an average growth rate common of seven in keeping with cent in the closing three years, a main improvement from underneath 3 in line with cent inside the 90’s.

Statistically, 91 million hectares of the usa’s total land location of ninety two.Four million hectares is adjudged to be suitable for cultivation. Approximately 1/2 of this cultivable land is efficaciously underneath permanent and arable crops, while the rest is protected by using woodland timber land, permanent pasture and constructed up regions. Among the states, which have the most ample land, regions are Niger (7.6 million hectares) and Borno (2.8 million hectares).

Agriculture plants in Nigeria are grouped into cereals, root and tuber crops, grains legumes and other legumes, oil seeds and nuts, tree vegetation, and vegetable and end result. Governments and the Ministries of Agriculture have made land acquisition smooth, recommended agricultural practices, prolonged (nevertheless extending) invitation to overseas investors and have installed vicinity several incentives to stimulate growth within the zone. Despite, the agricultural potential of Nigeria is slightly being tapped and this explains the lack of ability of the u . S . To meet the ever-growing demand for agricultural merchandise and her rank as fifty fifth within the world (even though first in Africa) in farm output.

As the sector reviews food disaster and chronic upward push in gasoline fee, the u . S . A .’s agriculture offers limitless possibilities for overseas traders and the arena at big to offer solutions to those crises. Foreign traders will find investments in cultivation of sugar cane, sugar beet, sweet sorghum, starch (corn/maize), palm oil, soybeans, jatropha, and algae. These merchandise are beneficial as they are ability for biofuels, an awesome substitute for fossil gasoline. Presently, there is a totally high demand for these plants from the developed economies.

Solid Mineral is every other quarter with terrific funding possibilities. Nigeria is endowed with numerous mineral assets. Recent policy reforms have delivered the stable minerals area to the fore. The emphasis is on encouraging large overseas investors’ participation on this sector as less than 0.5 consistent with cent is contributed to the Gross Domestic Products from Solid mineral zone. However, the Ministry of Mines and Steel and the Ministry of country’s focal interest in the ultimate three hundred and sixty five days is to strategically place the usa in a better function to discover and take advantage of just seven minerals in the plethora of minerals as a way to boom Gross Domestic Product to five consistent with cent within the following few years. The seven strategic minerals are coal, bitumen, limestone, iron-ore, barite, gold and lead / zinc.

Coal can be determined in Enugu, Benue and Kogi. Within these 3 districts 396 million metric tones can be demonstrated the use of JORC category criteria, even as a further 1,091 million tones of inferred and hypothetical coal resourced for the areas studied is 1481 million tones.

Knowing fully that improvement of coal will assist within the attention of strength, the Government and the Ministries are inviting overseas investors to take part actively within the exploration and exploitation of the mineral. Companies such as Denver Resources and Western Metals have already dedicated US$10 million and US$15 million respectively for 2 coal fields inside the country. Another Chinese company, Grid Xin Yuan International Investment Company this is imparting more than half of of China’s electricity wishes is also inside the u . S . A ., indicating their hobby inside the improvement of a coal field in Kogi State.

The Bitumen reserve inside the united states of america is expected at greater than 27 billion barrels of oil equal even as iron-ore is expected at over five billion inferred reserves with presence in Kogi, Enugu, Niger, Zamfara and Kaduna States. Gold in only 10 places is envisioned at 50,000 oz, barites 10 million metric tones and limestone at 2.Three trillion reserves.

Talc with an estimated reserve of over one hundred million tones can be found in Niger, Osun, Kogi, Kwara, Ogun, Taraba and Kaduna States.The shade of the Nigerian talc varies from white via milky-white to grey. The talc enterprise represents one of the most versatile sectors of the commercial minerals in the international. The exploitation of the extensive talc deposits in Nigeria could therefore fulfill not most effective the local needs but additionally that of the international marketplace as well.

The countrywide call for for desk salt, caustic soda, chlorine, sodium bicarbonate, sodium hydrochloric acid and hydrogen peroxide exceeds a million tones. A big sum of money is expended yearly to import these chemical substances. There are salt springs at Awe (Platue State), Enugu, and Uburu ( Imo State), even as rock salt is to be had in Benue State. A total reserve of one.Five billion tones has been indicated. Government, to examine the quantum of reserves, is now wearing out in addition investigations.

In the same vain, massive bentonite reserves of seven hundred million tones are to be had in many states of federation equipped for massive improvement and exploitation, over 7.5 million tones of barite been recognized in Taraba and Bauchi states, and an estimated reserve of three billion tones of top kaolinific clays has also been diagnosed.

Gemstone mining has boomed in numerous parts of Plateau, Kaduna and Bauchi States for years. Some of these gemstones include Sapphire, Ruby, Aquamarine, Emerald, Tourmaline, Topaz, Gamet, Amethyst, Zircon, and Fluorspar, that are a few of the great in international. Good possibilities exist in this place for feasible investment. Understanding that this quarter calls for urgent investment, the Ministry has directed miners who’re nevertheless in small artisan degrees to form cooperatives for you to benefit from World Bank US$10 million assistance. Apart from this, 3 Nigerian Banks have also set up stable minerals desk with fund of over US$ eight million every for the development of the arena.

Foreign traders will find this region worth-making an investment on as Nigerian governments have put in region numerous incentives and strategies for investment inclusive of 3-5 years tax holiday, deferred royalty payments, possible capitalization of expenditure on exploration and surveys, extension of infrastructure and provision of one hundred% foreign ownership of mining worries.

Recognizing that best a sustained macroeconomic environment and a sound and vibrant financial gadget can propel the economy to reap the usa’s desire to emerge as one in all 20 largest economies in the global with the aid of the 12 months 2020, at the July 6, 2004 the Federal Government thru the Central Bank of Nigeria (CBN), under the management of its Governor, Professor Charles Soludo released a 13-point reform time table to restructure, refocus and fortify the Nigerian Financial System. To supplement this agenda, every other comprehensive long-term reform time table for the Financial System (the Financial System Strategy 2020-FSS2020) changed into launched. The grand objectives of those agendas are significantly being completed. The united states of america economic system now accommodates of strong, efficient and internationally competitive banks with an eye for international markets, a capital market with maximum returns on funding, in dollar phrases, a valid and profitable insurance industry and different aggressive economic participants.

Gordon become right in his submission to have described Nigeria because the most dynamic marketplace in Africa. His view that “overseas investors, who can be affected person sufficient to weigh the Nigerian Financial System on the credit risk angle relative to the global occasion, will discover the kingdom’s economic area greater thrilling to make investments and lift budget from” x-rays the fact about the u . S . A .’s economic quarter.

The u . S .’s banking device is the most secure and the soundest it has ever produced in history. It is the quickest growing banking machine in Africa and one of the quickest in the international. In truth, the most remarkable contribution in the direction of attention of the u . S . A .’s dream came from this sub-quarter. Economic analysts have determined that it has taken Nigeria much less than 3 years to attain what it took South Africa two decades to reap inside the location of banking. In a quick phrase, a global-class banking system has emerged in Nigeria.

Statistically, banking sector contributes 10 per cent to the Gross Domestic Product (GDP) and represents 60 according to cent of the inventory market capitalization, whilst there was a reduction within the number of banks from 89 to 25, the quantity of banks branches rose by 33 according to cent from 3383 in 2004 to 4500 in 2007. The general asset base of banks rose by means of 104 consistent with cent from $ 26.8 billions ( 3.21 trillion naira) in 2004 to $fifty four.7 billion ( 6.Fifty six trillion naira) through mid 2007; capital and reserves rose through 192 in line with cent from $2.Seventy two billion (327 billion naira) to $7.98 billion ( 957 billion naira); capital adequacy ratio rose by means of 42.6 in step with cent, point from 15.18 in step with cent to 21.6 in keeping with cent and ratio of non-acting loans overall loan advanced massively through 51.Three according to cent, factor from 19.Five per cent to nine.5 in keeping with cent. The area has also remained one of the most profitable inside the u . S . A .’s capital marketplace. It was cited that thirteen out of 21 quoted banks on the Nigerian Stock Exchange recorded returns in extra of 100 according to cent seeing that January 2007.