Remarks At The First Nigeria-German Business Dialogue In Germany

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It is a special pleasure to be here at this first Nigerian-German Business Dialogue. We must thank the Nigerian Ambassador here in Germany, His Excellency, Yusuf Maitama Tuggar for envisioning this event, and also Afrika-Verein alongside the staff of the Nigerian Embassy, for bringing this event to fruition.

Germany is known and admired in Nigeria for its legendary engineering prowess.  For a very long time, the aspiration of young Nigerians of my generation was to own their first car which was inevitably the Volkswagen Beetle. It was popular for its affordability, ruggedness and durability and many will remember the advert ‘there’s no killing the beetle’.  In some ways, this is a metaphor for the Nigerian ethos of ruggedness and resilience. We, in that sense, come from the same origins as Germans.

And there are several other reasons why it is natural for Nigeria and Germany to develop closer economic ties.  With its population of nearly 200million people and as the largest economy in Africa, Nigeria is a natural partner of Germany, which is also the largest economy in the European Union and also its most populous country.  Both countries are potential locomotives of growth, trade and investment between Africa and Europe and this is undoubtedly why there has been a significant exchange of high-level visits between both countries, including most recently, the visit to Nigeria by Chancellor Angela Merkel at the end of August earlier this year.

It is encouraging that there are significant economic ties between Nigeria and Germany.  Germany is a significant exporter to Nigeria, which is its second largest trading partner in Africa.  Recent reports show that German investment in Nigeria contributes as much as $1billion in turnover annually.

This is good but we must agree that there is scope for even deeper collaboration given that Nigeria’s GDP is close to $500billion.

Given economic and trading developments in other parts of the world, Nigeria has become an investment destination of choice.  In its recent ‘Lions (still) on the Move’ publication, McKinsey pointed out that consumer spending in Africa was $1.4trillion by 2015, with Nigeria, Egypt and South Africa accounting for more than half of that total.  There is also increasing economic opportunities in Nigeria because of deliberate actions by our government to diversify the economy and improve the business environment.

Agriculture perhaps presents one of the best investment opportunities in Nigeria.  Only three years ago, we were importing 5million dollars worth of rice daily. Today, we produce locally, 10million metric tons of paddy rice annually. And we are importing only two percent of our rice consumption now.

Investments in milling capacity have risen astronomically since then, with one investor putting a million tons of milling capacity into the market. Carlos Farms, a Mexican fruit and vegetable investor, had initially planned to grow bananas and pineapples for export. Until he discovered that he was making more money selling his bananas locally at $3 a kilogram, for what he would have been paid only a dollar per kilogram in Europe.

With a substantial percentage of the world’s arable land and over half of that uncultivated, it is becoming clearer that the world will be looking to Africa and Nigeria in particular, as its food basket. Just to take China’s demand alone, China has 27% of the world’s population, but only 7% of the world’s arable land for agriculture.

China needs 2million tons of hybrid Soya beans per annum for livestock feed and vegetable oil, and in Nigeria, we have not met that demand.

Sesame seed is also in high demand, about 2million tons per annum is the demand from China, Vietnam, Japan and Arab countries. Sesame seed oil is used for confectionaries and that demand is largely unmet. China also requires over 2.3million tons of cassava chips and cassava products for industrial Starch and ethanol.

Africa has also not been able to meet China’s demand for Cocoa.  How about goat meat? 120,000 carcasses of goat meat are required weekly in different Arab countries. There is still a major gap in supply here as well.

Most of Vietnam’s demand for over 2.5million tons of cashews is unmet and so therefore, Nigeria’s role as food provider to the world and especially in the next few decades, is clear. It is difficult not to be tremendously successful as an investor in Agriculture in Nigeria.

At the same time, major business groupings are making serious investments across the agricultural value chain in rice milling, animal feeds, and fertilizer production amongst other things.

To mention just a few examples, the WACOT Group built a rice mill in Kebbi State that can produce 120,000 metric tons of rice a year, while the Lagos State Government and the Dangote Group are putting up their own rice mills with similar capacities.  Flour Mills of Nigeria also built a sugar mill in Minna that produces 100,000 tons of sugar annually.  For the OLAM Group, their investments include poultry feed mills with a combined capacity of up to 720,000 metric tons per annum.

These investments, which are mainly private sector driven, reflect the belief that the Nigerian government is genuinely committed to supporting the growth of the agricultural sector in Nigeria.

Our determination to diversify the Nigerian economy is also reflected in the manufacturing sector, in mining and within oil and gas.  Our plans for manufacturing are based on ensuring that the sector can source its inputs and materials locally where possible, but also through imports when necessary, including by ensuring that the sector has access to foreign exchange.

A number of Special Economic Zones are being built in Lekki, Aba and Kano, which will serve, as hubs for manufacturing activity while small and medium enterprises will be linked to them through a deepening of the manufacturing value chain.

The mining sector, which had suffered great neglect with the advent of the oil boom, is being revived.  One heartwarming development is that with the priority given to the revitalization of the mining sector, a nickel deposit was found in Kaduna State, which has been described as ‘world class and highly unusual’.  Equally noteworthy though is that we are also diversifying within oil.

Nigeria is already exporting urea since it is producing more than enough for its domestic needs and in the very near future, thanks to the Dangote Group, we expect to have an additional petrol refining capacity of 650,000 barrels a day, alongside one of the largest petrochemical facilities in the world.

Taking our hospitality sector and budding tourism drive as examples, about 1.8million international travellers spend two nights on average at Nigeria’s estimated 10,000 hotel rooms yearly. This generated about US$210million in revenue for the industry in 2017, which barely reflects on Nigeria’s US$500 billion GDP size.

Nigeria’s hotel industry alone is projected to grow by double digits up to 2020, as the sector bounces back post-recession to one of the fastest growing in the world, the possibilities for investors is significant.

Major international hotel brands have obviously recognized the enormous opportunity with the likes of the Hilton, Marriott, Westin, Sheraton, Radisson and Best Western scheduled to open new hotels in Nigeria over the next five years.

In real estate, projects such as the Eko Atlantic City project in Lagos, which has been dubbed Africa’s “Dubai”, offering 10 million square metres of multi-billion dollar Grade A real estate investment opportunities, are worthy of note. The project is entirely private sector owned but was supported by both the Federal and Lagos State governments, and there are investment opportunities for malls and shopping centres across the country.

How about retailing in Nigeria? Retail space in Nigeria reached 326,958 (sqm) in 2017, compared to 30,000 sqm in 2005. From just two shopping malls in Lagos and in Abuja, 13 years ago, the country now has several malls such as the Palms flagship mall in Lagos, Jabi Lake Mall in Abuja, Ikeja City Mall and Maryland Mall also in Lagos, Novare Malls, Hub Mart, among others in Port Harcourt, Ibadan, Ilorin, Owerri, and Onitsha – all of which are commercially viable and densely populated cities across the country.

Novare Real Estate Africa, an investment portfolio involved in property development across Africa, has just recently opened its $54million (about N19.4billion) Novare Central Mall in Wuse Zone 5, Abuja. SHOPRITE, a South African company, has hundreds of shops in Nigeria.

This is one of the sectors with great potential when compared to South Africa, Africa’s largest retail economy, with 23million sqm, a lower GDP and a population less than a fourth of Nigeria’s.

The technology sector is not left out of the exciting economic developments in Nigeria.  Nigerian start-up firms have already carved a niche for themselves with innovative products in FinTech like Eyowo, PayStack and Flutterwave, in computer education like Andela and in logistics like Kobo360.  Major technological investors in Silicon Valley have begun to sit up and take notice and as a start, the US-Nigeria Council collaborating with Ventures Platform has put up $10million dollars to support Nigerian technological start-ups.

Our support to technology start-ups is part and parcel of the pride of place that we give to our micro, small and medium enterprises.  Our specific efforts in support of small businesses range from working to link them with larger enterprises, helping them overcome regulatory challenges, providing them with dedicated infrastructure and shared facilities, and facilitating accessible and affordable financing.  It is pleasing to know in this particular regard that KfW Development Bank is a role model for the recently established Development Bank of Nigeria and has provided it with advisory services, as well as a loan of $200million in support of its operations.

These examples are the tip of the iceberg and I mention them just to give a flavour of the kind of opportunity that exists in Nigeria now.

But then the opportunities in Nigeria are not limited to our efforts to diversify the economy.  They also extend to the extensive work that we are doing to overcome the critical constraints in the Nigerian business environment.  One of the first principles in our Economic Recovery and Growth Plan was the focus on overcoming critical constraints relating to electric power, petroleum products, skills and finance.  This means that there are abundant opportunities in these areas as well.

President Buhari has placed a lot of emphasis on building and upgrading infrastructure in Nigeria so that is modern and fit for purpose. For the first time since we attained independence in 1960, three new railway lines are up and running from Abuja to Kaduna, from Itakpe (near our iron ore deposits) to Warri Port and the Abuja Light rail.  A fourth, which straddles the Lagos-Ogun-Oyo urban corridor from Lagos to Ibadan, is nearing completion. Recently, the bid for the Kano Maradi Railway was won by a consortium led by the Portuguese firm   Motaengil and it is co-financed by KFW and the AFC. This is an important rail project for that crucial commercial route.

In terms of the road network, every single one of our 36 States has an on-going major road project, while work on three long-standing projects namely the Lagos-Ibadan road, the Second Niger Bridge and the Abuja-Kaduna-Kano Road are now proceeding apace.

This audience will be pleased to know that Julius Berger, a firm with German roots, which is one of the first choice construction companies in Nigeria, is actively involved in some of these projects.

Our ability to proceed apace on the three large-scale road and bridge projects, which I just mentioned, is due to the establishment of a $650million Presidential Infrastructure Development Fund under the management of the Nigerian Sovereign Investment Authority.  The NSIA has also established InfraCredit in collaboration with GuarantCo to provide guarantees that will improve the credit quality of local currency debt instruments issued to finance infrastructure projects in the country.  KfW Development Bank has also invested 31million euros in this enterprise.

Power, of course, is a critical area of infrastructure for Nigeria and our needs extend across generation, transmission and distribution.

Siemens, another German company has also developed a strong track record in this area, including more recently, its work on the Azura Edo Power Plant and its introduction of a 44megawatt mobile power generation turbine, under its fast-power initiative.

Nigeria’s electricity needs are such that require mini-grids and off-grid solutions, especially those using renewable energy.  One of the main components of the Nigerian Energy Support Program (NESP) is developing mini-grids throughout Nigeria, including the one at Gbamu  Gbamu, which is co-funded by the European Union and the German government and is being implemented by GIZ, the technical arm of the German Federal Ministry for Economic Cooperation and Development. In addition to Gbamu Gbamu, five other mini-grids have been developed during the first phase of NESP. USAID partnered with GIZ to support two of the mini-grids, including the one in Gbamu Gbamu.

Under the first phase of our Energizing Markets initiatives, our Rural Electrification Agency is working with private sector operators to provide electricity to several market clusters on a commercial basis.

One constraint that economic operators in Nigeria sometimes face is a shortage of skills, especially in the manufacturing and construction sectors.  We know however of Germany’s track record of success in vocational training so, I expect that our on-going programmes to upscale technical and vocational education in Nigeria, including our N-Build, which aims to provide accelerated training and certification to 75,000 young people in building, construction, utilities and automotive, amongst other sectors, will attract the interest of our partners in the Forum.  Indeed, we hope to see some alignment between what we are trying to do and Germany’s ‘One World – No Hunger’ initiative.

Our efforts to place the Nigerian economy on a sound footing goes beyond the efforts at sectoral diversification and the provision of infrastructure.  It also extends to improving the environment for doing business, which covers our ease of doing business initiative as well as the framework of policies, agreements and incentives to support business activity and relationships.

Our Presidential Enabling Business Environment Council which I have the honour to chair was established to improve the ease of doing business, which had been deteriorating steadily.  According to the World Bank’s Ease of Doing Business Rankings, Nigeria had lost 64 places between 2007 and 2015.  We were determined to reverse this slide and implemented reforms around the entry and exit of people, property rights, construction permits, starting a business, paying taxes, enforcing contracts, getting credit, trading across borders and resolving insolvency.  We succeeded in reversing the trend and gained 25 spaces over the past three years in the rankings.  One of the most practical and visible achievements that will resonate with this audience is that it is now easier and faster to get entry visas into Nigeria.

The Nigerian government has also adopted a stance of upgrading and updating our framework of agreements with countries like Germany, on issues such as avoidance of double taxation and promotion and protection of investments.  The idea is to ensure that businesses from both countries are enabled to invest in the other country on a fair, balanced and business-friendly basis.  We have also reinforced our regime of incentives for investors, including through liberal ownership and profit repatriation laws and a newly revised list of sectors qualifying for pioneer status.

Nigeria allows foreign ownership of up to 100% of the enterprise and there are liberal provisions for the repatriation of capital inflows and derived profits.  The pioneer status incentive exempts qualifying companies from paying corporate income tax for an initial period of five years, renewable for another two years.  Some of the sectors, which I have already spoken about, like agriculture, mining, manufacturing, power and construction of infrastructure, are included in the list.  Others include more modern concerns like telecommunications, waste management, e-commerce, software development, motion pictures and music.

We do realise that investors are very interested in a predictable and sustainable policy environment, which is why we have paid particular attention to macroeconomic stability.

Growth has been restored from the recession we experienced in 2016 and we now have up to six quarters of positive growth since the end of the recession.  Now that we have changed the direction, the key thing is to ramp up the rate of growth while continuing our successful efforts to bring inflation down for 18.7% early last year to a plateau of about 11% over the last three months.

Another thing that we have done in this regard is to recognise the harm that outstanding debts (mostly unspoken about) are honoured.  We thus resolved our $6.8billion outstanding arrears on Joint Venture cash calls with partnering international oil companies and have resumed outstanding payments to contractors and the export expansion grant.

One of our main economic challenges is the provision of jobs to our teeming youth population.  We are determined to create jobs for this young Nigerians to give them hope and a stake in society, which will also prevent them from undertaking risky and life-threatening irregular migration to European countries including Germany.  One of our main avenues for doing so is in partnership with the private sector to create wealth and employment.  In addition to partner forums such as this, we also work closely with the Nigerian private sector in various Councils and Forums in realization that the private sector is the engine of growth.

Our vision is a dramatic improvement in Nigeria’s business environment, with increased cross-border trading, increased productivity across key economic sectors and an improved business environment that is attractive to both domestic and foreign investors, where policies are predictable and consistent, where we public and civil servants act as partners and facilitators, not obstacles or adverse regulators. Nigeria is certainly open for business.