Strife-Torn Nigeria Is a Money Magnet

The oil state attracts foreign capital despite terror attacks | “From an economic perspective [the attacks] are negligible”

Chris Kay and Maram Mazen

Nigerian troops wield AK-47s at the Transcorp Hilton Abuja in the capital, while security guards scan for car bombs at the hotel’s entry checkpoints, snarling traffic. Down the road, police block access to Holy Trinity Catholic church on Sundays as worshipers congregate.

Nigerians have been living with high security alerts since attacks by an Islamist militant group, Boko Haram, intensified with a suicide bombing of the United Nations headquarters in Abuja in August. Boko Haram has claimed responsibility for a surge in gun and bomb attacks, including a Christmas Day bombing of a church in an Abuja suburb and multiple blasts on Jan. 20 in the northern city of Kano that killed about 256 people. The group, whose name means “Western education is a sin,” seeks to impose strict Muslim law on the country. The U.S. Embassy in Nigeria warned American citizens on April 17 that Boko Haram may be planning more attacks in the capital.

Yet economic statistics do not portray a country in the grip of a national emergency. Nigerian Eurobonds are so popular that their yield is near a record low. The currency, the naira, is Africa’s second-strongest performer against the dollar this year. The economy is expected to grow 7.1 percent in 2012.

Just as important, foreign and local investors seem unfazed by Boko Haram’s violence. The attacks have been isolated to Abuja and northern states, home to the Muslim population and a Christian minority, while oil facilities and the commercial hub of Lagos in the south have been undisturbed.

“The latest escalation of Boko Haram’s terror attacks is disturbing from a security perspective,” says Christian Mejrup, an emerging-market portfolio manager at Denmark-based Global Evolution, which holds Nigerian treasury bills. “From an economic perspective they are negligible, since they are still isolated to the northern part of Nigeria.” The 17 southern states, which cover one-fifth of Nigeria, produce about two-thirds of the growth. “All the sectors that are growing fastest are in the south,” says Jude Uzonwanne, head of the Nigeria office of Cambridge (Mass.) investment adviser Monitor Group. “The north’s economy is still geared towards subsistence agriculture.”

The multinationals want to stake out territory in a country of 160 million whose population is growing 2.5 percent a year. That translates into a need for more electricity, more houses, and more food and drink.

Nestlé is boosting the capacity of its local plants to make food seasoning, chocolate malt, and cereal. “There’s huge potential still, and on top of that the population growth is just staggering,” says Martin Woolnough, chief executive officer of Nestlé in Nigeria. Standard Chartered CEO Peter Sands said in March that Nigeria is the bank’s biggest business out of the 15 African countries it operates in. “We’re in Nigeria with a huge population and a rapidly growing economy,” he said. In April, Siemens signed an agreement with Scanpower, a Nigerian company, to build a 1,600-megawatt power plant in Lagos. “As one of the fastest-growing megacities in the world, Lagos is seeking a significant improvement in its power supply,” says Michael Suess, the head of Siemens’s energy business. Dangote Cement, Africa’s biggest supplier, is building a 3 million-ton plant in Calabar, Nigeria’s southeastern seaport; that cement can go into home construction. Brewer SABMiller is planning a $100 million plant in Onitsha, in the southeast.

The north is not sharing in the bounty. United Nigeria Textiles and other textile makers, once thriving foreign currency earners for Nigeria, have shut mills in the north amid competition from China and other Asian producers. About 74 percent of Nigerians in the north live in poverty, compared with 63 percent in the south, according to the National Bureau of Statistics. Nigerian President Goodluck Jonathan in January declared a state of emergency in parts of the north, where Boko Haram, inspired by Afghanistan’s Taliban, has told Christians to leave. The government is “on top of” the threat, Jonathan said recently. Nigeria is “a safe place for investment. We are a stable country.”

Boko Haram’s reach may yet extend to the south, as it has already attacked centrally located Abuja, says Sebastian Spio-Garbrah, managing director of New York-based DaMina Advisors, which focuses on frontier investments. “It may be only a matter of time before Lagos is attacked,” he says. The split in development between the north and the south may cause serious trouble someday for Nigeria. For now, it’s just one more business risk.

The bottom line Nigeria, a fast-growing market of 160 million people, is attracting multinationals even as hundreds die in the north.


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