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It's Nigeria's Season of Foreign Investments(AllAfrica Via Acquire Media NewsEdge) Foreign investors are undeterred, it appears, by Nigeria's seemingly inclement business and security environment in putting their money where their head is. Even as the insurgency problem in the country lingers, the investors have been engaging in big-ticket investments across sectors, both in quoted firms and off them. To the Chief Executive Officer, Citi Bank Nigeria, Omar Hafeez, foreign investors are, for now, overlooking security concerns. The current wave of huge foreign investments in the country, sparked off in 2001 by the arrival of mobile telecommunication players MTN of South Africa and Econet (now Airtel), soared last week with the announcement of a N48.708 billion (about $300 million) put-in by Investment Corporation of Dubai, the United Arab Emirates in Dangote Cement plc. Traded off the Nigerian stock market between the two parties - Dangote Cement and InvestCorp - the investment boasts the highest trading value in the Nigerian Stock Exchange's 60 years history. The Dubai firm had, on September 8, acquired a total of 243,540,000 units of Dangote Cement Plc shares at N200 per share, representing a 1.43 per cent minority stake in Africa's biggest cement producer. Dangote Cement has achieved significant revenue growth and industry-leading margins, with a market capitalization of approximately $23 billion. This places the company, in value terms, above industry heavyweights such as Anhui, CRH and Heidelberg, and leaves it second in value only to the recently merged Lafarge/Holcim. Dangote Cement projects to reach an annual Africa production capacity of 62 million tonnes by 2017, up from a projected 42 million tonnes this year. Earlier in the year, it commissioned its plant in South Africa and hopes to commission those in Senegal, Zambia, Cameroon and Sierra Leone before the end of the year. The company has increased its integrated local production capacity from about 20 million tonnes per annum, to around 29 million tonnes with the recent addition of nine million metric tonne capacity, comprising six million metric tonnes in the Ibese plant and three million metric tonnes in the Obajana factory. Awed by these achievements, InvestCorp's Executive Director and Chief Executive Officer Mohammed Ibrahim Al Shaibani spoke of the $300 million investment deal, "We believe sub-Saharan Africa and particularly Nigeria, provide fantastic long-term investment opportunities. In this case, Dangote Cement provides some excellent investment credentials, being a highly profitable, well capitalized and efficiently run organization, with a market leading position in the largest African economy and very well positioned to access and act on growth opportunities across the continent. Consequently, we are very pleased to be given the opportunity to invest and participate in its future growth potential." The Dangote group had also in June last year posted a similar top-drawer foreign look-in when Dangote Industries Limited (DIL), majority shareholder in Dangote Cement posted a 1.5 per cent sale of its 95 per cent stake in the cement company to South Africa's Public Investment Corporation (PIC) for $289.3 million at N179 per share. PIC, manager of South Africa's pension fund and regarded as Africa's largest asset manager, was reported as monitoring growth rates in Nigeria's economically promising areas like industries, telecommunications, consumer goods, infrastructure and agribusiness in which it is willing to sink an investment chest of about $7 billion as it seeks to diversify its investment portfolio away from its South African market to tap into other fast growing African markets.. There are expectations the investment manager will soon be knocking on the Dangote group's door once again. While PIC was investing in Dangote Cement last year, its Head of Resources, Fidelis Madavo expressed that the deal was offering it (PIC) other opportunities in Dangote's sugar, flour, oil refinery and port operations. Another South African firm, Tiger Brands Limited (TBL), a leading consumer goods company and Africa's second biggest, had also two years ago acquired majority stake in another Dangote group subsidiary, Dangote Flour Mills (DFM). In 2012, DIL divested 3.67 billion ordinary shares of DFM to TBL for $181.9 million, thereby according the South African firm a 63.35 per cent controlling stake. The Dangote group had explained it was divesting such a stake in the DFM in pursuit of its diversification objective, but analysts were not unconscious of the miller's declining performance at that time. In the first half of last year, it posted a loss of N3.8 billion. Up till early this year, Tiger Brands was angling to increase its stake in DFM to 70 per cent by buying additional 332.5 million ordinary shares of 50 kobo each at N9.50 per share from minority shareholders. About the acquisition, the Chief Executive Officer of Tiger Brands, Mr. Peter Matlare had enthused, "We are especially pleased with the successful conclusion of this transaction." But that enthusiasm may have been dampened by DFM's poor performance so far. Matlare said in May after Tiger Brands wrote off about 42 per cent of its initial investment sum in DFM due to losses, that the South African foods maker has learnt not to be too hasty in pursuing growth opportunities in African companies. That statement doesn't seem to have impacted negatively on foreign investments in Nigerian companies, though, especially on Dangote group's subsidiaries, going by InvestCorp's fresh investment in Dangote Cement. Dangote Cement's major competitor, Lafarge WAPCO has also increased its investment in Nigeria over the past 10 years by about N100 billion, with a N75 billion capital in constructing phase 2 of its plant in Ewekoro and another N23 billion in building a power plant. Risks by MTN and Econet in setting the investment pace at the turn of the century and inception of the current democracy are, indeed, paying off. The two telecom firms had paid $285 million each to secure licences to start operating the Global System for Mobile (GSM) phone technology in Nigeria in 2001 amidst future uncertainties. Besides the licence fee, each operator invested about $350 million in building the enabling infrastructure. Econet Nigeria was so crisis-ridden as to undergo four nominal changes and is now called Airtel Nigeria, owned by Bharti Airtel India, which disclosed last April that it has invested $1.7 billion in the company since it assumed its ownership in 2010. Figures released by telecom regulator, the Nigeria Communication Commission early this year put Airtel as Nigeria's second largest mobile services operator with a 21 per cent market share and 26,194,33 subscribers. MTN Nigeria dominates the local market by about 45 per cent and boasts 57,183,745 subscribers. When MTN Group's President and CEO, Sifiso Dabengwa said last year that the telecom giant would be investing $1.5 billion in its operations across Africa, MTN Nigeria's Corporate Services Executive, Adewale Goodluck, was quick to clarify that its Nigerian operation, which is its cash cow, would get the highest part of the investment plan, which was just under 50 per cent of the total capital expenditure. Now, exploiting the successful example that other foreign investors have set, Mi-Fone, a phone manufacturer owned by an Indian-Ugandan, Alpesh Patel, stated last year it had finalised plans to establish a $30 million mobile phone manufacturing plant in Nigeria, which should have been ready by the third quarter of 2013, if the company's plan had gone well. "We know there is a lot of talk about other phone brands coming into Nigeria with plans to build a plant. We are very serious about our plans. We want to bring what we are doing in China here. Nigerian labour costs are much cheaper than China. There is a big push in Nigeria for increased employment. There is a big push for localisation. I think we need to play our part in ensuring that these objectives are attained," Patel had said. Dutch brewing giants, Heineken has over the last 10 years been consolidating its hold on the industry with massive investments. The company, which has steadily built up a 64 per cent controlling interest in Nigerian Breweries plc and had also acquired greater control in Consolidated Breweries, in 2011 acquired two holding companies of the Sona Group, which had controlling interest in Sona Breweries. By the acquisition, Heineken possesses control of International Beer and Beverages Industrial Limited, Benue Breweries, Life Breweries and Champion Breweries. The deal was reported to have brought into Nigeria an estimated investment figure of more than $649 million. SABMiller, the leading brewer in South Africa has also moved into Nigeria with the commissioning, in 2012, of its $100 million brewery in Onitsha, Anambra State. SABMiller has acquired other major stakes in Grand, Castle and Trophy brews. In January this year, the company's Nigeria managing director, Simon Harvey disclosed it would be increasing its investment in its Nigerian subsidiary, Intafact Beverages Limited with a further $110 million in order to triple capacity at its Onitsha brewery. The brewery already directly employs 300 local people and the proposed fresh investment is expected to create more 400 direct jobs. The expansion work has begun already, according to Harvey, and would be completed in the first quarter of 2015. In banking, there has been a gradual inflow of foreign investments into the sector since Stanbic Bank of South Africa, merged in September 2007 with IBTC Chartered Bank Plc to form Stanbic IBTC. The South African financial giant's investment in the Nigerian bank gives it a majority shareholding of 50.75 per cent. The merger was executed by way of the first ever tender offer in Nigeria and a $525 million investment. Ecobank Transnational Incorporated (ETI) has been benefiting from the trend. Last year, PIC bought 19.58 per cent of the pan-African lender for $250 million, its first major investment outside of South Africa. Again this month, ETI announced that Qatar National Bank (QNB) has acquired a 12.5 per cent stake in it from the Asset Management Corporation of Nigeria (AMCON). The stake, worth $200 million of Ecobank shares were transferred the at N20.01 kobo each. AMCON acquired the stake after Ecobank merged its Nigerian operations with failed Oceanic Bank, which AMCON helped to recapitalise, before the Ecobank take-over. The transaction makes QNB the second-largest shareholder in Ecobank after PIC. ETI's Chief Executive Officer, Albert Essien, in a similar development, said he expected South Africa's Nedbank to convert a $285 million loan into shares in Ecobank before the end of the year and top up the conversion amount with $206mn to give it a 20 per stake in Ecobank. In Union Bank, foreign investors had to step in in 2009 to bail it out after immediate past governor of the Central Bank of Nigeria and now Emir of Kano State, Sanusi Lamido Sanusi did a forensic audit of it, alongside other banks, and declared it ill. It is now owned by Union Global Partners Limited, a consortium of investors that include hedge fund Corsair Capital, African Capital Alliance and the Netherlands Development Finance Co.This month, Atlas Mara, the African investment vehicle of former Barclays boss, Bob Diamond, lifted its stake in Union Bank of Nigeria to almost 30 per cent with a $270m investment. There were reports that South African media giant, Naspers, has acquired a 50 per cent holding in leading Nigerian online general merchandise store Konga.com. A news website, HumanIPO reported Naspers' Group Information Relations Officer, Meloy Horn, as confirming, "Nigeria will possibly soon be the largest economy on the African continent, therefore as an investor we are keen to participate in the growth of a promising African market." Konga, which was launched in July 2012 by serial entrepreneur Sim Shagaya with 10 staff's has grown to employing over 70 workers. "With the additional capital, the Konga.com management team will invest in growing the business and enhancing customer service," the report quoted Horn as saying. A few months earlier, it had been reported that global leading asset managers JP Morgan had invested millions of dollars in another major Nigerian online retailer, Jumia. Jumia itself announced another $26 million investment from leading growth equity investor Summit Partners. "The middle class is growing. Consumption is on the increase," Tunde Kehinde, Jumia founder said in an interview. From Zambia is coming a $164 million via the Copperbelt Energy Corporation (CEC) for a 60 per cent stake in Nigeria's Abuja Electricity Distribution Company (AEDC). Zambia Daily Mail reported that KANN Utility Company Limited, a 50 per cent joint venture of the CEC has signed a sale and purchase agreement to that effect in Abuja with the AEDC, the Bureau of Public Enterprises and the Ministry of Finance. In Calabar, the Cross River capital, General Electric Company of the United States of America is investing $1 billion (N158 billion) to establish a new manufacturing and assembly facility. Minister of Trade and Investment, Mr. Olusegun Aganga, signed the Memorandum of Understanding (MoU) on behalf of the Federal Government, while GE's Chief Executive Officer, Mr. Jeff Immelt, signed on behalf of the company. The deal, comprising $250 million capital expenditure and about $800 million incremental spending on local sourcing of goods and services, is expected to create 2,300 jobs and make Nigeria the regional hub for GE's manufacturing service and innovation in Africa. The deal will also support the company's power generation, oil and gas production and exploration activities. Indorama Corporation is also upping its investment profile in Nigeria with the establishment of a $1.8 billion (N275 million) fertilizer and methanol plants on the premises of its petrochemical plant in Port Harcourt. The plants are expected to commence production in 2016. The Indorama Group arrived in Nigeria in 2006 to invest $400 million to acquire and resuscitate the then ailing Eleme Petrochemicals Company Limited, which was a subsidiary of the Nigerian National Petroleum Corporation (NNPC). "The state-of-the-art manufacturing complex will produce 1.4 million tons of granulated urea per annum, using natural gas as feedstock, from early 2016," Indorama Group managing director, Amit Lohia said. The Western Metal Products Company Limited (WEMPCO) has already completed test-running of its $1.3bn cold roll steel plant in Ogun State, while in Calabar, Sino Arab Energy, has signed an agreement with a local firm, Osabo Refining and Petrochemical Industry Limited to build a $7.5bn refinery. United Kingdom consumer goods producer PZ Cussons has also invested $56 million in establishing a palm oil refinery in Nigeria, in partnership with Singapore's Wilmar International. PZ Cussons Nigeria Chief Executive Officer Christos Giannopoulos told Reuters in 2011 the joint venture company PZ Wilmar would actually be investing $100 billion in the Nigerian economy over the next 5-7 years to develop oil palm plantations. A particular hub of foreign investments in Nigeria is the Lekki Free Trade Zone (LFTZ), where, by 2012, 48 firms had injected $2 billion, according to figures given by Dr. Olusegun Aganga. A major investor is Puma Energy Free Zone Enterprise (FZE), which is investing $400 million in the zone. Others include Imad Oil and Gas FZE, which is investing $200 million; China Railway Construction Corporation ($50 million) and YFK Pharmaceutical FZE ($30 million). Port operator, International Container Terminal Services Inc. (ICTSI), a Phillipines company, is executing a contract to develop and run a major container terminal at the LFTZ. The terminal, when operational in 2016, is expected to be the largest in sub-Saharan Africa. The project is estimated at over $225 million. The project, ICTSI management disclosed, forms part of the $1.4 billion it is investing in the entire port development. South Africa's consumer goods marketer Shoprite has invested in establishing its stores across Nigeria. The popular brand has stores in states like Lagos, Kano, Oyo and Anambra states, among other states, with its total investments estimated to be worth over N50 billion. Citi Bank's Hafeez, asserting foreign investors have been buying Nigerian assets undeterred by rising violence, cited to Reuters the $1.1 billion worth of Eurobonds it had traded for three local lenders so far this year as evidence. Saying Nigeria is growing as an investment destination, attracting capital equity and debt investors, though with security and political risks clouding its outlook, the country is witnessing an increase in both foreign direct investments and portfolio flows. The banker revealed Citi was the largest arranger of Eurobonds in Nigeria and had sold $500 million for Zenith Bank, $400 million for Access Bank and $200 million for Diamond Bank in the first half of the year, with FCMB also mandating Citi and Standard Chartered Bank to also raise Eurobonds for it. "The demand for long-term dollars is increasing in Nigeria as industries such as oil and gas and power develop," he said, adding that the demand could not be met locally. Investment analysts are upbeat about the trend, saying it can only promise well for the Nigerian economy and galvanise it to global levels in the near future. Managing Director and Chief Executive Officer of APT Securities and Funds Limited, Mallam Kasimu Garba Kurfi, told the Sunday Trust that the recent deals by Qatar National Bank and Emirate Sovereign Fund Investment are welcome developments to the Nigeria capital market. Kurfi particularly noted the diversification of investments into Nigeria, saying beside investors from Western countries, Middle East investors have also been showing interest, which he described as good for the Nigerian market. "It is good for the market, especially now when there is need for liquidity to bring activities to the market. It shows that the local investor should wake up to take position now to also benefit from low prices of most of the stocks", Kurfi said. He said the huge participation of foreign investors in Nigeria is in the government's interest: "It is for the interest of the government to get more inflow of foreign exchange from the market to serve as an alternative source that will stabilize the foreign exchange market". Referring to the Indigenisation Policy of 1976 which sought to restrict foreigners control of Nigerian businesses, Kurfi believed such a policy was uncalled-for. "There is no need for any law or decree to force companies to get listed or whatever. It is better to provide incentives such as tax relief for those which get listed and additional tax charge for those that are supposed to be listed in our market or other markets but have refused to be listed in our market," he said. National President, Constance Shareholders' Association of Nigeria (CSAN), Shehu Mallam Mikail, appreciated efforts of the present leaders of Nigerian agencies in charge of formulating policies and regulating operations in the Nigerian business environment. "During the time of former Central Bank of Nigeria Governor, the Emir of Kano now, he was able to sanitize our financial industry. This is the pointer that gave foreign investors to show interest in the Nigerian economy, and it is through the capital or money markets those investors will be able to penetrate into the Nigerian economic system," Mikail posited. Copyright Daily Trust. Distributed by AllAfrica Global Media (allAfrica.com). |