Presentation on theme: "Business Environment and Challenges in Nigeria Presentation By Mr Larry E Ettah GMD/CEO UAC of Nigeria Plc and Chairman CAP Plc at the Akzo Nobel Conference."— Presentation transcript:
Business Environment and Challenges in Nigeria Presentation By Mr Larry E Ettah GMD/CEO UAC of Nigeria Plc and Chairman CAP Plc at the Akzo Nobel Conference
Presentation Outline Introduction Nigerian Economic Overview Business Environment Challenges Expectations of Akzo Nobel as Business Partner Conclusions
Nigerian Economic Overview Nigeria is Africa’s second largest economy in terms of GDP ($175Bn as at 2008) second only to South Africa. GDP growth has averaged 6-7% since 2003. The country is the largest in terms of population in Africa, with population estimates now approaching 150 million people! The population distribution is weighted in favour of younger citizens with 52% nineteen years and below; and over 80% below 40 years of age.
Nigerian Economic Overview (contd.) Nigerians are entrepreneurial, dynamic and amenable to global lifestyles and consumption-oriented. Per capita GDP has improved from under $700 in 2004 to $1,418 by December 2009 reflecting economic growth, but wealth distribution is heavily skewed with 54% of the population classified as living below the poverty line. Telecommunications has experienced a revolution with tele-density at 58%; 95.7million mobile/GSM; 11.7million mobile/CDMA and 2.7million land lines as at August 2010, from just 400,000 total lines in 2001.
Nigerian Economic Overview (contd.) Nigerian has experienced its longest period of uninterrupted civilian rule after independence in 1960 since 1999 even though there are questions about the quality of the electoral process. There has also been various economic reforms since 1999, particularly between 2003 and 2007 in telecommunications, banking, pensions, insurance, downstream petroleum, mines and minerals etc. The current president appears to be resuming reforms suspended by his late predecessor, particularly in the power sector and privatisation.
Nigerian Economic Overview (contd.) But the macroeconomic picture is weakened by a dependency on oil which provides over 75% of the national budget and over 90% of export earnings. In addition GDP growth is disproportionately based on oil export; un-modernised agriculture and trading; with manufacturing now contributing less than 4% of national output. The major constraint to manufacturing is power- national power generation is around 3,700 MW versus possible demand in excess of 20,000 MW (including suppressed demand)
Business Environment Challenges: Social Rising Crime and Insecurity – Armed Robbery and Kidnapping in Eastern Nigeria – Militancy in the Niger-Delta – Recurrent religious and sectarian crisis in parts of Northern Nigeria Education and Health Services have suffered from under-investment during military rule Absence of social protections
Political Elevated political risk as 2011 elections approach Regional and ethnic tensions associated with power rotation Political Corruption Multiples Taxes, Charges and Levies from Federal, State and Local Governments and Agencies
Economic Weak Infrastructure, particularly power and transportation Businesses have to provide alternatives to public services:- – Alternative Power Generation – Security Services – Courier and Postal Deliveries – Water Boreholes Problems associated with export and import logistics-ports; customs; inspection services; etc
Economic (contd.) Mostly Imported Inputs Exchange Rate Risk – In December 2008, the Naira was devalued from N117/$ to N150/$ – With Falling External Reserves, further devaluation is a possibility High Interest Rates (Prime Lending Rates around 18%) High Inflation (13.7% as at August 2010) Strained Financial and Capital Markets New law on local content (Game changes)
Conclusions Nigeria is a huge potential market which continues to experience GDP growth averaging 6-7% through the global recession. In spite of its environmental and infrastructural constraints and challenges, Nigeria remains a high return business environment, and one which stands poised to experience economic and social transformation. “Challenges exist, we don’t mourn them, we don’t complain about them, we take those into account as reality as we design our business models”. Akzo Nobel can work with UACN/CAP Plc to mitigate some of the challenges assured that the medium to long term prospects for our market is very positive.