Guest Post: Investment in Nigeria Remains Strong Despite Insecurity

This is a guest post by Jim Sanders, a career, now retired, West Africa watcher for various federal agencies. The views expressed below are his personal views and do not reflect those of his former employers.

In his July 1 Reuters piece, Tim Cocks states that despite "bomb blasts, gun attacks airline crashes, kidnappings, industrial-scale oil theft, armed robberies and fraud costing billions of dollars...investors just keep coming."  While acknowledging that violence and political instability have damaged PZ Cussons’ profit margin, for example, Cocks cites sources who believe "the demographic dividend is colossal."  That is, in the long term, "Nigeria’s big population will turn into a massive consumer market."

But taxes on this supposed dividend are substantial.   One is diminishing life expectancy in the country.  Down to just forty-seven years, it is the lowest in West Africa, and thirty percent below the world average, according to Professor Abdulsalam Nasidi of the Nigeria Centre for Disease Control.

Another tax on the "demographic dividend" is growing poverty.  Yet Cocks quotes the CEO of South Africa’s Shoprite store chain as saying that "even if sixty percent (of Nigerians) live in poverty, the other forty percent still outnumber South Africans."  Such a view lays a foundation for deepening existing inequality in Nigeria, already a contributor to societal violence.

A third tax consists of the possibility of a near-term recession.  Finance Minister Ngozi Okonjo-Iweala recently warned that the slide in crude oil prices (Brent remains below $100/bbl and Nigeria has lost seventy percent of its oil exports to the U.S.) as well as economic conditions in Europe, could serve as a "trigger for another round of global recession."  She emphasized that Nigeria might not be able to avoid a downturn, as it did the last time, in 2008.

Most worrisome, however, is William Wallis’ report  that claims oil theft is sharply increasing and currently amounts to the equivalent of about 400,000 barrels per day, or more than $1 billion per month.  "It’s definitely spreading," he quotes a source as saying.  "There are far more people doing it than a year ago."  The practice is "infecting government at all levels, with senior military and political figures staking out a leading role," he writes, providing detail that supports Buhari’s Congress for Progressive Change party’s allegation earlier this year that in the area of corruption and "sleazy tendency...Jonathan’s government transcends all others before it."

While elements in the international investment community see Nigeria as a "massive consumer market," especially given poor growth prospects in developed markets, some in Nigeria, perhaps sensing the fin de siecle, appear to be siphoning as much of the national patrimony as they can, before it’s all gone.