Nigeria aims to lure UAE business

LAGOS // Potential UAE investors in Nigeria are being reassured that the country remains open for business despite worries about security risks.

The message from business leaders in Nigeria comes as a number of Emirates executives prepare to visit to assess the investment climate in Africa's largest consumer market.

"Terrorism is an issue, but it's not as big an issue as people think, as with the right research and planning you can mitigate against risk," said Ken Igbokwe, the managing partner of PricewaterhouseCoopers Nigeria.

He pointed out that the violence was in isolated pockets, mainly in the north, while the rest of the country was stable.

A heavy focus on terrorism and other challenges facing Nigeria was not helping foreign perceptions of the country, said Olusegun Okunnu, a Nigerian economist and a member of a task force set up by the government to monitor oil revenue.

"Perception of Nigeria is key," he said. "A lot of the western media don't present the good side or opportunities."

With a population of about 160 million, vast oil wealth, cheap labour, and a rapidly emerging wealthy class, Nigeria has been rated as one of the most promising emerging markets.

But terrorism clouds its future.

The terror group Boko Haram has carried out a series of deadly attacks in the past two years. It said it was behind bombings of three churches last month in the state of Kaduna, attacks in which at least 50 people were killed.

Foreign investment will be harmed if terrorism is not curtailed, Baroness Chalker warned on Friday. She is the coordinator of the Honorary International Investors Council (HIIC), a group of foreign investors advising the Nigerian government.

A delegation of UAE businessmen including executives from the Sharjah-based conglomerate Mulk Holdings and Danube Building Materials plans to visit Nigeria after Ramadan.

Mulk Holdings, which has interests in solar-panel manufacturing, sees "immediate opportunities" in the renewable-energy industry in Nigeria, said the chairman, Shaji Ul Mulk. Solar technology offers a possibly cheaper power alternative than the country's current costly generators.

But Mr Mulk is mindful of potential risks. "The decision (to invest) will be based to a large part on a security point of view," he said.

Ties between the UAE and Nigeria are growing. Bilateral trade between Nigeria and Dubai swelled four times to about US$572 million (Dh2.1 billion) between 2005 and 2009, the latest period for which trade data is available.

Since then the flow of goods is believed to have risen further as Dubai services a growing chunk of the south-south trade between Asia and Africa. Significant amounts of that is bound for Nigeria.

Investment, however, has been less forthcoming. The telecommunications operator Etisalat's presence is perhaps the most high-profile business link between Nigeria and the UAE.

Mining and minerals, infrastructure and agriculture are among the "shopping list" of sectors into which Ibrahim Auwalu, Nigeria's new ambassador to the UAE, said he would like to tempt investors.

Nigeria needs much more foreign investment.

President Goodluck Jonathan's government is trying to push through reforms to find jobs for the estimated 24 per cent of the working age population that is out of work.

He is also attempting to tackle terrorism, sacking his national security adviser and defence minister after the latest bombings.

The heavy presence of army and police on the streets of the capital, Abuja, reflects the government's heightened sense of caution.

Nigeria is also trying to get to grips with a spate of oil bunkering - the theft of crude - as well as the long-running problem of corruption. If not addressed, bunkering could also deter investment, Baroness Chalker said last week.

But for those investors willing to take the plunge, the potential rewards are high.

"It's the wild west, but the market is also straightforward," said one South African businessman in Lagos. "If you make spoons, you can sell millions of them."

UAE businesses have to decide whether the rewards outweigh the risks.

tarnold@thenational.ae

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”