Cote d’Ivoire and the risk from terrorism

The biggest risk to a slow down in economic development in Cote d’Ivoire over the next 2 years is not a further decline in manufacturing output in China or the United States nor a resurgence of domestic political or ethnic violence.  The most significant risk is the threat posed by the importation of Islamic militancy from elsewhere in West Africa and the Western Sahel.   We identified a lack of preparedness and urgency to deal with the threat of Islamic militancy in Cote d’Ivoire in the government and the Grand Bassam resort  attack was therefore of no surprise.   We believe the risks of Islamic militancy can only be addressed by regional collaboration, a subject countries in the region have until now only played lip service to.

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Grande Bassam Abidjan(1)






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Risks to doing business in Angola

  1. The Angolanisation Policy Risk

 The Angolan government is committed to promoting Angolan companies and entrepreneurs. This policy pervades a wide range of commercially orientated legislation in Angola as well as the tender policies of many state and privately owned companies such as Sonangol.   A foreign company (“FC”) risks losing tenders should it decide to do business in Angola without a local partner.  Moreover, should the FC wish to engage in the oil and gas sector its Angolan partner must own 51% or more of the business.  In addition, any investment in either IT, transport or logistics, requires Angolans to hold at least 35% of the company’s share capital should the FC wish to freely repatriate profits abroad in the form of dividends.   The risks associated with an Angolan shareholder possessing a majority stake or a large percentage of shares can be mitigated by: i) proper and effective due diligence on the local partner;  ii) carefully drafted shareholders agreement and iii) the Angolan partner granting a power of attorney to the FC for the exercise of a percentage of its voting rights.

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The MTN fine and political interference in Nigeria

Negotiations embarked upon by the telecoms operator MTN with the Nigerian Communications Commission (“NCC”) in the hope of reducing the telecom operator’s US$ 3.9 Billion fine has exposed an interesting new approach by the Nigerian government that should be of interest to foreign investors in Nigeria

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Nigerian Customs Service: Plus Ça Change?

The Nigerian Customs Service (“NCS”), together with the Federal Inland Revenue Service and the now unbundled Nigerian National Petroleum Company, are arguably the most important state controlled parastatals in Nigeria. In 2015, the NCS generated NGN 905 Billion in revenue, an amount that dwarfs the combined revenues generated by other countries in the Economic Community of West African States.  The organisation employs in excess of 12,000 employees, across all 36 states in the country and is a key stakeholder in the fight against Boko Haram and the illicit drugs trade. In addition, for many decades, it has also been well known for being institutionally corrupt. In many respects it is a barometer for measuring the economic health of Nigeria and in particular the progress of President Buhari’s pre-election promise to eradicate corruption as a cause of economic dysfunctionality and social inequality. Its importance cannot be overstated in such an import dependent economy where the GDP per capita is a mere US$ 2,758[1] and GDP growth is forecasted to be only 2.3% in 2016[2], far lower than the 6-7% GDP growth that is required.

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Nigeria: Breakup of NAFDAC?

By the end of 2020, it is expected that spending on pharmaceuticals in Africa will reach between USD 40 Billion to USD 65 Billion[1]. The African market is currently the second fastest growing pharmaceutical market after Asia, with an annual compound growth rate of 12.5%[2].  West Africa has both a large young population under 25 years of age and an increasingly ageing population over 60 years of age and is a key high growth market for pharmaceutical companies.  The initiative by the West African Drug Regulatory Authorities Network (WADRAN) and the Economic Community for West African States (ECOWAS) to create one drug regulatory authority should further enhance the region’s

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Boye Gbadebo discussing the MTN Fine by the Nigerian Regulator

CNBC Interview MTN

Nigeria: Inflation And Austerity A Short Term But Necessary Concern In Nigeria.

Nigeria: Inflation And Austerity A Short Term But Necessary Concern In Nigeria.

Austerity and higher inflation is likely to be the challenges impacting Nigerian consumers over the next 18 months. This is notwithstanding the decision of the Central Bank to keep interest rates (monetary policy rate) at 13%. Concerns regarding potential foreign investor outflows and domestic investor confidence in local assets appear to have been behind the bank’s decision. However, this is likely to be temporary respite for consumers and investors in Africa’s biggest economy.

The National Bureau of Statistics (“NBS”) released the official inflation rate for June 2015, which was put at 9.2 per cent [the “street” rate is far higher]. The inflationary level released by the NBS is now above the upper limit of the Central Bank’s acceptable band of six to nine per cent. The austerity measures predicted to be put in place by the new administration such as the removal of the petrol subsidy is likely to take place during the course of 2016 causing a rise in inflation. Nigeria is a significant importer of consumer goods and the resulting pressure on the currency as a result of a falling oil price owing to a return of Iranian oil to the market are head winds Africa’s largest economy will have to tackle. This should undoubtedly cause concerns for those interested in investing in Nigeria’s middle class (and the related fast moving consumer goods industry).

Finally, the Monetary Policy Committee commented that the Naira was appropriately priced indicating an unwillingness to bow to pressure and permit the currency to float; at least  in the near future.

Nigerian State Government Bonds: A Greek Style Default?

Nigerian State Government Bonds:  A Greek Style Default?

The economic situation affecting many Nigeria states today can in some respects be compared with that of Greece. Many Nigerian states are effectively bankrupt. Reportedly 12 of Nigeria’s 36 states owe their workers more than US$550 million in salaries and allowances. Perhaps, no more than 5 states are economically viable. A recent finance ministry official called Nigeria’s debt profile as “scary” and President Buhari reported that the treasury was empty.

In its annual report for 2014, the Debt Management Office reported that Nigerian states’ external and domestic borrowings amounted to US$10.967 Billion. These figures are unreliable based on 2013 borrowings and it has been difficult to obtain reliable information from certain states such as Bayelsa. The total amount for 2015 is likely to be far higher than the US$10.96 Billion reported by the DMO.

Only sixteen states are able to provide clear outlines of how the funds raised have been used. The Securities Exchange Commission was reluctant to approve new bond issues prior to the election for fear as to how those funds could be squandered by incumbents fearing a loss of power. Nevertheless, few governors can point to capital projects that represent the proceeds of debt borrowings.

Ironically, it has been the country’s growth allied with low yields in Europe and the US and stringent money laundering controls in those territories that has fuelled the growth in state debt. Supported by many banks that made significant amount of money in fees, Nigerian states took advantage of these factors to raise billions of United States Dollars in the past 5 years. The Nigerian economic growth story was strong. Debt prices were relatively low and rates high arising the attraction of yield hungry funds particularly pension funds, which had stringent asset allocation restriction and were put off by a poorly performing stock exchange.

The fall in oil revenues and the weakening of the Naira has had a detrimental impact on the ability of Nigeria’s states to meets its obligations as they fell due. States receive the majority of their revenue through an allocation of revenues from the Federal Government. As the price of oil has fallen so naturally has the allocation. To illustrate this further, the 2015 budget was passed on the basis of an oil price of US$53 per barrel. At the time the price of oil was US$68 per barrel. Brent Crude currently stands at just above US$52 per barrel. States have focused on using the smaller allocation to meet their debt service obligations rather than pay employees.

The immediate future appears rather bleak. The Nigerian government in July approved a $2.1 Billion rescue package. This would be repaid from the central government’s allocation to the states. However, with this allocation likely to be smaller rather than larger, an increase in demand for infrastructure a Greek style creditor renegotiation may not be too far away.

Doing Business in Nigeria

A summary of the various issues of doing business in Nigeria.

Doing Business In Nigeria

Business Organisations


Useful business organisations