Weeks after President Bola Tinubu rang the closing bell at NASDAQ in New York and declared that Nigeria is now open for investment; some institutional investors from the US visited the country with their eyes on pension funds and infrastructure. For local stakeholders, Nigeria holds more promises beyond these two sectors. Oluwakemi Abimbola reports
The enthusiasm, with which the Chief Commercial Officer of Fuelcell Energy, Mark Feasel, spoke about his experience in Nigeria and the deals he had made within three days in Nigeria, was infectious.
With a smile spread across his face at the reception hosted by the US Consul General, Will Stevens, at his residence in Lagos, Feasel talked about the Memorandum of Understanding his company had signed with an energy firm, his trip to Alaro City and interest in Nigeria’s energy sector.
He said, “We have met amazing companies in Nigeria. Today, we signed a Memorandum of Understanding with Oando. I have only been here since Sunday and I have been in seven places since then including Alaro City; that traffic was not easy but there is such entrepreneurship in this country and I want to partner. So, it is exciting. I can bring US technology that we can surround with local expertise here in Nigeria and create jobs.”
According to Feasel who is also a lecturer at the University of Northwestern University, Evanston, Illinois, United States, being able to boost local expertise with US technology and funding is the best of both worlds.
This feeling was shared by the Deputy Executive Director of the Board of Education Retirement System in New York, Danie Miller, whose pension fund is worth over $8.2bn
He said, As far as coming to Nigeria and meeting pension funds, once you come, you see the true story of what Africa is. There are opportunities here. As such it is a no-brainer for us to look at Africa. My job is to find the best returns possible and if I’m not looking at Africa, I’m not doing that. There is tremendous opportunity for growth in Africa, especially in Nigeria. Since 2019, we have had $30m invested in Africa, $20m of that is in Nigeria.”
The investors are part of the USAID-sponsored American Institutional Investors Reverse Roadshow which has been touring the country for viable investment opportunities.
According to the National Bureau of Statistics, capital importation from the US was the highest in the second quarter of 2023 at $271.92m, marking 26.39 per cent of total capital importation followed by Singapore and the Republic of South Africa with $177.44m (17.22 per cent) and $136.95m (13.29 per cent) respectively.
In terms of foreign goods trade, the NBS reported that as of Q2, the US ranked second in the top five export destinations of Nigerian products with N718.63bn or 10.24 per cent of the total exports, trailing The Netherlands with N788.85bn or 11.24 per cent. For imports, the US was also ranked second, cornering N921.45bn or 16.09 per cent of the nation’s total imports behind China (N1, 269.41tn or 22.17 per cent).
Although Nigeria’s trade (export and import) had been heavy on petroleum oils and oils obtained from bituminous minerals, crude, liquefied Natural gas, Urea, Motor Spirit Ordinary, Used Vehicles, with diesel or semi-diesel engines, of cylinder capacity and Gas oil, Nigeria’s pension funds and their dominance in the capital market may be sparking an interest in the institutional investors from the US.
Speaking on the floor of the Nigerian Exchange Limited, the Investment Team Lead of Prosper Africa, Cameron Khosrowshahi, declared the openness of US institutional investors to working with Nigerian institutional investors including pension funds to explore more avenues to invest in the Nigerian capital market.
Whilst giving remarks, he noted that in the US, pension funds, some of whom were represented at the engagement, were allowed by regulation to invest 60 to 75 per cent of their capital into equities and funds targeting equities.
Khowsroshahi urged the “Nigerian stakeholders to work with the pension regulator to allow pension funds inject more of their liquidity into the Nigerian equities market.”
In Nigeria, the guiding principle of investing pension funds is to ensure the safety and maintenance of fair returns, with a prohibition on borrowing or lending pension fund assets. The instruments into which pension funds can be invested as outlined by the Pension Reform Act 2014, include bonds, Sukuk, Treasury Bills, and other securities issued by the Federal Government of Nigeria and the Central Bank of Nigeria or their respective agencies.
According to the National Pension Commission, pension assets under Management had hit N16.76tn as of the end of the third quarter of 2023 with the number of Retirement Savings Accounts under its Contributory Pension Scheme standing at 10 million.
Based on the latest Domestic and Foreign Portfolio Investment Report of Nigerian Exchange Limited for August, Institutional investors, which included Pension Fund Administrations have continued to dominate the market and outperformed retail investors by 14 per cent in the period under review.
Local stakeholders’ take
While local stakeholders are welcoming of the interest in the country and the investment climate, they are clear about the fact that the opportunities in the country are far beyond those being sought.
Chief Executive Officer of Chapel Hill Denham, Bolaji Balogun, addressing the investors at the US CG resident, said, “Many people think of this country as one of oil and gas but actually, it is not. Fundamentally, there are three parts of this economy that have far more value than our oil and gas industry. First and foremost, we are a farming country and one that has the ability to feed this entire continent. The country is incredibly blessed with solid minerals and many of the EV metals that can be so critical to the energy transition but most importantly, we are a country of tremendous talent; talents across films, talents across music, sports and talents across a youthful economy who are very comfortable digital natives.”
Balogun, who is also the chief investor of the Nigeria Infrastructure Debt Fund, which was recently listed on the NGX added, “When you do turn up here, one thing you will go away with is you will feel the dynamism, you will recognise the energy, opportunity and most importantly, like us, you might believe that demography is destiny. In 2075, Africans will represent 34 per cent of the world’s population and 15 per cent of the world’s population will sit in this country. Today, with an average age of 18 years and nine months, I see that as an opportunity rather than as a challenge.”
Not shutting the door on conversations surrounding infrastructure, Balogun stated that Nigeria is one of the last interesting infrastructure investment markets globally. It is a market of scale, capable of creating all sorts of opportunities across power, digital networks, across transportation networks and “We are really hoping that as these investors get more comfortable, they will do more here.”
Dr Joe Abah, Country Director of international development company, DAI, said that despite the devaluation of the currency recently and the concerns of a lot of investors about the value of Nigerian companies, it was wonderful to have the US investors still showing interest in the country.
He said, “It is not only in dollar terms, it is the talent that we have here, the industry, the natural resources. We are not just about oil and gas, we are not just about infrastructure, we are an agriculture-based country. We have a lot of solid minerals; we have a lot of talents whether it is in music or film.
“While there may be a focus on infrastructure, there is a lot more to do. However, infrastructure is important because you need it to grow. You need infrastructure to be able to move people and goods around. So, it is right that there is a focus on infrastructure.”
Need for change in Africa-US Relations
As the power play for global dominance plays out among members of the G-20 as well as the shift on the continent, Africa has increasingly become one of the deciding factors in who comes out on top. This has resulted in various countries approaching and reapproaching the continent on new terms or reinforcing their places.
The vehicle with which the US is elevating its relationship with Africa is the Prosper Africa Initiative. It connects US and African businesses with new buyers, suppliers, and investment opportunities. Khosrowshahi, speaking at the reception hosted in honour of the institutional investors said that Africa is changing and that the relationship with the US needs to change.
“Africa is changing and I think the relationship with America needs to change alongside it and that is why the Biden administration has elevated the relationship and that is why we are here with our institutional investors. The narrative around Africa and the United States has to change as well. In the past, the relationship has been dominated by perceptions of people’s minds. They had not come here to see the real Africa and the sophistication of Africa on the ground and Prosper Africa’s mandate is to change that, particularly among our investors.
“Africa is growing. The fundamentals are strong and increasingly the US community is viewing Africa as an investment destination,” Khosrowshahi said.
The fact that America desires a change in its relationship with Nigeria and Africa was further reinforced by the visit of the Deputy Secretary of the Treasury, Wally Adeyemo, to Nigeria in September, during which he highlighted the economic opportunities in Nigeria, the partnership with the US and a promise to deepen the relationship especially as Nigeria navigates a tough economic patch.
Adeyemo was quick to point out that Nigeria’s greatest resource is not oil, but its people.
Similar to the way President Bola Tinubu, wooed investors while ringing the closing bell at NASDAQ, New York last in September, the US Consular General, Will Stevens, took out time to sell the country to the institutional investors and expressed optimism that they would invest in the country.
Meanwhile, local stakeholders are playing it safe in terms of their expectations from the roadshow as they seek first of all that the investors become comfortable with the clime.
Abah said, “What we’re doing is showing people that Nigeria is open to investment. We have the talent; we have the natural resources and we have the will to grow our economy and maximise returns for investors. So, we welcome as much as we can get.”
Balogun added, “You have to start with baby steps, people have to get to know the market, they have to become much more comfortable with the risks, the opportunities, the long-term outlook, currency but over time as they get more comfortable with opportunities around here, you will see more significant investment.”