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FBN Capital Limited. (A part of the FirstBank Group). Invest in Nigeria: The Way Forward. Kayode Akinkugbe CEO, FBN Capital Limited 2 nd Nigeria International Investment Forum Lagos, 4 th October 2012 . A leading FDI destination in Africa.

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invest in nigeria the way forward

Invest in Nigeria: The Way Forward

Kayode Akinkugbe

CEO, FBN Capital Limited

2nd Nigeria International Investment Forum

Lagos, 4th October 2012


A leading FDI destination in Africa

  • Nigeria was the no 3 destination in Africa in 2010 per UN
    • Figure for Nigeria for 2011 per CBN was US$8.9bn (gross) or US$8.1bn (net)
  • Levels are modest in context of a market size of close to 170 million
  • Need to more than double current rate of 2.7% of GDP to soak up unemployment
  • Some way to go to join the BRICs by this measure

Gross FDI 2010 (US$bn)

a popular regional comparison
A popular regional comparison

Net FDI (US$ bn)

  • Trend for Nigeria more stable than SA
  • Nigeria outflows largely in finance sector, which is now curtailed
  • SA outflows more diverse, including mining, telecoms and retail
  • Potential of reform agenda and active infrastructure programme in Nigeria to yield substantial increase in FDI
direct vs portfolio flows
Direct vs portfolio flows

Capital inflows (gross; US$ m)

  • Direct second to portfolio investment in Q1 due to offshore entry into FGN debt market
  • This story likely to have been repeated in subsequent quarters
  • Both inflows valuable in underpinning current account of BoP and naira exchange rate
  • More enduring value of direct investment than portfolio flows
the many fruits of fdi
The many fruits of FDI
  • A substantial increase in FDI in conjunction with FGN’s infrastructure programme has the potential to push the GDP growth rate from 7% to 10% and beyond.
    • The example of Brazil shows that agriculture has piggy-backed on the building of roads for the development of natural resources.
  • FDI can help to soak up unemployment, which was running at 24% nationally and as high as 38% for the 15 to 24 year age group in 2011 according to the NBS.
  • It opens the door to technology transfer and higher productivity: examples include plantations, mining, hotels, shopping malls and cable tv.
some steps to boost fdi
Some steps to boost FDI
  • FDI should never be a substitute for domestic investment. If FDI predominates, there are negative implications for entrepreneurship, employment, wealth creation and even sovereignty.
  • The policy environment is appropriate yet the annual surveys from the World Bank Group, the World Economic Forum and others all point to remaining challenges on the ground.
  • The passage of the investor-friendly petroleum industry bill and the review of the Land Use Act of 1978, not to mention further reforms at FGN and state government level, would all enhance the environment.
  • A deepening of sub-regional integration, based around ECOWAS, along the lines of the East African Cooperation would broaden the market for Nigerian products and attract new investors.
the nigerian banks a way forward
The Nigerian banks: a way forward
  • On the surface the banking industry is in good health: AMCON has cleansed its balance sheets, the valuations of listed banks on the NSE are compelling and the regulatory environment has been tightened since 2009.
  • Financial inclusion policies targeting the banks e.g. mobile money which is in its infancy – most Nigerians are unbanked and IT offers the potential for efficiency gains. Over time, mobile money extends the taxed economy.
  • The banks continue to be large holders of FGN debt because of the slower development of the buy side community.
the financial sector a future
The financial sector: A future
  • Large gaps remain in the pensions business, insurance companies and in the overall savings industry. Filling those gaps on the buy side would transform the low level of financial intermediation.
  • Pension assets under management have reached N2.75trn but this is just 7% of GDP and covers just five million employees nationally. The public sector is under-represented.
  • Insurance penetration stands at just 2% of the population.
  • Promotion of collective investment schemes

FBN Capital Limited

  • 16 Keffi Street
  • Off Awolowo Road
  • S.W. Ikoyi
  • Lagos, Nigeria
  • Tel: +234-1-2798300, +234-1-2707180-9
  • Fax: +234-1-2707192
  • info@fbncapital.com
  • www.fbncapital.com