Washington, DC — Nigeria, which has long been Africa's leading oil producer - and most populous nation, is aggressively pursuing investment to diversify its petroleum-dependent economy. Leading the campaign on behalf of President Goodluck Jonathan is Olusegun Olutoyin Aganga, who has been Minister of Trade and Investment since June 2011, after serving for 14 months as Finance Minister. He is a chartered accountant who spent 20 years at Ernst & Young and Goldman Sachs International. In several U.S. appearances this month, Aganga is making the case that reforms implemented by Nigeria's government have dramatically changed the investment climate but remain little understood outside or inside Nigeria. Following are excerpts from his AllAfrica interview following his presentation as part of a ministerial roundtable hosted by the Corporate Council on Africa on 20 September.
What is the essence of your pitch to prospective investors?
We operate in a new paradigm in the world economy. Countries controlling 75 percent of the world's GDP have issues today they've not faced before - large budget deficits, fiscal consolidation, low growth. In Africa, we are now a high-growth environment. Six of the 10 fastest growing economies are in Africa, Nigeria being one of them. Seven of the 10 fastest growing by 2015 will be from Africa, and Nigeria will be one of them. We are in a very different economic and political situation today. We have grown at an average rate of 8.8% over the last 10 years. When you look at the debt to GDP ratio, it is under 20%. Average in Europe is 18.4. When you look at return on investment, we rank at number four globally with an average return of 35%.
So we are a high-growth, high-returns environment for the first time ever, and the developed economies are in a low-growth, low-return environment. Money follows money. Where the opportunities are, where the high returns are today, where the market is today, where the raw materials are today - that is Nigeria. The country is far more stable and stronger. We have had unbroken democratic rule for the past 14 years. We've had three changes in government. In 2011 we had an election that was described locally and internationally as the freest and the fairest in the country ever.
When you look at the macroeconomic situation, exchange rates have remained stable. Inflation is down to single digits. Debt-to-GDP ratio is low. So it is not a surprise that Nigeria, for the first time, was the preferred number one destination in Africa for investors in 2011, attracting $8.1 billion - 46% higher than in the previous year. In 2012 Nigeria retained that position.
As a country we have done very well in attracting investment. That is not a surprise because the UNCTAD (United Nations Conference on Trade and Development) World Investment Report ranks Nigeria at number four globally in returns on investment at an average rate of 35.5% compared to 7% on average rate globally. Based on those returns, our goal is to be attracting more than $30 billion worth of investment per annum, because the opportunities here are huge.
What measures have you introduced to meet that goal?
First, we make sure we have a clear role for the government and private sector. We do the policy part. It is the private sector that is going to deploy capital. Second, we now have very clear policies that we are implementing rigidly. In the past, we were satisfied with exporting raw materials and buying back [finished products], which means exporting jobs. You use the proceeds from the sale of the raw materials to buy finished goods - which is wrong policy that we have followed for decades. All that has changed. The game now is industrialization - it's about adding value.
Yet Nigeria remains a petroleum-dependent economy.
But we can change that easily. History tells us that no country has managed to move from a poor to a rich nation by relying entirely on exporting raw materials without having a strong industrial and services base. United Kingdom started that move in 1485 under the rule of King Henry VII. They were exporting wool to the Dutch and to Florence. England banned exports and started their own garment industry. For countries that are not resource rich, revenue comes primarily from taxes and duties. Who pays taxes? It is industries and companies. That is the direction we have for the country. So we now have a clear strategy and vision for the country which is about adding value for areas where Nigeria has competitive and comparative advantage.
For example, in agriculture we have competitive advantage because we have 84 million square hectares of arable land, and only 40% of that is cultivated. We have very good climate for agriculture and almost anything and everything can grow in the country. If you look at cotton, it will grow in 23 states in the federation. But it is not about the cotton, cocoa, or palm kernel. It is what you do with those commodities. Rather than just exporting the raw material, now it is about industrial processing.
We have clear policies to go from sugarcane to sugar. In the past we were satisfied with bringing in brown sugar and refining it and then selling it locally, which meant we were importing 97% of the sugar we consume. As [entrepreneur and philanthropist] Aliko Dangote has said, he was employing in his refinery 1,403 people. Now he is going to invest an additional $2 billion in the sugar sector [and] create about 700,000 jobs by going from sugarcane to sugar. He will be investing in different states in the federation - Kogi, Kwara, Kebbi, Adamawa and Taraba.
Cassava is another example?
Yes, we are the number one producer of cassava in the world, but it is not only about producing the cassava. It is what we do with it. For example, Malawi has 24 cassava products - wine, bread, starch, cakes, biscuits. We are also talking palm kernel to palm oil. Malaysia got its first seeds of palm kernel from Nigeria. Palm oil is now a big import earner for Malaysia and Indonesia. We can go back to that. Textiles used to be the second largest employer in the country. Today we are reviving that. We want to go from cotton to garmenting to fashion, because it is the retail end that actually provides a lot of the jobs. We have a policy coming up on that.
If you look at the industrial sector, among the top ten most populous nations in the world, there are only two that do not have an auto program - Bangladesh and Nigeria. We are determined to get our policy on automobiles right, which is 99% complete today. We have been working with our colleagues in South Africa, who have a successful automobile program. We have been working with the likes of Nissan, Toyota to develop that policy, because I want the likes of Nissan and Toyota to come to Nigeria and start assembly.
We have a holistic policy, which means that we produce goods but we also look at areas where we need to improve our competitiveness. So skills are going to be a major part. Brazil is working with one of our local agencies to design an auto training center in three clusters - encompassing Lagos, Ibadan, Kano, Kaduna, Aba and Owerri. Trainees will learn to maintain all the cars we produce in the country, and they will produce the spare parts. By the way the OEMs [original equipment manufacturers] only produce 30% of a car today. The balance is produced by their joint-venture partners. So the JV partners follow the OEMs into the country.
In the oil and gas sector, I want a vibrant petrochemical refinery that will give rise to plastic and chemical industries. While I will still sell my oil and gas, I will sell it to local people that are manufacturing [and] still get that revenue. The difference is [that at the local level] they process the product, they will make money, they will pay taxes, the government will generate more money and income per capita will go up. That is the new Nigeria.
What is being done to solve Nigeria's longstanding power shortage?
Our policies are making it very easy for investment to flow into different sectors of the economy. The bedrock of all this will be infrastructure and power. Under the MOU [Memorandum of Understanding] we signed with [General Electric chairman and CEO] Jeff Immelt, GE will invest about a billion dollars in turbine production. The first $250 million has come into the country, and three partners of GE are now looking to come to Nigeria to service GE.
We have privatized power generation and distribution. We've had a successful sale of those companies. There were only about 17 companies, but we had 331 bids to buy them. That tells you the level of interest.
To make it easier for investors and to remove the risk, we have set up the bulk trader to buy power from the generators and interface with distribution companies. There are several distribution companies who will take the power and make money out of it. For power generators, because of the bulk trader it is almost guaranteed income and is sustainable over a long period of time. You cannot lose.
What about cement production and exports?
We produced less than two million tons of cement in 2002. Today we are producing 22.8 million metric tons of cement, and next year it will be 39 million metric tons. Today we have one of the largest cement plants in the world, and that has created jobs. Nigeria is now a net exporter of cement.
On the latest World Economic Forum's 2013-2014 Global Competitiveness Index (GCI), Nigeria dropped five places - from 115 last year to 120 this year. Why the decline?
We found out that the WEF relied on a survey sent to the private sector National Economic Summit Group. The problem is we have not done the communication we should have done about all we are doing. We are not getting our message out about how we are tackling corruption or how infrastructure is better today than it was two or three years ago, how we have done far more in the power sector than any other [previous government].
We have also strengthened the Nigerian Investment Promotion Commission.
They have 26 ministries on one floor. When you come to register your business, all you need to do can be done in one location. We have it at the federal level, now we've taken it to the state level. We have it in 17 of the states today and we want to take it into all of them. Before the end of the year, you will be able to register your business online and pay online and reduce the fee for registering a company by 50%.
We now have a new visa regime, which allows investors to obtain their visas at point of entry. All they need to do is go online, register, pay the fee and bring the document. All our embassies have a trade and investment desk today, and I am setting up eight regional trade and investment offices - the first one in Beijing. The second one is going to be in Abu Dhabi, the third in Brazil, and the fourth in the United States. Their job is to answer the queries, provide information, make sure the people there know what we are doing in the country and make sure we are able to attract investments from those locations.
We are examining laws affecting investment in the country. We have an insolvency bill going to the national assembly. We have anti-trust and consumer protection bills going to the national assembly, which I'm backing up with a policy so that we can start implementing even before parliament acts. So these are some of the initiatives we are doing to make sure that we have the right environment for investors.
I think many observers would say this is an ambitious agenda. Are you confident you can make this happen?
I don't agree that these are ambitious goals, because we are already doing them. I already have an industrial revolution plan and a sugar policy in place. I have a 99%-finished automobile policy, which I developed with the OEMs. I already have the textile strategy in place, which I am taking to FEC [Federal Executive Council - the Cabinet]. I already have a National Competitive Council in place. I already have an insolvency bill in place. I already have a competition and consumer protection bill ready. I have already reduced the cost of setting up your business by 50%. I have already implemented the 24-hr business registering service.
What are some indicators of success?
We are number one in Africa [as an investment destination] - for the first time. That's indication. Our investment forum in China - close to 1000 people came to the event. Power China committed to building 20,000 megawatts of power in Nigeria in the next 10 years. That is about $20 billion [in investment]. Electobras [from Brazil] has signed an MOU to build 10,000 megawatts of hydroelectric power. That's close to about $10 billion. Siemens and GE have said the same thing. GE is looking at assembling locomotives in Nigeria, in addition to turbines, and they looking at setting up diagnostic centers in the country. P&G is increasing investment in the country today. That is the reality.