The Head of Business Development for Jersey Finance, Allan Wood, was recently in Nigeria with a delegation from the Government of Jersey for a presentation and dinner reception in partnership with the Commonwealth Enterprise & Investment Council (CWEIC). The event was organised to strengthen evolving relationship with Africa and particularly Nigeria. In this interview Allan speaks about the opportunities in the Nigerian economy. Excerpts:
Why are you in Nigeria?
Jersey's forward-thinking international finance centre (IFC) has a lot to offer Nigeria. Our approach is to help new capital invest into the country to support economic growth and job creation, while also helping corporates, high net worth families and international organisations diversify their wealth. To quantify that, Jersey is a custodian of US$1.3 trillion of capital and US$500 billion of that is deployed into the United Kingdom (UK), in a range of assets and it supports 250,000 jobs in the UK, which represents five per cent of the UK's foreign direct investment (FDI). From a European perspective, we facilitate €180 billion into Europe and that supports about 88,000 jobs. The interesting thing is that US$600 billion is invested into global markets; our challenge is how do we invest that capital into Nigeria.
Why Nigeria and not South Africa, Kenya or any other African country. What's the interest in Nigeria?
We are promoting and working across these three big economies you mentioned. South Africa already has a strong relationship with Jersey that dates back 25 years. So, from a South Africa perspective, we have a lot of big brands - Standard Bank, Nedbank, Investec, Ashburton and Alexander Forbes for example, as well as having a lot of South Africans living and working in Jersey. We also have about US$5 billion of South African private wealth under management. Kenya, on the other hand, is a market that we have been working closely with for the past two decades. From a Nigerian perspective, we have a fair number of Nigerian clients within the trust companies and investment houses in Jersey from our London network, and we now feel it is time to build on this relationship, which necessitated me and other Jersey professionals travelling to the region.
What is the volume of capital that you are bringing in?
Currently, Jersey provides a conduit for between 0.5 per cent and 1.5 per cent of all FDI into the African continent, below the 2.8 per cent of total FDI we facilitate globally. Jersey can play a much bigger role going forward. As Nigerian companies and fund managers look to access Western capital, it's important to understand that Western investors' put a lot of emphasis on corporate governance. As time goes on Nigeria will need more and more capital and Jersey can act as a key partner. We can help deliver sustainable growth through access to capital markets, investor protection, and expertise and governance experience in areas such as anti-corruption and tax transparency.
Are there local organisations you are partnering with to achieve your target?
Over the last five years we have been working hard to build our strategic partnerships with many financial services intermediaries on the ground in Lagos. Our success in this market will only work if we have strong local partnerships.
Are you not considering setting up a unit here in Nigeria?
We don't have a presence in South Africa, Kenya or Nigeria at present, but it's only a matter of time.
Do you consider the Nigerian environment before bringing in capital to the country?
Absolutely. I think investors recognise the demographic dividend that Nigeria offers and its huge opportunities. There are associated risks and I think the big challenge is finding the right partners and investors going forward; this is where we can work together with the CWEIC to try and bring in that opportunity.
What is your take on the AfCFTA that has been adopted by African countries?
My view is that it makes complete sense for Nigeria to sign the agreement and trade with other countries across the continent. From a Jersey perspective, this will create more wealth for the continent and as people become wealthier, they will need to internationalise and diversify their wealth and this is where Jersey can come in and provide support. Jersey has 200 trust and corporate service providers, 70 asset managers and 28 banks, which is a deep pool of talent to help and support diversification. Not only will you get access to individuals, you also get investment opportunities in hard currencies such as British pounds, US dollars and Euros.
Are you looking at also going into partnership with some Nigerian banks?
We already have ongoing discussions with some banks. And, while we have 28 banks in Jersey now, which have global footprints and several South African banks, we are also very interested in having conversations with Nigerian banks. So, the discussions are ongoing.
With the Central Bank of Nigeria proposing a merger in the banking sector, don't you think it will be an opportunity to invest in the Nigerian banking sector?
We work on behalf of our members, who happen to be banks, law firms, private equity firms etc. I certainly think there are investors out there that would be interested in these opportunities. I think one of the things that Nigeria needs to consider is how they promote opportunities outside the country, so that people gain an understanding of where the investment opportunities lie.
What has been the impact of your partnership with the CWEIC to what you do in Jersey?
On Monday 8 July, CWEIC Chairman, Lord Marland, signed a programme of work with Senator Ian Gorst, Minister for External Relations, from the Government of Jersey. CWEIC has enjoyed a close partnership with the Government of Jersey since their joining in 2016. We look forward to working with the CWEIC - throughout the coming year.
So how many jobs has Jersey created in Africa?
I won't be able to give you the exact number, but we have a significant piece of research which is called "Jersey's Value to Africa" which quantifies the need for FDI into Africa. Africa is still a young continent which will make up almost a quarter of the world's population by 2040. Greater life expectancy is a challenge for African governments, but it is also a great opportunity: their fast-rising working-age populations will boost urbanisation and sustain economic growth.
Our research estimates that Africa's economy could grow by five per cent a year to 2040. However, achieving such growth will require a surge in investment, - US$85 trillion by 2040 - for infrastructure, machinery, buildings and homes. Some of that could come from domestic sources, though entrepreneurs and investors would need reassurance that they would be properly rewarded in a region where the rule of law is often weak. Government investment could also help, but too many countries lack the ability to administer and collect taxes consistently and effectively. Foreign aid is too small, and often targeted at day-to-day needs. So foreign private investment must help fund the investment gap.
What will you recommend being done to stimulate economic growth in Nigeria?
I think working with leading IFCs like Jersey can support economic growth and job creation. I am delighted that one of our Government officials was in Abuja recently and they had discussions about a potential Double Taxation Agreement (DTA). I think instruments or treaties like that with IFCs like Jersey, would bring about transparency into the system. We view corporate governance as a significant part of transactions and if that particular treaty was to be explored further, I think that would really help FDI into Nigeria. I am not saying Jersey is the silver bullet, but we want to play our part and increase FDI into the country. Technology seems to be thriving in Nigeria, which is very exciting. We have seen entrepreneurs come back from the United States looking to raise capital and we are working with them to see how we can structure funds and help them access the capital they need. So, private investment is a critical component.
Can you shed more light on the DTA?
I am not a DTA expert, but it is an agreement between two or more countries that reduces the amount of tax that an international worker or company must pay, so they do not have to pay tax twice on the same income. Ultimately, it gives tax incentive to investors. The other instrument that will be interesting to investors is the Bi-lateral Agreement Treaty, which again gives further protection to investors and all of these help in de-risking transactions. So, we are playing our role in ensuring that there are the right solutions to structure product.
Infrastructure challenge is a big issue in Nigeria. Are you considering investing in that sector?
It is obvious that significant infrastructure is required, which includes building homes. So, it goes back to that path of Nigeria having to promote these opportunities with the right people. From our perspective, we are trying to educate those in London, so that they can consider Jersey as the right platform to structure that infrastructure deal. So, if we can play a role, that would be fantastic. I think there is an element of promotional work that is required to achieve that.
How optimistic are you about the opportunities in the Nigerian economy?
It wouldn't be a strategic market for us if we didn't believe in Nigeria. One of the challenges I recognise is that while the Nigerian economy is growing at two per cent, the population is growing faster and that creates a problem. There is no two ways about it, there is going to be people creating significant wealth here and we believe that Jersey is one of the best IFCs in the world to help clients in that respect. We also see that there are significant infrastructure opportunities in Nigeria as well as other sectors, that our members are interested in.
But one thing that is clear is that you have to be committed to this market for the long term. I have been travelling to Nigeria for five years and this is my fourteenth trip, and I believe that as the economy turns around and growth starts to build again, you will see me making more trips to Nigeria. From our perspective, we have a long-term view about Nigeria. What we do is to promote the right ecosystem for investment.
Are there any other challenges you see in Nigeria?
I think one of the challenges is perception. From a Western world perspective, some forms of insecurity, such as the threat of Boko Haram and oil challenges, do have a certain degree of impact on investment. So, the challenge for all of us is to get more people that have the capital to travel to Nigeria to see these opportunities for themselves. From our perspective we just see a great opportunity to help a wonderful country that has a huge demographic dividend and a very exciting future, when the Western world is aging. That said, further promotional work is required to let the world know what the sectors are and where people can invest.