Women work in a fiber hair factory in Ikeja district in Lagos, Nigeria. Reuters
Nigeria announced a target to double its manufacturing output to 20 per cent of GDP within six years and will set up production hubs across the country in partnership with regional aid banks.
Nigeria is Africa’s biggest economy but it lacks a strong manufacturing base, which contributes less than 10 per cent to its total gross domestic product (GDP). The country has maintained a strong currency to ensure it can keep imports pouring in, with a growing proportion coming from China.
“Project MINE’s (Made in Nigeria for Export) strategic objectives are to increase (the) manufacturing sector’s contribution to GDP to 20 per cent and generate over $30 billion annually by 2025,” the ministry of industry, trade and investment said in a statement.
The government has set up Nigeria SEZ Investment Company, which will finance industrial parks in special economic zones in the commercial capital of Lagos, southeastern state of Abia and northern state of Katsina.
The government is currently raising capital of $250 million for Nigeria SEZ Investment Company. It plans to double its equity to $500 million over four years, the ministry said.
Lenders such as African Development Bank, Afreximbank, African Finance Corporation and Nigerian Sovereign Investment Authority have shown interest in co-investing with the Nigerian government, which would own a 25 per cent stake. Two Chinese groups have also shown interest, the ministry said.
The West African country’s manufacturing and agricultural sectors have been neglected since the 1970s oil boom, when Nigeria began making easy money from crude oil sales.
Nigeria, where the vast majority of the population lives on less than $2 a day, recently emerged from a recession but growth is fragile and the government is trying to diversify its revenue away from its reliance on oil.
President Muhammadu Buhari, who is due to start a second four-year term next month, has pledged to revive the economy and is focused on building roads and expanding the railway network to lower production costs.
The ministry said that the new investment company would facilitate investment into the special economic zones. However, some lawmakers have questioned government’s investment in the company, which is meant to be private-sector led.
Critics point to lacklustre interest in some other free trade zones around Nigeria, such as the $300 million Tinapa resort in the southeastern state of Cross Rivers, which was set up in 2007 and envisaged as a tourist resort and duty-free shopping area.
In 2010, Lagos state, touted plans to set up a free trade zone with Chinese investors to develop local manufacturing but little production has been set up there. South African lender Absa is aiming to make a start on its investment bank-focused expansion into Nigeria in the second half of this year, chief executive of the division, Charles Russon, told Reuters.
Absa, trying to make its name as a stand-alone bank after separating from Britain’s Barclays, has been touting Nigeria as a market central to its growth strategy since last year, but has given scant details on its plans.
Russon said the Nigerian expansion would be focused on Absa’s corporate and investment bank (CIB), and that he had requested his team develop a strategy within the coming months.
“I want the strategy nailed down and approved with our board pretty much at the end of Q2, so that we can start to action that in the second half,” he told Reuters in an interview.
He reiterated former CEO Maria Ramos’s view that the bank was unlikely to make acquisitions. But Absa would have to be clear on how to fund its activities without a retail deposit base, he said, adding that building from scratch can be slow.
Absa has a representative office and securities licence in Nigeria, but needs to up the ante in one of Africa’s most promising banking markets in order to meet its ambitions.
The bank, which has lagged competitors such as FirstRand or Standard Bank, wants to double its share of revenues on the African continent to 12 per cent – a target the CIB is central to achieving.
As well as planning its own expansion in Nigeria and other markets, such as Angola and Egypt, Russon said the lender would look to offer some services in such countries in partnership with French investment bank Societe Generale.
Absa and SocGen agreed to cooperate on the continent last year, but a lack of details left some investors sceptical.
Russon said teams of staff from both banks were putting together proposals that Absa hoped to disclose by the end of the second quarter.
Absa is also setting up offices in London and New York, both with securities licences, to replace some of the global reach it lost with the Barclays divorce.