Is the cup half empty or half full in Nigeria, is the country on its way down or on its way up, is this The End or The Beginning? These are question going through the minds of many Nigerians as conflicting headlines hit us on a daily basis.
The answers will likely depend on which headlines you are reading. Let us examine some headlines from Reuters, a news agency that writes both political and business news stories with equal vigour. On Thursday, September 4, 2014, one of their headlines was “Hundreds Flee Nigerian City as Militants Gain Ground.”
Naturally many Nigerian were alarmed by the headline and the scary details. Nigeria’s major city Maiduguri, the heartbeat of North-East Nigeria with more than two million residents was now under threat from attack by Islamists who have successfully taken over another key town Bama and Gworza.
From all indications, based on the story, Nigerian soldiers were on the back foot in the war against insurgency in the North-East. From what started like a group of rag tag ill equipped insurgents, Nigeria seem to have on its hands a full blown war in which its military is seemingly not doing well at all.
The sad news from the war front was compounded by the allegations that Nigerian soldiers were actually unwilling to fight. If the allegation is true, then it may just be a matter of time before the insurgents start threatening the seat of power in Abuja, if that is their ambition.
The cloudy picture of the Nigeria situation is further compounded by the Ebola outbreak in the two commercial centres of Lagos and Port Harcourt. With Lagos seemingly overcoming the Ebola spread, the Rivers State government, where Port Harcourt is located, is said to now have 400 people under watch over the Ebola scare.
The fact that a patient who was supposed to be under quarantine in Lagos managed to escape to Port Harcourt to spread the disease has left a lot of Nigerians shaken. It has now left many wondering, if we are being told all the truth about the Ebola situation in the country.
But in the midst of this seemingly cloudy outlook for Nigeria and Nigerians, comes the news of significant investments inflow into the country. Still from Reuters, the same day it was reporting that one of Nigeria’s biggest cities was under threat of falling to terrorists, it also reported that Qatar National Bank (QNB) has bought 12.5 percent stake in Ecobank, which has a chunk of its assets in Nigeria, for $200 million (N32.6 billion). As if that was not enough, Reuters again reported the same day that the Bob Diamond’s Atlas Mara was in talks to buy stakes in another of Nigeria’s major banks-Union Bank Plc.
This was eventually confirmed on Friday, September 05, 2014 when Reuters confirmed that Bob Diamond’s Atlas Mara has increased its stakes in Union Bank to 29.9 percent, by making an additional investment of $270 million (N44 billion).
So in two days, while it looked like Maiduguri, one of largest cities in Nigeria was falling into rebel hands in the amidst stories of a military that seem to be fast disintegrating, foreign investors were showing that whatever is happening has had no impact on their perception of the potential of the Nigerian economy.
The equity investment in the banks followed earlier successful issues of Eurobonds in the first half of 2014 by three Nigerian banks in the international capital markets. Zenith Bank had successfully raised $500 million, Access Bank raised $400 million while Diamond Bank $200 million, making it a total of $1.1 billion (N179 billion).
Foreign investors have also remained active in the Nigerian stock market despite the rising insecurity. Though, there is evidence of a decline in foreign investors buying stocks, there however, seem to be no serious cause for concern as foreign investors still control an average of 55 percent of all transactions on the stock market, though this is significantly lower than the year high 78.25 percent of transactions controlled by foreign investors as at March 2014.
In the bond market, foreign investor demand has also remained high. The Federal Government successfully raised N100 billion through bonds in August 2014 without any significant increase in the cost of funding and with foreign investors actively buying into the issue.
Clearly, a picture is emerging that foreign investors are not really bordered by the deteriorating security in the North-Eastern part of Nigeria. This could be because, the troubled spot seem to have so far, have been contained to the North-East and there is confidence that it will not go beyond that.
It could also mean that foreign investors know more than what most Nigerians know. The confidence may come from that knowledge that this insurgency would be contained. My guess is that this is the case. I am assuming that the world cannot afford to allow Nigeria to collapse, not because they love Nigeria but because they cannot afford to manage the outcome.
With Syria, Iraq, Ukraine, Libya all in turmoil, the world cannot afford to add Nigeria to that broth of turmoil. So, what will most likely happen is that Nigeria will get some form of international backing to defeat this insurgency, if it really gets bad. This may be the confidence driving the investment inflow despite what looks like a very bad situation.
However, the risk for Nigeria is that global powers get so distracted by the other wars especially Iraq and Ukraine, or engage in long debates on the best approach to help, that before they turn their attention to Nigeria, the damage is already done.
Kwaku Brown
