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Nigeria Entering the World League? An Introduction, May 2015

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Page 1: Nigeria – Entering the World League. Future Watch Report, April 2015

Nigeria – Entering the World League?

An Introduction, May 2015

Page 2: Nigeria – Entering the World League. Future Watch Report, April 2015

Contact information

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Amatka (Pty) Ltd

www.amatka.com

[email protected]

+27 (0)79 618 6570

Unit 608, 6th Floor

76 Regent Road (The Point Tower)

Sea Point 8060

Cape Town, South Africa

Amatka – Insight Africa Services

Amatka (Pty) Ltd is a South African company founded and owned by Finnish entrepreneurs based in

Cape Town. Amatka provides knowledge and views of business opportunities in Africa with focus on

Southern and Eastern Africa. Insight Africa also supports networking in these countries.

Tekes – the Finnish Funding Agency for Innovation

Tekes is the main public funding organisation for research, development and innovation in Finland.

Tekes funds wide-ranging innovation activities in research communities, industry and service sectors

and especially promotes cooperative and risk-intensive projects. Tekes’ current strategy puts strong

emphasis on growth seeking SMEs.

Page 3: Nigeria – Entering the World League. Future Watch Report, April 2015

Contents

Introduction ........................................................................................................... 2

Background ....................................................................................................... 2

Purpose ............................................................................................................. 2

Recommended Use and Liability Disclaimer ...................................................... 2

Nigeria in a Nutshell........................................................................................... 3

Political Economic Climate: Business Point of View ............................................... 5

Trade and Investment ........................................................................................ 5

Growth: Drivers and Challenges ........................................................................ 6

Political Economy: Supporting Factors and Challenges ...................................... 6

Key Areas of Potential Growth ........................................................................... 7

Innovation Ecosystems ......................................................................................... 9

Innovation Hubs................................................................................................. 9

Research ......................................................................................................... 10

Private Companies .......................................................................................... 11

Sectors in Focus ................................................................................................. 12

Energy and Environment ................................................................................. 12

Healthcare and Wellbeing ................................................................................ 15

Education ........................................................................................................ 16

ICT, Digitalisation and Mobile Solutions ........................................................... 17

Future ................................................................................................................. 20

SWOT: Nigeria ................................................................................................ 20

Scenarios ........................................................................................................ 20

Information Sources ............................................................................................ 21

Front cover picture: Lagos, Nigeria 57991 by Jrobin08 - own work. Licensed under

CC BY-SA 3.0 via Wikimedia Commons -

http://commons.wikimedia.org/wiki/File:Lagos,_Nigeria_57991.jpg#/media/File:Lagos,

_Nigeria_57991.jpg by Nairobi123 (Wikipedia)

Page 4: Nigeria – Entering the World League. Future Watch Report, April 2015

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Introduction

Background

This report provides, in a nutshell, facts of Nigeria and insights into future business

opportunities. The report is based on statistics, recent articles and publications, and

expert views.

The report has been prepared by an international team coordinated by Amatka (Pty)

Ltd, a private company owned by Finnish entrepreneurs, based in Cape Town, South

Africa. The report is part of Team Finland’s Future Watch Program in Africa, called

“Strategic Partners for Innovation Actives Africa Services”, and coordinated by Tekes,

the Finnish Funding Agency for Innovation.

The focus of the process is on the four most promising (defined by size, growth and

ease of doing business) Sub-Saharan African countries: Kenya, Nigeria, South Africa

and Tanzania. Sectors in focus are: ICT, mobile & digitalisation, education, health &

wellbeing, energy & environment.

Elements of Strategic Partners for Innovation Activities Africa Services are: Continent

Report Sub-Saharan Africa, Country Reports (Kenya, Nigeria, South Africa,

Tanzania), Alerts: arising signals for the future, Updates: frequent summaries of

alerts and Contact Database.

Purpose

The reports, and this service, focuses on issues, facts, signals and insights that are

likely to play a role in doing business in, for example, Nigeria’s medium term future

(2-5 years). This report DOES NOT provide sales leads or provide a picture of how to

establish operations in Nigeria.

Using present facts and information, combined with future insights, signals, and

scenarios, the report suggests possible futures and the related implications for

Finnish SMEs interested in doing business in Nigeria.

Recommended Use and Liability Disclaimer

Before reading this report, it is recommended to get familiar with the Sub-Saharan

Africa Continent report. Additionally, it is strongly recommended that the readers

always check the latest information; situations in Africa can change overnight.

Amatka has made every attempt to ensure the accuracy and reliability of the

information provided in this report. However, the information is provided "as is"

without warranty of any kind. Amatka does not accept any responsibility or liability for

the accuracy, content, completeness, or reliability of the information contained in this

report. No warranties, promises and/or representations of any kind, expressed or

implied, are given as to the nature, standard, accuracy or otherwise of the information

provided in this report nor to the suitability or otherwise of the information to any

particular circumstances. Amatka shall not be liable for any loss or damage of

whatever nature (direct, indirect, consequential, or other), which may arise as a result

the use of this report, or from use of the information in this report.

Page 5: Nigeria – Entering the World League. Future Watch Report, April 2015

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Nigeria in a Nutshell

History in Brief

The history of Nigeria can be

traced back to prehistoric settlers

living in the area as early as 11

000 BC. Numerous ancient

African civilisations settled in the

region that is known today as

Nigeria. Islam reached Nigeria

through the Hausa States during

the 11th century. Nigeria was

colonised by Britain in 1885, and

later – in 1901 – became a

British protectorate. Colonisation

lasted up until 1960, when an

independence movement

succeeded in gaining Nigeria its

independence.

Nigeria first became a republic at the time it was founded, but succumbed to military

rule in 1966 after a bloody coup d'état. A separatist movement formed the Republic of

Biafra in 1967, leading to the three-year Nigerian Civil War. Nigeria became a

republic again in 1979. However, the republic was short-lived, when the military led

by Major General Muhammadu Buhari (current president) seized it again four years

later. Buhari was overthrown and a new republic was founded in 1993, but was

dissolved again by General Sani Abacha afterwards. During Abacha’s rule, corruption

and governmental inefficiency as well as a repressive military regime turned this oil-

rich country into an international pariah. During the 1970s, Nigeria had the 33rd

highest per capita income in the world, but by 1997 it had dropped to the 13th

poorest. Abacha died in 1998 and a fourth republic was established the following

year.

Nigeria Today

Nigeria is a middle-income, mixed economy and emerging market; with expanding

financial, service, communications, technology and entertainment sectors. It is

ranked 26th in the world in terms of GDP and is the largest country in Africa – both in

terms of population and GDP.

Nigeria’s population is made up of approximately 200 ethnic groups, 500 languages

and two major religions: Islam and Christianity. It is also the biggest oil exporter in

Africa, with the largest natural gas reserves in the continent.

During the past decade, Nigeria has registered strong economic growth, averaging

6.5%. The Nigerian economy continued to experience growth in 2014 – largely driven

by the non-oil sector, while oil production declined. The sharp decline in oil prices has

posed major challenges to the country’s external balance and public finances.

The share of people living below the $1.25 PPP (Purchasing Power Parity) poverty

line has declined from 33% in 2010 to 30% in 2015. Growth has been an important

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driver of poverty reduction, yet at this rate, owing to the rapid population growth being

close to 3%, the actual number of the poor continues to increase.

National figures hide rather diverse regional patterns. The GDP numbers indicate that

telecommunications, real estate, manufacturing, construction and entertainment have

increased their shares of GDP. Most of them are labour-intensive sectors that have

generated a significant amount of new jobs and contributed to poverty reduction.

However, these gains have mainly concentrated in urban areas of South West

regions.

Figure 1 provides some of the figures at a glance; in addition to distances between

the commercial hub Lagos (Abuja is the capital) and some other cities.

Figure 1. Key Indicators - Nigeria

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Political

Economic

Climate:

Business

Point of View

Trade and Investment

Nigeria’s largest export partners in 2012 were the United States (about 20% of the United States oil comes from Nigeria), India and Spain. The largest import partners in 2012 were China, the United States and India. See Figure 2 below.

Figure 2. Nigeria’s export destinations and import origins 2012 (source:

Observatory of Economic Complexity/United Nations COMTRADE)

Nigeria’s exports to and imports from Finland in 2012 are illustrated in Figure 3

below.

Figure 3. Trade between Finland and Nigeria 2012 (source: Observatory of

Economic Complexity/United Nations COMTRADE)

Nigeria is among the largest Foreign Direct Investment (FDI) destinations in Africa.

FDI flows to Nigeria were $5.5 billion in 2013 according to the United Nations

Conference on Trade and Development (UNCTAD).

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Nigeria’s main sources of inward FDI have commonly been the home countries of the

major oil companies –roughly 50% of FDI into the country goes towards the oil

sector. The United States and United Kingdom are ever-present sources of FDI into

Nigeria; there is, however, an emerging source of FDI for Nigeria coming from the

Middle East, and despite Asia’s waning FDI into Nigeria, China has continued to be a

dominant force. Nigeria is currently China’s second-biggest trading partner in Africa

(following South Africa).

Growth: Drivers and Challenges

Despite the risk, rumours and hype, the fundamental reason many companies are

giving Nigeria a second glance is simple: the country is densely populated with a fast-

growing economy and an emerging middle class that is demonstrating an increasing

level of confidence.

Nigeria's young population and economic growth make it the largest high-potential

consumer market in Africa. Growing demand for electricity, housing and retail goods

provides a field for new entrants to explore. Challenges and risks that need to be

overcome include unfinished distribution networks and a shortage of skilled labour.

Accelerating the creation of productive jobs through private sector growth and

improvements in education (skills) remains the major medium-term challenge. So far,

the pace of job creation has been inadequate, leading to increasing frustration among

underemployed Nigerian youth. In many parts of the North, basic primary and

secondary education is still the exception rather than the rule.

Despite a strong economic track record, poverty is significant, and reducing it will

require strong non-oil growth and a focus on human development. Constraints to

growth, such as the investment climate; infrastructure; incentives and policies

affecting agricultural productivity as well as quality; and relevance of tertiary

education, have been identified.

In spite of successful initiatives in human development, Nigeria may not be on track

with meeting most of the Millennium Development Goals (MDGs). Underpinning

these challenges is the core issue of governance. Fiscal decentralisation provides 36

states and 774 local governments a considerable amount of policy autonomy; control

of 50% of government revenues; and responsibility for delivery of public services.

Capacity is weak in most states, and improving governance will be a long-term

process.

Political Economy: Supporting Factors and Challenges

In 2009, Nigeria Vision 20:2020 Economic Transformation Blueprint was published.

"By 2020 Nigeria will be one of the 20 largest economies in the world, able to

consolidate its leadership role in Africa and establish itself as a significant player in

the global economic and political arena."

The Vision has three pillars:

Productivity and well-being of the people.

Economic growth.

Sustainable social and economic development.

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Some examples of the targets of Vision 20: 2020 versus the current mid-way reality:

A GDP target of more than $400 billion, with an average growth rate of

13.8%; the reality is that a GDP of $510 billion has been achieved, although

this is more to do with the statistical rebasing exercise; in addition, an

average growth rate of 6.5% is half of the estimated targeted growth rate.

A poverty target rate of 21% by 2015, i.e. 2:10 Nigerians; as opposed to the

current 6:10.

A targeted ranking on the corruption perception index of less than 60,

compared to the current rank of 136.

Power generation capacity of 20 000 MW by 2015 versus the current reality

of about 5 000 MW.

The national election held in 2015 was successfully conducted to a large degree:

President Goodluck Jonathan lost, and he conceded defeat to former military ruler

Muhammadu Buhari. (See also 1.4 - A Brief History.)

Buhari has claimed a commitment to democracy and a new way forward for Nigeria,

although his first focus will be on bringing stability to the country. The fact that he was

elected democratically and had run unsuccessfully in 2003, 2007 and 2011 seems to

be an indication that he would be more inclined to favour the democratic process.

With his military background and participation in a military coup that brought him to a

short-lived presidency in 1983, he could be able to battle terrorism and corruption in

Nigeria.

The country has received positive momentum from the elections, but still faces strong

regional challenges, particularly in the Niger Delta and the North. In the short term,

Nigeria will need to solidify national unity and maintain/expand key public services in

the face of less (oil) revenues. Niger Delta militants have threatened a possible

resumption of their disruptive activities under a Buhari presidency, and this will need

to be defused. In the North East, Boko Haram remains a threat.

With the incoming administration's promise of "change", considerable changes in

focus are expected from the pro-capitalist policies of the incumbent administration.

As their campaigns were centred on improving developmental indices (poverty

reduction, employment, security. etc.), tackling corruption, insecurity and diversifying

the economy are on top of the administration's priority list.

Internationally, Nigeria continues to be a leading player in the African Union, the New

Partnership for Africa's Development (NEPAD), and in the Economic Community of

West African States (ECOWAS).

Key Areas of Potential Growth

A couple of years ago, many investors were optimistic about Nigeria; and the stock

market was booming, buoyed by strong economic growth and government reforms to

improve the country. Despite challenges – Boko Haram, Ebola, declining oil price and

poor governance – during the past few years, Nigeria could still have all the

possibilities of becoming the prime destination for major investments in Africa.

There are opportunities outside the energy sector, particularly in consumer products

and financial services. The efforts toward privatisation and investment in areas such

Page 10: Nigeria – Entering the World League. Future Watch Report, April 2015

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as mining, agriculture, finance and manufacturing diversify the country’s dependence

on the oil sector, and this may bear fruit in the longer term.

While a lower oil-price environment could prove a short-term test, perhaps the

biggest long-term challenge for Nigeria’s progressis to develop government

leadership that will be intent on economic development and utilising the country’s

resources to develop infrastructure: roads, railroads, electric power, sewerage, water,

etc.

Commonly listed areas of potential growth in Nigeria include:

Media & Entertainment. Nigeria’s film industry has become a global and

cultural phenomenon that enjoys a huge following within and outside the

continent. “Nollywood” generates nearly $600 million a year and employs

more than a million people.

Food & Agribusiness. Grains, milk and all sorts of raw and semi-processed

agro products are still to a large degree imported. Entrepreneurs who can

produce food products locally could reap very huge rewards.

Retail. Nigeria’s retail market is going through a monumental shift. Retail is

gradually moving away from informal trading in open markets to organised

retail in shopping malls and online stores.

Fashion & Beauty. All kinds of apparel, including locally-made fabrics and

imported designer labels are becoming hot-selling products across

expanding urban areas.

Internet & Tech. Tech hubs and incubators are springing up across the

country.

Real Estate. The demand for both residential and commercial real estate

continues to grow and there is still a huge accommodation shortage. It is

estimated that in Nigeria over 16 million new houses need to be built to solve

Nigeria’s serious housing problem.

Building and Construction Supplies. Africa’s richest man, Nigerian Aliko

Dangote is heavily invested in the cement business. Steel, timber, roofing

materials, glass, paints, plumbing and electrical supplies are other products

that enjoy a high demand.

Financial services. Like in other developing regions of the world, the

banking and payment systems; and overall financial services industry is one

of the least developed in the world. Those who can provide simple, easy and

convenient solutions can be well rewarded.

Investment. With slow economic growth in North America and Europe, more

investment is pouring into fast-emerging regions. In search for higher returns,

more investors are now looking to invest elsewhere. In 2014 a Nigerian

billionaire investor, Tony Elumelu, committed to invest $100 million in African

startups and entrepreneurs over the next ten years. There is also a growing

number of venture capital firms and startup-funding platforms that are

dedicated to the African investment market.

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Innovation

Ecosystems

In general, the African innovation ecosystems differ from their European

counterparts: In Africa, the individuals and mentors play a larger role, and there is the

extensive involvement of both local and international donors.

This section illustrates the potential role played by the different types of organisations

and institutions in the larger innovation environment.

Innovation ecosystems are relevant for Finnish companies as at their best these

ecosystems provide vital networks, potential co-operation partners as well as insight

into local market dynamics. Often these key stakeholders and influencers in the

ecosystems are also important entry points to new markets. The innovation

ecosystem has been divided into 5 groups: Investors (both private and public),

Innovation Hubs (accelerators and incubators), Research (Universities) and Events &

Competitions and Philanthropists. See Figure 4.

Figure 4. Innovation Ecosystem Framework in Nigeria

Innovation Hubs

The Nigerian innovation or technology hubs began to evolve in 2011: CC Hub was launched, with an idea to “solve social issues with business purpose”. This was followed by the launch of conference “Mobile West Africa”. There has been an estimate of 30 innovation hubs, including co-working spaces, found in Nigeria. The most well-known hubs are:

CC Hub

Wennovation Hub

440NG

iDEA

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Leadpath

Start Innovation Hub

focushub

The startup sphere in Nigeria is different from that of Kenya and South Africa; or even

Europe for that matter. For one, there is not much government and/or donor support.

In addition to the lack of funding, Nigeria also has these unique characteristics:

1. They focus on their home market.

2. They have an aggressive culture: there is a focus on building profitable

business.

3. There is a strong focus on ecommerce: Nigerian ecommerce contributor,

Konga, secured US$40 million from South Africa’s Naspers; and Jumia

received US$150 million from Africa Internet Group – backed by Germany’s

Rocket Internet.

4. Their role models: older startups like iRoko, Jobberman, Konga, Jumia and

WakaNow start new companies.

Perhaps, following the Konza City project in Kenya, there is a SmartCity Innovation

Hub technology project promoted by several government agencies.

Research

Nigeria has a total number of 128 registered universities. The TOP 10 in 2015 are

listed below.

Figure 5. List of TOP 10 Universities in Nigeria (source: Webometrics Ranking

of World Universities)

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Private Companies

The 10 largest local companies in Nigeria (market value 2012):

Dangote Cement (Construction and Materials)

Nigerian Breweries (Food and Beverage)

Nestlé Nigeria (Food and Beverage)

Garanty Trust Bank (Financial)

Zenith Bank International (Financial)

First Bank Nigeria (Financial)

Stanbic IBTC (Financial)

Lafarge Cement WAPCO Nigeria (Construction and Materials)

Guinness Nigeria (Food and Beverage)

United Bank for Africa (Financial)

Additionally, there are a number of multi-national corporations present in Nigeria who mainly embody oil and gas; telecommunications; banking; and food and beverage.

Page 14: Nigeria – Entering the World League. Future Watch Report, April 2015

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Sectors in

Focus

Energy and Environment

Nigeria has one of the worst electricity supplies in the world, second only to India. No

access to power hinders the country’s development in all sectors – from education all

the way to industrial production. Nigeria produces around 4,000 MW for a population

of over 170 million (with a similar population, Brazil generates 24 times as much).

Those who do have some access to electricity often experience long blackouts.

Unreliable power supply leaves Nigerians with no other option than to use expensive

oil-based generators – 60 million Nigerians rely on generators. Nigerians who can

afford generators spend an estimate of $40/kWh – one of the main expenses of the

average household.

An unreliable energy supply reduces Nigeria’s competitiveness. Business owners

and international companies hesitate to invest in Nigeria since the alternative power

generation becomes an expensive fixed cost, decreasing their profit margins in high-

energy consuming activities such as manufacturing. The power shortages constrain

the daily livelihoods of Nigerians – from limiting children’s reading hours to creating

food waste owing to the lack of refrigeration. While Nigeria is one of the biggest

telecommunications markets in Africa, many users have multiple mobile phones on

different providers to make up for the constant disconnection of cell towers.

According to USAID (Power Africa) Nigeria’s energy sector has been undergoing a

massive transformation in recent years as the government actively privatises new

generation and transmission projects.

In the first phase, five generation and ten distribution companies (linked to the

country’s main power holding company) have been privatised since 2013. In addition,

the Niger Delta Power Holding Company (NDPHC) is privatising ten newly built

generation plants.

It is expected that Nigeria will become the largest IPP (Independent Power Producer)

market in Africa. As the country aims to boost its capacity to 20,000 MW by 2020

(originally 40,000 MW) based upon the current pipeline of projects, much of this

production is anticipated to come through IPPs (Independent Power Producers) and

small power projects that are also looking to consolidate their positions in the post-

reform market.

In 2013 control of 15 state-owned electricity companies was handed to new private

owners. It was hoped that the move would encourage investment, but in reality it has

been a fiasco. The newly established Nigerian Bulk Electricity Trading plc (NBET) is

now the sole purchaser of power from the national grid. It would seem its only

purpose is to obstruct development in the power sector. The NBET has been fixing

the price at which power is sold and preparing the internal rate of return for power

projects. As a result Greenfield generation projects struggle to get off the ground as

they battle through a regulatory nightmare, sometimes for many years, before

construction can even begin.

"Epileptic" power outages are still characteristic of a sector starved of investment: first

as a state-owned monopoly and now, following privatisation, from poorly conceived

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price controls and private regional distribution monopolies that have scared away

necessary capital, impeded competition and discouraged new entrants to the market.

As of mid-2014, there were a total of 56 licences for on-grid generation, 36 on-grid

IPP licences with a total on-grid generation capacity of 19,407 MW, mostly thermal

generation installed in the South of the country where the oil and gas fields are

located. However, out of this figure, only 11,774 MW have been built; and owing to

poor maintenance, only half of that is currently available.

Most of the generation capacity is based on natural gas. The share of large

hydropower has decreased owing to the government’s focus on thermal. This trend is

expected to continue in the future.

The government has been preparing to pass legislation that gives incentives to invest

in renewable programmes. Minister of Power, Chinedu Nebo, has also been

promoting his plan to roll out solar village projects in every state. "I see communities

lighting up by renewable energy. In fact I see thousands of communities that never

even had any hope of being connected to electricity using off-grid solar technology.

That is the Nigeria I see in the next four years," said Nebo. Though Nebo says there

is a plan to set up solar installations in hundreds of villages across the country, the

programmes will not always be free for citizens. He wants to commercialise the

renewable energy sector, much like the mobile phone industry.

"There is going to be an explosion of job creation, an explosion of wealth with these

renewable energy situation because that is the only viable way we see now to bring

electricity to communities that are far-flung from the national grid," Nebo noted.

CASE: Oil-rich Niger Delta aims to 'light up' with renewable energy

Renewable energy is slowly picking up in the Niger Delta. Inemo Samiama is Nigeria's

country director for the Stakeholder Democracy Network (SDN), an organisation that tackles

a wide range of issues on the delta – including energy justice.

"Energy issues are critical, especially because the Niger Delta lacks energy. It's just a

paradox," said Samiama. "When you look at the delta from an airplane in the night, you see

gas being flared. And surrounding the gas flares is total darkness. "

SDN started a project on renewable energy. They supplied discounted solar lanterns to

communities – each costing 5 000 Naira ($26), allowing residents to pay in instalments.

On the outskirts of Port Harcourt, Adebayo Amos runs a drug store. He says he needs power

to run his business. "In this area the challenge that we are facing very much is power," Amos

said. "In a month, they'll bring the light twice and even when they bring the light, they are

coming to demand for money."

Amos bought one of the solar-powered lanterns for his store and says his customers showed

so much interest in them that he started selling them. "Almost every day people used to ask

about the light from me," said Amos. "I have been using this one for nine months and it's

okay. It lasts for 10 hours. I love it."

Amos quickly sold all the lamps. He hasn't been able to get any more ever since the project

ended.

Based on a story on Deutsche Welle

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CASE: “Biofueling” change in Nigeria with clean energy cooking

Green Energy & Biofuels is a Nigerian based eco-friendly company, officially founded at the

beginning of 2013 aiming to end kerosene usage. It manufactures cook stoves and a

cooking biofuel gel, made from waste products such as sawdust and hyacinth. How we

made it in Africa spoke to the startup’s founder, Femi Oye, about his business model and

some of the lessons he has learnt as an entrepreneur.

1. How did you finance your startup?

Starting out was chaotic. To be great, you need to start with a bold idea while keeping a

clear vision of the future in your head. I started with my savings, which was only US$500. It

was hopelessly too little. So I joined a MLM, a multi-level marketing company and in 12

months, I was able to raise more than $50 000, enough to start my dream business.

The next challenge was to grow and expand the business. I participated in accelerator

programmes and business plan competitions. I also began writing grant applications and

making presentations to investors, highlighting my great products. And more than $2 million

has been raised through those efforts, always stressing favourable social impacts.

2. If you were given $1 million to invest in your company now, where would it go?

Directly into expanding our ongoing modular micro bio-refinery plants in Africa. An

additional $2.5 million will be matched to install a cellulosic second-generation bioethanol

plant that will produce additional 500 000 gallons of biofuel per year. An investment

capable of generating an internal rate of return (IRR) of 17% by the company’s anniversary.

3. What risks does your business face?

The greatest and wildest risk to our kind of business is innovation, and the second is

change. We operate in an infantile but disruptive technological space. The rules and game

keep changing every nanosecond. So to continue to win and evolve, we must keep

innovating, and develop a strong and motivated team. Competition can be fought,

government policy and regulation can be complied with, but embracing change is dogma

itself.

4. So far, what has proven the most successful form of marketing?

Success in effective adoption of renewable energy products in a developing nation is

largely based on market education, engagement and rewarding incentives. We engage a

network marketing distribution model.

What we have done is to allow customer-participatory organic growth integration, then drive

the adoption while investing in training, support materials, and incentivising our green

entrepreneurs. We decided to segment and rely on a social one-on-one referral

introduction of our products to the customers, and have focused on allowing one person to

introduce our biogel and stove to another, thereby giving power to the people. Meanwhile,

we continue to provide support; training and education; incentives; and leadership as the

organisation expands and grows.

We observed that when peer-recommended, people will continue to use the product and

will either re-order more from the same friend, or simply become a distributor themselves.

We have a mentor-driven network marketing model for distributing the products to the last-

mile users. In the past three years, our distribution agents have soared to 22,000 and the

number continues to climb.

Since Nigeria is a huge market, we were careful not to sell a clean cook stove to customers

we cannot support through our fuel distribution network. Our social marketing model helps

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ensure we deliver our products effectively at the lowest cost possible. Cook stove

entrepreneurs sign up distributors and they educate our target market. Entrepreneurs

receive compensation as a share of the total sales generated, and its equivalent carbon

credit aggregate on a monthly basis.

5. Describe your most exciting entrepreneurial moment.

The life of an entrepreneur is filled with crises, chaos and celebrations. I have experienced

each one at every stage of my life. For me, it’s the feeling that things are working out after

all our invested energy, effort and expectations. At a time, it was the thrill of selling the first

bottle and cook stove to the first customer. While that lasts, there also came a desire to

satisfy the needs of a fast-growing market.

Defining moments include the times we received praise from, and saw change in the lives

of, female entrepreneurs. It’s gratifying to know how much of a difference a little product

can make. Never mind lifting their incomes, it can help protect the health of women and

reduce environmental pollution.

6. What has been your biggest mistake, and what have you learnt from it?

Surround yourself with great people – ignore naysayers and work with those who

encourage you and remain positive all the way.

Look for mentors – if you don’t have one, find one. Success is unpredictable, sometimes it

will come, other times not. And remember sole business owners also need a boss.

Build partnerships and networks. Sometimes the more you can do is all you can do. To

succeed beyond your imagination is worth more than the words of validators and the

quality of endorsements.

The sum of your life depends largely on co-operation with the alliances you are able to

form.

Source: How we made it in Africa

Healthcare and Wellbeing

Health services in Nigeria are often described as “unsafe, low quality and

inaccessible to majority of people”. Most of the healthcare infrastructure is confined to

major urban centres with people living in urban areas getting four times as much

access to healthcare as those living in the rural areas. Most of the high end medical

equipment and drugs are imported.

Nigerian healthcare system is, in principle, decentralised into a three-tiered structure

with responsibilities at federal, state and local government levels. The local

governments manage the local dispensaries (primary healthcare), the State

Ministries of Health (SMOH) manage various General Hospitals (secondary

healthcare) and the role of Federal Ministries of Health (FMOH) is confined to framing

of policies and management of Teaching Hospitals and Federal Medical Centres

(tertiary healthcare). National Health Insurance Scheme (NHIS) launched in 1990 has

not made any impact, with a poor country-wide penetration of less than 4%.

There is gross shortage of doctors, nurses and other clinical and non-clinical staff.

The salaries too are not attractive enough for good talent. Brain drain is therefore a

major issue with a large number of doctors, nurses and paramedical staff leaving the

Nigerian shores for better opportunities outside.

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The private health sector is highly fragmented, consisting of many small medical

facilities that are owned by medical professionals. Most hospitals in the private sector

have less than 50 beds with minimal facilities. The healthcare industry is under

steady consolidation. A number of healthcare groups are making healthcare ventures

into the promising Nigerian market. Hygeia Nigeria, a major Healthcare Maintenance

Organisation (HMO) in Nigeria has demonstrated further business interest. Turkish 5-

star hospital group called Florence Nightingale Group has disclosed plans to invest in

projects worth millions of dollars in Nigeria.

India is currently Nigeria’s second-largest trading partner, and Nigeria is the largest

trading partner of India in Africa. A number of Indian healthcare players are making a

beeline to Nigeria. Primus Hospital has a hospital on a PPP model in conjunction with

the Nigerian Government at Abuja. Awka is a group of Anambra professionals who

will partner with some Indian medical specialists to establish a world-class hospital in

the state, estimated to cost about Naira 38 billion. The proposed 200-bed hospital is

expected to employ about 100 doctors and 1 500 nurses and other medical

professionals.

A number of other domestic and international groups are also planning healthcare

investments into hospitals, diagnostics, pharmacies, medical equipment and

pharmaceutical domains. Some of the bankable projects identified in Nigerian

healthcare industry are tertiary care (cancer, cardiac and orthopedic) and multi-

specialty hospitals, small specialist clinics, mobile clinics, diagnostic centres,

pharmacies, pathological labs, trauma centres, ambulance services, health

insurance, healthcare education, healthcare consulting and production of

pharmaceutical products.

According to African Development Bank, Nigeria is Africa’s leading country of

outbound medical tourists. In 2012, 47% of Nigerians who visited India did so for

health reasons. With about 18,000 Indian visas issued to Nigerians for medical

purposes in 2012, Nigerians spent $260 million in accessing health care in India. In

the three years before 2012, this number had increased by a factor of three. Trips to

India account for only half of the annual cost of medical tourism from Nigeria. Other

middle-class Nigerians go to the Middle East while the richest Nigerians go to

Western Europe and the United States.

Solving the health system challenges in Africa will likely reduce the amount spent on

medical tourism, which in Nigeria is about 20% of the annual government health

budget. In turn, savings from medical tourism can be used to finance or subsidise

health insurance for the poor.

To do this, a few countries in Africa with the capacity to grow a viable high-end health

market for medical tourism will create the enabling environment to attract private

health care providers. For example, Indian investors are setting up high-end medical

facilities in Nigeria to generate inbound and reduce outbound medical tourism.

Education

Education in Nigeria hasn't always been as bad as it is presently. In the 70s Nigeria

had some of the best universities in Africa. Teaching and learning was robust and

infrastructure was adequate. Nigerian students excelled and earned reputable,

internationally recognised certificates. Years of military rule practically destroyed the

education system in Nigeria as the poor attitude shown by the leaders created a vast

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set-back in education. Many Nigerians have graduated from primary, secondary and

higher educational institutions in the country without being educated.

Issues plaguing the system today ranges from poor educational infrastructure;

inadequate funding; poor quality of teachers, lecturers and administrators; poor

delivery of educational content; non-conducive learning environments; increasing

cost of education; etc.

In Nigeria, the demand for a quality education is prompting those from the upper and

middle classes, to look to the West. Schooling in the UK is a popular choice, given

the UK's historical and cultural ties with Nigeria. By some estimates Nigerians spend

£300 million annually at British universities and elite secondary schools.

But why, given that public schools are free, do Nigerian parents send their children to

private schools? While the prestige and pedagogical style of some private institutions

are factors, the overriding decision is often that private schools display quality and

accountability, ensuring that learning takes place. Private schools typically

outperform the public schools and operate at a lower cost. When the total cost of

public schooling is factored in, including uniforms and books, private schooling is

comparatively affordable - even for lower-income families.

It is factors such as these - in addition to the need of improving the curriculum,

enhancing teacher knowledge, and driving vocational and technical education - that

is propelling the Nigerian private education investment towards public-private

partnerships.

Consulting firm The Parthenon Group has reported that according to the International

Finance Corporation (IFC) estimates, private schooling accounts for 10% to 40% of

primary and secondary schooling in Africa. Private education providers play a major

role in Nigeria. Listed below are some examples:

It is a significant market for UK boarding schools with over 23,000 students

enrolled at 72 British-oriented schools across Nigeria.

In urban areas, 44% of children attend private schools; and in Abuja alone,

the number of pupils enrolled in independent schools has increased by 275%

over the past three years.

In Lagos State, there are over 12 000 private schools - compared to 1 700

public ones.

ICT, Digitalisation and Mobile Solutions

In 2011, ICT contributed 5% of Nigeria’s GDP, whereas the proportion in 2014 was

estimated to be close to 10%. The sector is expected to be a main driver of economic

growth in future years. According to Nigerian statistics, the ICT sector is the fourth

largest contributor to the country’s GDP and the sector has been identified as the

fastest-growing sector in the Nigerian economy. The sector has a 30% growth rate

and it is employing more than two million people. The Nigerian telecom sector is one

of the fastest growing telecom markets in the world and continues to attract

significant foreign direct investment, with an estimated additional $6 billion invested

between 2011 and 2013.

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The National Broadband Strategy aims for an increase in broadband penetration from

6% to 30% by 2018. Through its Local Content Guidelines, Nigeria is looking to foster

more participation from the Nigerian companies in the ICT industry, in order to

stimulate job creation.

A relatively stable economic environment and a spirit of innovation has enabled the

success of leading e-retail outfits such as Jumia and Konga, even though the Internet

is in a state of infancy in most parts of Nigeria. Lagos is developing an ICT-themed

startup ecosystem that is drawing international investment and has seen the launch

of several incubators.

CASE: Startup coach in Lagos

US-born technology entrepreneur Richard Tanksley started his career at Motorola, but he

moved to Africa in 2009 seeking adventure. He ended up working with technology startups

as a senior faculty member at Ghana-based Meltwater Entrepreneurial School of Technology

(MEST). He now heads the African division of Seedstars – a Swiss-based venture builder

investing in emerging markets.

How did you end up in Africa?

I came seeking adventure. Frankly I was bored in the US and the economy was in the

dumps. So I quit my job and moved to Cameroon. I had no job and didn’t know anyone, but

within a week I had two offers. I ended up helping launch the Cameroon division of a mobile

phone application called Mobile-XL.

What did you learn about entrepreneurs and startups while teaching at MEST?

This is the best job I have ever had because MEST is changing the world. When I started,

the school was still fairly new. Nobody had ever done it before. The environment at MEST

became fantastic. We tried to recreate the feeling of being a startup in Silicon Valley so

students would be infected with the urgency and scrappiness of a Western startup. One

challenge was teaching them to think global. It’s hard to imagine creating a multi-billion dollar

global company when you don’t have role models and have never left Ghana. When the

dream of every graduate and their parents is for them to get a job working at a bank making

US$500 a month, it’s hard to shift that to running a company bringing in $1 million a month in

revenue. Once the companies started making $500 a month, the students thought they had

made it and were done, because that is as much as they could imagine. It took some effort

changing that mind-set.

Describe living and working in Ghana as an expat.

We call it “Africa for beginners”. It’s safe, quiet and calm. It has the same infrastructure

problems as many others in Sub-Saharan Africa, but you rarely have to worry about your

personal safety. The people are friendly and nice, almost to a fault. It’s actually hard starting

a business because everyone wants to know you and help you. So they will never say “No”,

even when they know they can’t deliver what they promise.

You now work and live in Lagos. How does Nigeria differ from Ghana?

After hearing nightmare stories about Nigeria from Ghanaians, I was actually terrified to

make the move. When I got here I realised most stories were exaggerations. Moving to

Nigeria proved an easy transition.

I find many people here are more like Americans. They work really hard to buy things they

don’t need, drive ridiculously huge cars, they go out, they have fun, they drink, they swear

and they smoke. They are normal people with the same flaws as anyone, and are not afraid

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to admit it.

I think the best thing about Nigeria, specifically Lagos, is the energy of the work culture.

Everyone works hard in Lagos. You can’t help it. Work starts early and usually does not finish

until late night. There is no separation between work and pleasure. No matter what you are

doing, you are working. Even if you are out with friends, or at dinner, or a club, you’re

working because everyone you meet you may do business with.

Your challenges in working as a trainer and mentor to startups?

You can teach anyone the mechanics of starting a company. You can teach them to write

software, you can teach them the mechanics of creating an efficient operation and how to

sell, and so forth. But you can’t teach having the ridiculous passion, drive, and burning

desire, to grow a company. I have found that drive is hard to find in Africa. Many people want

to build a company that makes them and their family comfortable. Which is fine, but if you

also want to grow the economy, you need to build past that point.

How has working and living in Africa changed you perception of the continent?

I tell my family and friends stories about Africa all the time, but in the end, if you want to know

and understand Africa as much as possible, you have to be here. The news does a

disservice to Africa, which is an amazing place with more potential crammed into one

continent than anywhere in the world. Almost every country went through problems of

disease, dictators and corruption. It is a natural part of the growth process of a nation.

Any advice for expats coming to work in Africa?

Read a lot before you get here. Listen to radio stations online from the city you are going to.

Local knowledge about politics and culture will go a long way towards ingratiating you to your

hosts, and opening doors. Study a local language when you get there. Try to have more local

than expat friends. Returnees are the bridge between Western and local culture, you need

them both as friends and employees. Remember, you are a visitor. You are here at the

pleasure of the indigenous population. Respect them, or you’ll be sent home; or wish you

were home.

Based on a story in How we made it in Africa

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Future SWOT: Nigeria

Nigeria is a country of many extremes and much controversy. Despite the many

challenges Nigeria faces, it already is, but more importantly will be, one of Africa’s top

business destinations. Yet, there is still a lot of scope for improvement, and doing

business in Nigeria is certainly not for the faint-hearted.

This SWOT matrix below provides an investors’ viewpoint of Nigeria.

Strengths Weaknesses

Africa’s largest country both in terms of GDP and population.

Young, English-speaking population.

Entrepreneurial spirit.

Strong E-commerce business scene.

Huge scalable possibilities – “if you get it right in Nigeria, you really get it right.”

Large and expanding retail sector is drawing new investments that contribute significantly to the economy.

Poor infrastructure such as transportation and electricity –, high cost of doing business.

Poor governance, red tape and corruption.

Poor quality of education; shortage of skilled people.

Brain drain.

Very different (i.e. aggressive) business culture scares investors away.

Economy is dependent on natural resources (mainly oil), which makes diversification difficult.

Sixty million people still live in absolute poverty.

Opportunities Threats

Newly elected president is able to deliver “change”.

Drop in oil price forces government to look for economic diversification.

With about 17 – 18 million Nigerians working abroad, the country has one of the biggest diasporas in the world. If some of the skilled ones move back, the locale could be easier for foreigners.

Huge reserve of employees in informal sector becomes part of formal workforce.

Terrorist attacks continue and cause a vicious circle.

New government fails in delivering results.

Population growth surpasses GDP growth; resulting increase in absolute number of poor.

Ecological catastrophes.

Corruption, theft and fraud become the norm in the business culture.

Scenarios

Figure 6 provides four potential scenarios for Nigeria 2020. These are based on various sources of information and signals and information available. The two main components of the scenarios are:

1. Level of economic diversification 2. Openness of the economy

Any of the scenarios, or combinations of the scenarios, could come true. Much depends on local government policies and actions of international players, and other uncontrollable factors.

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Figure 6. Scenario framework

The scenarios for Nigeria in more detail are described in Figure 7.

Figure 7. Four Scenarios for Nigeria 2020

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Information

Sources

Publications:

African Development Bank. 2014. Tracking Africa’s Progress in Figures.

African Development Bank, Development Centre of the Organisation for Economic Co-operation and Development, United Nations Development Programme. African Economic Outlook 2014. Global Value Chains and Africa’s Industrialisation.

The Economist. Africa is the horizon 2015 – African Business Outlook Survey.

International Energy Association. 2014. Africa Energy Outlook.

KPGM. 2014. Nigeria Snapshot .

World Bank. 2015. World Development Report.

Internet:

http://en.wikipedia.org/wiki/History_of_Nigeria

http://mobius.blog.franklintempleton.com/2015/04/14/new-way-forward-nigeria/

http://oilprice.com/Energy/Energy-General/Nigerias-Future-Depends-On-Electricity.html

http://pwc.blogs.com/growth_markets/2015/04/business-in-nigeria-post-election.html

http://qz.com/309891/nigeria-not-kenya-is-about-to-become-africas-next-big-technology-hub/

http://ventureburn.com/2015/01/440-unique-trends-shaping-nigerias-startup-scene/

https://energypedia.info/wiki/Nigeria_Energy_Situation

http://techcabal.com/2014/05/12/ict-face-off-lagos-vs-kenya-vs-south-africa/

http://unctadstat.unctad.org/CountryProfile/566/en566GeneralProfile.html

http://www.afdb.org/en/blogs/integrating-africa/post/using-the-high-end-health-market-for-

regional-integration-in-africa-12998/

http://www.dw.de/oil-rich-niger-delta-aims-to-light-up-with-renewable-energy/a-18230149

http://www.dw.de/renewable-energy-how-realistic-is-nigerias-vision/a-18235831

http://www.eia.gov/countries/country-data.cfm?fips=ni

http://www.howwemadeitinafrica.com/four-reasons-why-operating-in-nigeria-can-boost-your-

success-rate-in-africa/43802/

http://www.howwemadeitinafrica.com/investors-do-nigerias-benefits-outweigh-

challenges/47643/

http://www.infoplease.com/country/nigeria.html?pageno=1

http://www.innovationiseverywhere.com/nigeria-startup-scene-can-africas-india-make/

http://www.movebacktonigeria.com/2015/04/opportunities-in-nigerias-healthcare-sector/

http://www.pcworld.com/article/2860252/tech-telecom-contribute-10-percent-of-nigerias-gdp-

ict-minister-says.html

http://www.slideshare.net/innovationiseverywhere/innovation-is-everywhere-nigeria-lagos-

startup-tech-innovation-ecosystem

http://www.smallstarter.com/get-inspired/africa-top-5-entrepreneurs-in-the-waste-recycling-

business

http://www.theviewposts.co.uk/nigeria-africas-fdi-hotspot/

http://www.usaid.gov/powerafrica/partners/african-governments/nigeria

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http://www.worldbank.org/en/country/nigeria/overview

Observatory of Economic Complexity/United Nations COMTRADE

https://atlas.media.mit.edu/en/profile/country/ken/

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