High Risk, Keep Off

Eight years ago, officials of HP inside the Silicon Valley office of the computer giant mooted the idea of opening a Nigeria office. It sounded good.

But the idea was killed before they left the boardroom. Nigeria was a sea infested with sharks. At about the same period in the office of the CEO of one of the big IT companies was this map of Africa shaded with blue, red and yellow.

Blue meant ‘good for business’ and only the region of South Africa had a weak shade of blue. Yellow meant low business risk; not particularly good for business if the investor had other places outside of Africa in mind. Red meant the obvious: Danger. Nigeria’s space on the map was splashed in blood red. It meant ‘High Risk, Keep Off.’


The same CEO had since visited Nigeria more than half a dozen times. He loves Lagos, thinks Abuja is too relax and ostentatious. “Lagos is real”, he says and “has all the actions.” Nigeria is still red on his map meaning that business is still fraught with dangers but it is profitable. And why! Even in the US business can be as dicey as it can be rewarding.


In the last 36 months, no less than 1000 companies have made enquiries at the Nigerian Communications Commission (NCC) and half that number have actually made physical presence in terms of some level of financial commitments and more than a handful are already rooted in the Nigerian business environment. Nigeria is ‘grudgingly’ becoming a haven of sort to IT investors.

These could have helped: the formalisation of the sector under an independent regulator, the creation of an enabling law, a policy thrust of making the private sector the engine of the economy, and an evolving political culture. But above all these, there is a market. A vibrant one at that. And like the Chinese and Indian examples have shown, business could boom once a large population exists to excite provisions of IT services to no end. The only condition is that the populations must not be too poor.


No EXIM
Even so, it is still a long road to cleansing Nigeria of one of its most telling problems: Image. Black Africa’s most populous country has not left the list of high-risk countries. With over 10 military coups, and an experimental attempt at forming democratic culture in between from 1979 to 1983, Nigeria’s recent try at democracy since 1999 is still viewed with suspicion. By the thinking of the business and political communities in the west, the five years old democracy is not sufficiently matured to warrant long-term loan or financial agreement for local players.



Consider this: The US EXIM facility to an enterprise within Nigeria would attract about 10% charges, the same facility to a South African firm would not exceed four per cent. In Botswana, it would not exceed two percent and in Ghana, it would also not go beyond four percent. Unlike Nigeria that is considered a high-risk zone, these countries are deemed low risk countries. “There is no stability yet, so they cannot commit themselves to a long them loan agreement,” a US based Nigerian financial consultant told the Lagos publication Fortune and Class last May. Besides, the prospect of loan recovery in Botswana is five times higher than in Nigeria. Everything is hinged on the next election, said a senior official within the Ministry of Finance to IT Edge in Abuja. Said he: “If we get it right and manage to have a smooth transition, then we can move to the next level for the benefit of the local entrepreneurs.”



For now, Nigeria does not have any credit rating and this limits the potentials of the local players to do business in the global arena. For external investors, it is a peculiar sort of dilemma as they settle to draw up partnership agreements with local companies viewed with suspicion. For a country under the scourge of 419, the financial scam that had gained notoriety as a Nigerian thing, fishing out genuine local business enterprises could sometime be difficult for genuine offshore investors.



The west is cautiously walking into Nigeria but it would take sometimes to win over the hardcore pessimists that the fast changes in the IT sector are pointing to good business in future, said an HP official in Lagos. More…. No more fishing in dangerous waters

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