Chamberlain S. Peterside, Ph.DTuesday, May 15, 2007
[email protected]
New York, NY, USA



…Changing Landscape

hange is hardly noticeable until it happens. Despite significant events occurring in Nigeria today, not many inhabitants at home or observers abroad recognize the subtle changes that will impact lives forever. On the heels of general elections, rather than focus on the raging political debate amidst the cacophony, I decided for a moment to draw our attention to something a bit more refreshing, - the transforming economic landscape and how it might reposition Nigeria – assuming all things are equal.

For starters a lot of skeptics including international pundits doubted that Nigeria could stage a successful transfer from one democratically elected civilian administration to another, yet the elections have come and gone, despite lingering issues regarding its legitimacy.

Meanwhile in the financial arena, a groundswell of activities is steadily recalibrating the economic sub-structure, giving impetus to new bold ideas such as penetrating the global financial market by local banks or launching the country amongst top 20 economies by the year 2020. Meanwhile the apex regulatory organ, Central Bank has set its own Vision 2020 Program aimed at making Lagos a regional financial hub over the next few decades. To put some of the notable changes into context lets consider the following:

…Notable Events
The first notable change that truly touches on Nigeria’s economic role in the global marketplace is foreign debt profile and size of external reserves. Never in the annals of Nigeria has it had such a low debt stock in the face of staggering financial reserves, surpassing $40 billion. Debt to GDP ratio is at historical low ebb, just as amount of reserve to import bill has been lengthening (how long the reserves can cover cost of imports).

Yes some might question the essence of that if common folks remain so impoverished. The simple truth is that even without the improved financial status, majority of Nigerians have been economically deprived and wallowed in abject poverty over the years. Moreover, there is no chance of ever alleviating the deplorable condition unless a radical step such as we have seen in the last few years is taken. The BB- sovereign credit rating was a historical first for Nigeria and pointer to the changing fortunes. True, high oil prices have a lot to do with this progress.

The second notable change, relates to domestic macro-economic indicators such as inflation, interest rate, exchange rate, capital flow etc. Through tactful and disciplined fiscal policies, the Central Bank has been able to tame inflation and bring down lending rates. Recent figures show that inflation has declined to a modest 8%, while interest rate level is experiencing some return to sanity, though still high by international standard at 15-18%. Gross Domestic Product (GDP) growth rate was over 5% last year, just as mid-range forecast will see Nigeria attaining 6-7% annual growth. Even more exciting is that non-oil GDP is growing at a faster rate – 8%.


Naira exchange rate has also become somewhat more predictable as archaic “ black-market” in foreign currency is sliding into extinction. Again upon the introduction of the Dutch Auction System (DAS) few years ago, naysayers didn't expect it to succeed in stabilizing the currency rate. The significance of stable forex rate is that it enables corporate players to plan and helps attract investments to the capital market domestically and from abroad. Already volume of foreign portfolio investment has been growing by leaps and bounds hitting the billion dollar mark in 2006 according to report from International Monetary Fund (IMF), whilst the Nigerian Stock Exchange remains on a bull-ride. The third notable change is of more systemic nature. When the new banking capital requirement was unveiled in mid 2004, most people never imagined that it could be actualized. Critics knocked the new policy real hard and predicted gloom for the banking industry. Three years later everyone is singing praises of the Central Bank governor Charles Soludo, while the surviving banks have since embraced the new order and forging ahead aggressively. By recent statistics, Nigerian banks now number amongst top 1000 global banks; just as reports indicate that plans are being put in place to list 10 Nigerian banks in the London Stock Exchange (LSE).

…New Role, Better Outlook
The overall impression prior to and after the recent elections is that international investors are becoming keen on investment opportunities in Nigeria, despite certain concerns on long-term stability, Niger Delta situation and prospects of consistent reform agenda. This change of heart by international investment community, although still early to conclude whether or not it will last, is a function of policy foundations laid over the last few years. Upon closer scrutiny you can't help but applaud the forward-thinking approach of the Central Bank and the leadership - rightly so, they have set out to capitalize on this gains by re-positioning Lagos as a financial hub, which brings us to the critical question of whether or not that can ever happen. My thought process was jolted by a conversation with a good friend of mine here in New York. I don't see why Lagos can't become a financial hub, if the vision and courage could be sustained and backed by the right steps. The CBN governor was quoted as saying that Lekki in Lagos will become the new financial corridor. As lofty as that idea sounds, I am wondering why Lekki? For one, Lekki and adjoining Victoria Island are budding residential districts despite the incursion of banks and corporate entities with their glass houses, therefore you would have expected that a better location will be Lagos Island – the area straddling Marina, Tinubu Square, and CMS, with broad street as the main thorough fare.

Lagos has historically been a commercial nerve center of Nigeria and even West Africa for that matter and these areas mentioned were the center of attraction. Like most global financial districts, namely New York, London, Shanghai, Hong-Kong, Sao Paolo etc proximity to the waterfront, existence of high rise/purpose-built office properties, cultural attractions, transport arteries and technology infrastructure in Lagos Island, albeit dilapidated and over-run by “area boys” are very essential pre-requisites.

…Onerous Task Awaits
My recent drive-through around the area revealed that the district already boasts of more corporate and banking offices/headquarters, plus the Nigerian Stock Exchange (NSE) trading floor than anywhere else in Nigeria. Despite the relocation of CBN headquarters to Abuja, Tinubu Square (with its famous but now dry water fountain) still holds so much potential. If adequate attention and effort is applied toward rehabilitating this district nowhere in Nigeria can be better suited for this purpose.

The necessary steps to take are multifaceted but nonetheless a cakewalk. Firstly it will entail recognizing these potentials in midst of new realities, then drawing up an aggressive long-range, multi-billion dollar urban renewal and rehabilitation master plan. Secondly, create a task force to mobilize support through public-private partnership, then identify concrete projects and go out to raise construction finance locally and from abroad to execute them.

The practical aspect might involve an “El-Rufai no-nonsense style” (do in Lagos what was done in Abuja). That will rejuvenate the property market – by renovating or tearing down old structures and building better ones in their stead, developing the water-front, creating clean/safe parks and pedestrian walk-ways, developing parking garages, and reorganizing the traffic pattern (possibly making some of the tighter areas inaccessible for vehicular traffic or instituting parking restrictions). These plans must involve every stakeholder; including members of the financial community, policy-makers at the local, state and federal levels as well as current inhabitants/property owners.

No such initiative will succeed without taking adequate cognizance of local inhabitants, for some of which the area remains their historical homeland. However it is foolhardy to allow the interest of few to override the long-term interest of the economy. The benefit of reconstructing and creating a robust financial district in the heart of Lagos is tremendous and far outweighs the short-term dislocations of local residents - ranging from employment creation, huge capital flow, real estate boom and higher economic productivity. Nothing should be allowed to derail such a timely match toward modernization. Mustering the political will to initiate and complete such a large-scale project in Nigeria’s situation will be a tall order, given the countervailing influence and constant bickering between local and federal politicians. The fact that Lagos State is not run by the ruling party (PDP) makes matters even worse. As land reform is being considered by the incoming administration of Yar Adua, it might be necessary to work closely with Lagos state government to designate that area as “federal territory” with adequate compensation for property owners or implement US-style eminent domain law that will allows the government to acquire or condemn properties for public good (with adequate compensation of course).

In order not to create an enclave within the city, it might be necessary to pursue a larger vision of cleaning up Lagos as a whole. Most visitors are shocked by the level of disorder and garbage lying in streets of Lagos. The transportation system remains rather chaotic just as overall infrastructure leaves much to be desired. Global fund managers and financial institutions will be very reluctant to operate in such a sub-standard environment

Serious re-working of Lagos Island will be inevitable to meet internationally accepted levels and for the city to live up to this new calling. With the right team in place, backed by strong political support and if the parties concerned can work together hand-in-glove, who says this objective can't be achieved.

Chamberlain is the Founder & President of New Era Capital Corp. and, a New York based financial services group. He was previously a Financial Advisor in the Global Private Client Group, of Merrill Lynch.