Sub-Saharan Africa's largest city in its most populous country is now open for foreign direct investment. According to the World Bank, Nigeria remarkably grabbed nearly 30% of all FDI to sub-Saharan Africa last year, making it one of the continent's premiere investment destinations.
The recent development of Nigeria's oil sector is responsible for having catapulted its GDP nearly 200% in just two short years. Oil contributes roughly 20% to the national GDP and over 10% to US oil imports. Amidst global economic decline, the Nigerian economy is still expanding at nearly 3% this year and the country continues to increase both oil and non-oil exports.
As the government improves its banking sector and diversifies its economy away from the oil sector, it has attracted foreign investors that realize the country's vast potential for further economic growth. A testament to both the growth of the non-oil economy and brisk expansion of capitalism in the third world, Nigeria is home to a surging number of wealthy entrepreneurs such as billionaires, Aliko Dangote (sugar, flour, cement), as well as Femi Otedola (oil).
Lagos, Nigeria's chief port and financial hub, is at the heart of all the action. The Lagos state government is rather serious about attracting foreign direct investment (FDI) and is taking measures to open itself to international investors.
Not only has Lagos become more business friendly, it has a host of ambitious projects underway that promise to transform it from a chaotic, third-world city, into Africa's world-class center of commerce, trade, and tourism.
Housing Developments
Nigeria's Federal Housing Authority will increasingly rely on private developers to fill the shortage of housing. There is a strong need for new housing developments in the country's largest metropolitan area of over 15 million people. At an estimated average annual rate of over 4%, Lagos is one of the fastest growing cities in the world. By UN estimates, there will be over 25 million people in the Lagos area by 2015.
Developers now have a chance to help Lagos solve its urban housing crisis by providing either affordable or luxury housing units--or both.
The Lagos state government is willing to provide land and support to developers who are equipped to construct housing units--especially for low-income dwellers. Although there are many areas of town that require new housing units, there are a few mega-projects in the works that are partially designed to meet these needs.
In its early stages of construction, Lekki will be a city within a city, complete with not just housing, but office space, hotels, tourist attractions, a free trade zone, a shipping port, and an airport. In order to give you an idea of just how massive this project is, the government's master plan calls for housing for nearly 3.4 million people!
The next mega-project underway is Eko Atlantic City, another mixed-use project that will incorporate new housing developments. Slated for 8 square miles of land reclaimed from the Atlantic Ocean, this new community will soon boast modern infrastructure, pricey real estate, and access to big businesses.
Investment Properties
Both residential and commercial investment properties in Lagos have appreciated over 200% in 2008. Because demand for housing is so high, the potential for a huge return on real estate investments is high as well.
Before investing, it's important to consider the following information:
- By law, Nigeria has NO land ownership
- Property investing is only possible through a 99-year leasehold for which you get a certificate of occupancy (COO) from the state government and pay an annual fee
- After expiration of the land lease, the land is returned to the state government and the structure remains with the private owner
Property investment trends indicate that most international investors choose to build multi-unit residential structures or invest in commercial real estate projects. It's common practice for Nigerian property owners to request rent payments for several months in advance, so you should too.
Lekki Free Trade Zone Business Opportunities
Lagos is modeling the Lekki Free Trade Zone after Dubai's successful Jebel Ali Free Trade Zone in hopes of attracting more foreign direct investment. Lekki promises to be the shipping, industrial, and business hub of not only Lagos, but of all of West Africa. As an incentive for doing business in the zone, goods will be duty-free, companies may be 100% foreign-owned, and capital will not be subject to exchange controls.
Lagos Energy City Opportunities
Officials are working to convert a portion of the Badagry Town, just west of Lagos, into a massive oil and energy-related business community. At an estimated total cost of $ 1.8 B, Energy City will be complete with a light rail, a tourist/convention zone, as well as a separate zone that caters to oil and gas companies, government agencies, and other private enterprises. Again, the state government is open to private developers with the resources to construct commercial buildings.
Alternative Energy
A good way to participate on Nigeria's solar power industry is by providing it to villagers. According to Kadiri Hamzat, the Lagos State Commissioner for Science and Technology, it costs just $ 83,000 to set up a solar power system in a village of about 5,000 people. Considering that it costs over $ 1 Million to connect a village to the national power grid, solar energy is extremely cheap.
In a world that is still unconnected, electricity can enable these villagers to improve their quality of life.
At just $ 83,000 per village, large solar energy providers could easily contribute charitably to villagers by building their solar power systems. Such generous efforts will undoubtedly improve the image of your solar company and serve as further evidence for why we should continue to invest in the solar industry.
Although Lagos may seem attractive, there are two common deterrents: bureaucracy and safety. Government officials are certainly making a strong effort to attract foreign capital; however, bear in mind that the government still has a long way to go. Bureaucracy is frequently blamed for the excessive amount of time it takes to do business, but that is changing. By comparison, Nigeria ranks well amongst sub-Saharan African countries when it comes to ease of doing business.
Foreigners shouldn't assume the worst when it comes to safety because Nigeria's overall violent crime rate is lower than that of the UK, France, Switzerland, Canada, and of course the US. Furthermore, crime in Lagos state has dropped significantly in recent years in spite of explosive population growth and remains behind the Nigerian Delta region.
In the world of emerging markets, it rarely gets better than Lagos: explosive growth of both population and wealth; development in every direction; growing oil, gas, and alternative energy industries; government cooperation; and potential for tourism. Need we say more?
*Images courtesy of Lekki Free Trade Zone Corporation & Eko Atlantic City Corporation
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