Hello Everyone!
Welcome to the Nigeria Decoded newsletter. This edition looks at recent business developments in Nigeria—Africa’s most powerful economy and populous country.
Nigeria's economy is recording important developments in its traditional sectors (oil and gas, finance, and telecommunications) and emerging sectors (such as lithium mining and production). Some of these opportunities are opening because of current government-led economic reforms. Plus, with the global economy agreeing on a transition from fossil fuels, Nigeria's emerging sectors will have an even more important role.
We begin with Nigeria-related developments at the United Nations Climate Conference (COP28).
President Bola Tinubu of Nigeria and German Chancellor Olaf Scholz oversaw the signing of the Presidential Power Initiative (PPI) agreement. The managing director of the Federal Government of Nigeria Power Company and the Managing Director (Africa) of Siemens AG signed the agreement. This agreement aims to add 12,000 megawatts of electricity to Nigeria's national grid. The project will focus on grid stabilization and improving power supply in terms of regularity, functionality, and affordability.
Nigeria's Rural Electrification Agency (REA) and the National Agency for Science and Engineering Infrastructure (NASENI) have partnered with Chinese outfit SHENZEN LEMI Technology Development Company to establish a lithium-ion battery manufacturing and processing factory in Nigeria. The US$ 150 million project will start in the second quarter of 2024.
Oando Clean Energy plans to assemble electric buses in Nigeria by 2026, aiming to deploy 12,000 nationwide. Two buses are already operational in Lagos, and the plan is to increase this to 50 soon. The company states that the initiative is part of Nigeria's commitment to reducing greenhouse gas emissions and transitioning to renewable energy sources.
Nigerian National Petroleum Company (NNPC) signed two agreements to expand its liquefied natural gas (LNG) operations. One agreement is with China-based Wison Heavy Industry for a floating LNG project targeting the international market. The other is with SDP Services for a small-scale LNG project in Ajaokuta, Kogi State, focusing on the domestic market.
In infrastructure-related developments, American-based merchant bank Z Capital Group (ZCG) and the Nigeria Sovereign Investment Authority (NSIA) announced a strategic infrastructure investment partnership. The joint venture will focus on sustainable and innovative infrastructure solutions in the healthcare, renewable energy, and digital infrastructure sectors.
The Nigerian and Moroccan governments remain optimistic about securing funding and implementing the Nigeria-Morocco gas pipeline. Both countries have announced that the project will begin in 2024. The pipeline will facilitate gas transportation, promote economic integration, combat desertification, and reduce carbon emissions. Originating in Nigeria and extending to Morocco, it will connect with Europe's existing Maghreb European Pipeline. This ambitious project spans 5,600 kilometers and traverses 13 African countries, aiming to transform the region's energy landscape.
Pan African Towers (PAT), a leading Nigerian digital infrastructure company, received investment from London-based Development Partners International (DPI) and Nigerian-led Verod Capital. With this investment, PAT aims to capitalize on the opportunity to provide world-class digital infrastructure, supporting Africa's economic development and bridging the supply gap in tower infrastructure for 4G and 5G technology.
On the extractives front, Canadian headquartered Orosur Mining Inc. announced a joint venture with Nigerian company Jurassic Mines Ltd, focusing on lithium mining in Nigeria. Under this partnership, Orosur's subsidiary Lithium West Limited can earn up to 70 percent equity by investing US$ 5 million over five years. During their first license exploration, they discovered lithium-bearing pegmatites, a promising indication of potential. The joint venture secured two additional licenses, expanding its total area to 533 square kilometers.
The United Kingdom, through Deputy Prime Minister Oliver Dowden, expressed interest in partnering with Nigeria on energy minerals, focusing mainly on lithium. This announcement came during a meeting with Nigeria's Minister of Solid Minerals Development, Oladele Alake, in London. The partnership will involve a comprehensive investment in the lithium value chain. Nigeria, rich in mineral deposits, aims to prioritize local value addition over the export of raw minerals.
Regarding finance, Access Bank, Nigeria's largest lender by assets, is planning to expand into Asia early in 2024. This move aims to cater to Asian customers, a significant non-African trading partner. With US$ 26.5 billion in assets under management, Access Bank joins other African banks like South Africa's Standard Bank and TymeBank in expanding to Asia. The bank recently acquired Standard Chartered's subsidiaries in several African countries and operated in various international locations.
In technology, Sunil Natraj, former CEO of Jumia Ghana, will head Jumia Nigeria starting January 2024. He replaces Massimiliano Spalazzi, who is stepping down after 11 years with Jumia Group. Natraj plans to expand Jumia's operations to more Nigerian cities, targeting those with populations over 20,000. This expansion strategy, already successful in Ghana, Cote d'Ivoire, and Senegal, aims to cover Nigeria entirely. The company faced challenges, including workforce reduction and budget cuts, but remains focused on growth.
Airtel Africa launched a new data center business, Nxtra, in Lagos, Nigeria. The first significant facility will also provide 34 MW of power. Nxtra aims to establish one of Africa's largest networks of data centers, offering high-capacity facilities in major cities across Airtel Africa's footprint.
In Petroleum, Shell, the British multinational, plans to invest US$ 1 billion over the next decade in boosting Nigeria's natural gas production. The investment will focus on the offshore Bonga North oil project, representing a US$ 5 billion opportunity. They discovered the project in 2005, and it is currently in the feasibility stage, with production expected to commence in 2025.
Dangote Petroleum Refinery received its maiden crude cargo from Shell International Trading and Shipping Company Limited (STASCO), containing one million barrels of "Agbami" crude grade. This delivery is part of a six-million-barrel supply intended for the refinery, which will initially process 350,000 barrels daily. NNPC and ExxonMobil will supply subsequent cargoes. The refinery, designed for Nigerian crude and capable of processing various international grades, aims to meet domestic requirements for refined products and support exports.
Economic developments include Moody's upgrade of Nigeria's outlook from stable to positive, reflecting potential improvements in fiscal and external positions due to the government's reform efforts. Nigerian President Bola Tinubu's reforms include ending a fuel subsidy, removing exchange controls, and ending import bans. Investors have received these reforms positively, but these have also led to increased costs and continued high inflation. The country is trying to attract more investment, including proposed projects across various sectors and measures to stabilize the naira currency.
South African-owned Oppenheimer Partners acquired complete control of Nigeria's largest beverage can-maker, GZ Industries Ltd. The acquisition from Affirma Capital (formerly Standard Chartered Private Equity) involves a 37.5 percent stake previously held by Affirma. Oppenheimer Partners first invested in GZI in 2018. The company, with a significant market share in South Africa, produces 3 billion aluminum cans annually in Africa.
Otsuka Nigeria Nutraceutical Company, a subsidiary of Japan's Otsuka Pharmaceutical, initiated the construction of a Pocari Sweat manufacturing factory in Sagamu, Ogun State, Nigeria. This US$ 50 million investment marks Otsuka's first factory for Nutraceuticals and Pocari Sweat in Africa. The factory will create about 1,100 jobs and source 80 percent of its raw materials locally.
Procter & Gamble (P&G) announced that it will stop manufacturing operations in Nigeria and transition to an import-only model. P&G's Chief Financial Officer, Andre Schulten, disclosed that the company made this decision due to the challenges of operating as a dollar-denominated organization in Nigeria's macroeconomic environment. As a result, Nigeria will now become an import market for P&G.
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