Nigeria: transformation presents opportunities
Nigeria and its central bank are working toward greater economic stability, a task that includes shoring up infrastructure, expanding public-private partnerships, reviving agribusiness and diversifying exports.
in mid-july, the international monetary fund (imf) predicted that the Nigerian economy would expand by 1.9% in 2018. it also projected that Nigeria would exit its current economic recession this year with a slim economic growth of 0.8%. Nigeria is undergoing structural transformation and challenges instigated by internal and external developments.
godwin emefiele, governor of the Central Bank of Nigeria (CBN), and his Deputy governors are steering the nation’s financial system through the economic turbulence. since emefiele assumed office in June 2014, he and his team have charted a course to greater stability and growth.
in line with the provisions enshrined in the CBN act (2007), CBN has remained focus on the bank’s core mandate of ensuring monetary and price stability; issuing legal tender currency in Nigeria; maintaining the country’s external reserves to safeguard the international value of the legal tender currency; promoting a sound financial system in Nigeria; acting as Banker to the government; and providing the fiscal authorities with economic and financial advice.
emefiele says strong policy coordination is needed among those guiding the nation’s direction: “in Nigeria, this would include fiscal, monetary, exchange and trade policies, which must be targeted at protecting farmers, companies and industries that are committing resources to support the government’s drive to diversify the economy away from oil and fossil fuels.”
Focus on Infrastructure Investment
a recent World Bank study estimates that sub-saharan africa’s infrastructure deficit — especially in power and transportation — costs the region about 2 percentage points
of gdp growth per year, emefiele reports. the study also indicates that about us$93 billion per year would be needed to tackle the region’s infrastructural challenges. although Nigeria has relatively better infrastructure than many of its african peers, its core stock of infrastructure is estimated at about 25% of gdp. given that most middleincome countries of Nigeria’s size have core infrastructure of about 70% of gdp, the african Development Bank estimates that Nigeria has an infrastructure-funding gap of us$300 billion.
this presents major investment opportunities in the areas of infrastructure. Nigeria seeks to construct and rebuild basic infrastructure including roads, bridges, airports, railways and information technology. Beyond the benefits of immediate job creation, infrastructure improvements will act as a catalyst to the movement of goods and services across the country.
Nigeria is also looking to explore opportunities for public-private partnerships for similar opportunities in infrastructure projects that could offer returns to investors and help drive economic growth across the country.
Policies Seek to Stimulate Economy
fiscal policy for Nigeria looks to stimulate household consumption and business investments. these two make up more than 85% of Nigeria’s gdp by expenditure. Work is underway to ensure that fiscal policy is targeted at improving productivity of labor, increasing disposable income for workers and deploying resources to create an enabling environment for investors.
agriculture remains the largest employer of labor in Nigeria and contributes about 24.2% of its gdp. “the CBN has both a direct and indirect rationale to ensure that this sector is revived in a significant way,” says emefiele. “the CBN’S anchor
Borrowers’ programme, together with other initiatives like the Commercial agriculture Credit scheme and Nirsal (the Nigeria incentive-based risk-sharing system for agricultural Lending), are proving to be successful in several states. to date, the Bank has committed close to N29 billion in the anchor Borrowers’ programme, with active participation across 24 states of the federation.”
in Kebbi state, for example, over 78,000 smallholder farmers are now cultivating about 100,000 hectares of rice farms, with an expected yield of over one million metric tons of rice this year.
“the positive impact of catalyzing domestic agricultural production is that we restore wealth and create employment in our rural communities,” emefiele notes. “the CBN remains committed to doing more in the identified crops such as rice, maize, sorghum, tomatoes, cassava, cocoa, cotton, dairy and groundnuts. We also need to find ways to make land cultivation much easier, especially for smallholder farmers. in this regard, Nirsal can assist with technical knowledge and deployment of relevant gis and satellite imaging that will realize this within a short period of time.”
Diversification Is Key
Non-oil exports present another area of opportunity. Diversified exports can help Nigeria bolster its reserves while also creating jobs and engendering broad-based economic growth. “from preliminary analyses of global trade trends and discussions with potential trade partners, it is now increasingly evident that Nigeria can benefit significantly from tapping into the market for certain highdemand goods,” emefiele says. “for example, the demand for Halal meat and sesame across the gulf Cooperation Council (GCC) countries is huge. the demand for cashew nuts and shea-nut butter across the world is rising. Nigeria has comparative advantage in all these products, and can quickly tap into the vacuum created from the sharp fall in availability of these products from other major suppliers.”
another area of opportunity ripe for expansion is the flourishing entertainment industry. the rate of movie production in Nigeria in fact now surpasses that of movies produced in China annually. opportunities in the industry have drawn the interest of Huaxia film Distribution Company, the second-biggest movie distributor in China, reports Nigeria’s ministry of information and Culture. alhaji Lai mohammed, minister of information and Culture, welcomed the Chinese movie group to invest in some critical aspects of the creative sector, including the establishment of cinema houses, studios and exhibition centers.
the “pioneer status” recently granted to the creative sector will enable investors to benefit from tax incentives. “Nigeria is ready to receive investors in the creative industry, having created the enabling environment for investments through favorable economic policies,” says mohammed. “We have a very determined administration that believes in diversification.”
Services for Investors
the Nigerian investment promotion Commission (Nipc) coordinates, monitors and provides necessary assistance and guidance for the establishment and operation of enterprises in Nigeria. it serves as the gateway to investment in Nigeria for foreign investors and Nigerian investors, and is Nigeria’s window to the international investment world. its one-stop investment Centre (osic) was established in 2006 to facilitate investment in all sectors of Nigeria’s economy. for more information, visit www.nipc.gov.ng.
Lotus and a 1966 Alfa Romeo. His most prized automobile is a 1966 Ford GT40, the first American race car to win at Le Mans, which is estimated to be worth millions. He raced the car the next year at Pebble Beach and won in his class. He says he’s stopped racing old cars after seeing too many crashes and now races a modern Porsche.
Davis is taking me for a drive through Omaha’s beef history, pointing out streets that used to be filled with blocks of stockyards and thousands of cattle. He slows the Merc as he nears the former Livestock Exchange Building, now a brown-brick landmark sometimes used for weddings and events. “There used to be 36 packers here,” he says with a nod before turning into his own headquarters. Pointing to a red-brick building on his right, he adds, “That was one right over there.” Just four packers are left in Omaha, and Davis’ plant, still in view of the exchange building, is the city’s largest.
Davis’ office is 200 yards from the main packing floor, just past the sales department. Inside, his desk is crowded with three computer monitors. One shows the movements in the beef futures market, another is open to his email, and the third is used to access the internet and work on spreadsheets. There’s also a tablet and a smartphone for when Davis needs more bandwidth. “Every morning I get up, I can’t wait to go to work,” he says with a grin from behind his desk.
Most days he dons his white smock and hairnet and steps into the freezing-cold 400,000-square-foot stainlesssteel plant, which is open to visitors ranging from curious chefs to family ranchers. He and his executive team designed it themselves in the late 1990s. He didn’t hire an engineer because they “knew this better than anybody else.” The renovation was necessary in part because of the growing size of the steers. The average weight of cattle has nearly doubled in three decades as more are being fed corn rather than grass. “When cattle got bigger, all of a sudden they didn’t fit through the line,” Davis says.
Each day 2,400 cattle are brought in from the outside pens and slaughtered here. Then their carcasses are rigged to a machine that strips off hide in one fast pull. From there the meat is chilled for two days while a USDA official inspects the marbling and marks each with a grade—select, choice or prime. The meat then winds its way through conveyor belts and machines spread across several rooms, as the beef is separated into sections. At the very end of the line, butchers cut to order. In a new $12 million addition, the beef trimmings are ground into fresh (never frozen) hamburger meat. (The trimmings are also sold to distributors who resell to places like Five Napkin Burger and Five Guys.) Contrary to expectations, the plant is pristine, and there is no odor. The vast stainlesssteel rooms have a lablike quality to them.
Davis designed the huge space to be flexible, and he’s investing $40 million to erect a 65,000-square-foot eight-story cold-storage warehouse. Using artificial intelligence, robots will pull the boxed beef off shelves and fulfill orders. The new warehouse will open up space in the existing plant to allow Davis to come up with additional high-margin items. He’s already planning on doubling his ground-beef production to an estimated 70 million pounds annually by next year. Greater Omaha has also started selling to meal-delivery outfits like Amazonfresh and Hello Fresh as well as offering direct-to-consumer steaks, called Tenderage. (It couldn’t use the name Omaha Steaks, as it’s already taken by a rival.) The steaks it sells online are some of its most expensive and premium cuts: $320 for eight 14-ounce ribeyes or $180 for eight 6-ounce filets.
Davis says he will never abandon his restaurant customers, a business that is still quite lucrative. Pat Lafrieda Meat Purveyors, for instance, which sells to thousands of restaurants around the country, has been ordering from Davis for decades. “Greater Omaha actually selects product specifically for us, and that means the world to us,” Lafrieda says.
Lawry’s, which operates ten restaurants and buys more than 750,000 pounds of meat a year, concurs. Executive chef Ryan Wilson says he’s been transitioning all his locations to exclusively use Greater Omaha beef, despite the fact that the prices are a bit higher and that he can’t always get as much as he wants. “You oftentimes have to pay more of a premium up front,” Wilson says. “But I think it’s worth it,”
Despite the demand, Davis says, he has no plans to open another plant. He’s toured two that were modeled after his but wasn’t interested. He also turned down buyout offers, including two since the trade deal with China. “I don’t open that door because the plant’s not for sale,” he says.
Davis has no heir apparent and no succession plan. Divorced in 2006, he has two children in Chicago: a 26-year-old daughter who is a psychotherapist and a 23-year-old son who just started law school. Davis says neither has any interest in coming back to Omaha like he did. He’ll figure out what that means for the business when the time comes but doesn’t think that will be anytime soon: “I’ve never enjoyed this more in my life. I’m not giving this up. You’re not getting me out of here.”
The slaughterhouse’s 400,000-squarefoot stainlesssteel plant is pristine and there is no odor. The rooms have a lablike quality.