We need to talk about Nigeria - Davos 2014

In the last few years, we’ve seen a number of highly polarizing private (Marissa Mayer’s Yahoo CEO appointment) and public (Janet Yellen’s Federal Reserve Head appointment) sector female appointments. Though none quite as contentious as the one that never quite was, I’m talking about Ngozi Okonjo- Iweala’s failed 2012 bid for World Bank Presidency. A magna cum laude Harvard graduate and MIT doctorate holder with a wealth of experience in international finance and macroeconomic policy, Mrs. Okonjo-Iweala seemed set to buck the trend of US favored candidates making it to seat.

Unfortunately, it was not to be. Mrs. Okonjo Iweala narrowly lost out to Jim Yong Kim and instead went back to employing herself in Nigeria’s political sphere as Coordinating Minister For The Economy And Finance.

In a zero sum world, it would seem the World Bank’s loss has been Nigeria’s gain, Mrs. Okojo Iweala has a great many opinions on and hopes for Nigeria to realize it’s hugely untapped potential. She discussed many of them at the World Economic Forum at Davos in Switzerland and we’ve summarized three of the key takeaways for this below: “If They (Investors) Are Not In Nigeria. They’re Not In Africa” Ngozi Okonjo-Iweala Mrs. Okonjo – Iweala was quick to dispel the myth that perception is still a prevailing problem in attracting investment to Nigeria.

She pointed out that Nigeria is the largest foreign direct investment destination in Africa recently surpassing South Africa and Egypt. With the fourth highest rates of return in the world at approximately 30% it’s no real wonder why. For more information on sub Sahara’s attractiveness we suggest you watch the following link (a TED talk by Charles Robertson of Renaissance Capital) or better yet buy his book at Amazon. “The New African Proverb Is Pray That We Don’t Discover Oil” – Bono Despite this investment and impressive growth trajectory, Mrs. Okonjo – Iweala, believes Nigeria’s economy could soon be in trouble, because essentially Nigeria is resource cursed. Naturally blessed with an abundance of natural resources (namely oil) it’s been allowed to get away with a lot.

Nigeria has employed low levels of investment in other industries namely agriculture, which has resulted in an ill diversified and subsequently vulnerable economic structure. Further, it has not significantly reinvested in the infrastructural development of its oil sector (e.g. in the form of a refinery – until recently).

Finally, Nigeria’s resource curse has allowed for selfish abuse of this great gift from high-ranking public officials to low level gangs engaged in oil theft.

As a result of these and a host of other macroeconomic factors, Nigeria’s Excess Crude Account has been in continuous decline for the past few years. It’s fallen from $8.65 billion in 2012 to about $2.5 billion now. This may sound like a lot of money but when you consider the natural volatility of the oil price market, the recent shale gas ‘discoveries’ around the globe and the fact that approximately 95% of Nigeria’s export earnings come from oil, you realize its not a very comfortable cushion.

As a result, Mrs. Ngozi Iweala has made some changes to the parameters’ that shape Nigeria’s fiscal budget. She’s lowered the budget’s benchmark price of oil as well as its forecasted levels of barrels a days of production. This has naturally lead to a downward revision of Nigeria’s growth rate to approximately 6.5% (Nigeria’s been growing at a about 7% for the past 10 years) modest in comparison to the IMF which forecasts 7.2%. Though still reasonably attractive considering the global economy is growing at approximately 3%, but logical considering Nigeria is starting off from a considerably lower base than a lot of regions.

To Nigeria’s credit it has set up a $1 billon Sovereign investment Authority in attempt to follow in the footsteps of Norway, which early on looked to avert the ‘curse of oil’ by diverting it’s oil profits to a sovereign wealth fund now worth approximately $460 billion. But, Mrs. Okonjo wants more from Nigeria, she and Mr. Sansui’s target this year will be to rebuild the savings in the Excess Crude Account. A tough job, but one for which I believe no one is better suited than Mrs. Okonjo – Iweala. “…It’s Not Just Good Enough To Grow. There Has To Be Quality In The Growth”

In a panel discussion with guests including Bono and the Prime Minister of the UK titled “The Post – 2015 Goals: inspiring A New Generation To Act”, Mrs. Okonjo – Iweala talked about fighting poverty after the Millennium Development Goals.

Whilst she acknowledges Nigeria is a growth success story, Mrs. Okonjo Iweala argues growth within the region needs to be more equally distributed as 48% of people are still living in poverty in Nigeria. She suggests that the way to achieve this is through job creation like in China and through the establishment of a certain level of social safety net like in Argentina.

In that vein, she went on discuss the recent success of a practical South America inspired pilot she had implemented in Kano State of conditional cash transfers upon school attendance. In Kano state she saw an improvement in school attendance of 40% and is looking to roll this out in the rest of the country.

Ultimately having poured through many a Davos transcript on the subject of sub Saharan Africa, I was filled with hope. Not because “Everybody’s marveling about the way that Africa has changed”, but because in the words of Prudential Group Chief Executive, Tidjane Thiam “it’s not Africa that has changed it’s Africans that have changed”.

We have leaders like Mr. Dangote and Mrs. Okonjo Iweala truly understanding our socio – political landscape and steering our future, which buoys me with a significantly more sustainable level of hope for our future.

#lifestyle