ATTRACTING FOREIGN DIRECT INVESTMENT THROUGH GLOBAL PARTNERSHIPS presentation made at the: 17 TH NIGERIAN ECONOMIC SUMMIT Thursday November 10, 2011 THE

ATTRACTING FOREIGN DIRECT INVESTMENT THROUGH GLOBAL PARTNERSHIPS

presentation made at the: 17TH NIGERIAN ECONOMIC SUMMIT

Thursday November 10, 2011

THE HONOURABLE MINISTER OF COMMUNICATION TECHNOLOGY MRS OMOBOLA JOHNSON

Ministry of Communication Technology

Outline

• Attracting FDI– Conditions Precedent – Country Competitiveness

• Investment Requirements, Challenges and Goals of Priority Sectors– Oil & Gas, Power, Agriculture, Transport, ICTs

• Building Global Partnerships

2© 2011. Federal Ministry of Communication Technology

Attracting Foreign Direct Investment and Building Global Partnerships

Conditions Precedent are fairly well known....

• Opportunity– Of Markets

• Stability– Of Governments

• Consistency– Of Policy

• Certainty– Of Regulation and regulatory environment

• Ease of Doing Business– Doing Business Index

© 2011. Federal Ministry of Communication Technology4

But FDI is finite and country’s compete for these funds......

• Nigeria’s Competitive Strengths :– Existence of a large and attractive domestic market with high unmet

demand for basic (and public) goods and services• Increasingly sophisticated and growing middle class

– Good competitive domestic market; however foreign competition impeded by

• Prevalence of trade barriers, high trade tariffs, and burdensome customs procedures

– Good labour market efficiency; exhibiting high degree of flexibility. More efficient use of labour is however required and gender imbalances persist in the workplace

– Improving business sophistication• Good quantity of local suppliers engaged in a range of activities along

value chains; however improvements required with respect to quality of local suppliers



• Nigeria’s Competitive Weaknesses :– Significant improvements required in strengthening public

institutions including• Enforcement of property rights and intellectual property• More efficient government spending• Accountability – auditing and reporting standards• Arresting the declining security situation

– Significant improvements required in availability and quality of physical infrastructure – transportation, power, ports, ICT

– Significant improvements required with respect to healthcare; impact of health issues on businesses is significant



• Nigeria’s Competitive Weaknesses:– Significant improvements required in the quality of education and the

quality of entrants into the workforce– Significant improvements required in technological readiness.

Currently low adoption of ICT by individuals and businesses with negative impacts on productivity

– Development opportunities still exist in the financial market• low access to capital

• high cost of capital, when it can be accessed

• Size of the capital markets (number of companies and market cap)

– Whilst there is capacity to innovate, significant improvements are required in harnessing such capacities – especially university-industry collaborations and government’s adoption of advanced technological products


Best performing Nigeria

Global Competitiveness Index 2011-2012

South Africa (50) 127

Infrastructure South Africa (62) 135

- quality of electricity supply Egypt (74) 139

Market size South Africa (25) 34

Labour market efficiency Kenya (37) 70

Technology readiness South Africa (76) 106

The resultant effect.......

© 2011. Federal Ministry of Communication Technology 8

102102

5050

9494

127127

6262

135135

7575

103103

2525

7777

2727

3434 7070

141141

3737

9595

106106

9595

9898

7676

Source: The Global Competitiveness Index Analyzer 2010 – 2011

http://gcr.weforum.org/gcr2011/

Rank out of 142 countries

A large and attractive market is only a starting point

Investment Requirements, Challenges and Goals of Priority Sectors

Investment Requirements, Goals and Challenges of Priority Sectors

OIL & GAS POWER AGRICULTURE TRANSPORT ICT

Total proposed investment in sector: N571.16bn



Total proposed investment in sector: N2.216tn


Maximize the benefits of Nigeria’s hydrocarbon resources

Meet demand for adequate and sustainable power in Nigeria, and at affordable costs

Create a sustainable, vibrant and technology enabled Agricultural sector that can meet the needs of the country

Develop a world class infrastructure that will support all other sectors of the economy, particularly the productive sector

Develop a ICT sector to drive and expand national production and soft sectors (inc. governance, public services, media etc.)

• High level of foreign content

• Focus on export of unprocessed crude and low refining capacity

• Lack of enabling environment in the Niger Delta

• Liberalization and privatization of the downstream sub-sector

• Inadequate and ageing physical assets; overloaded transformers; and frequent vandalisation

• Lack of implementation of policies (e.g. Nigerian Gas Master plan) and weak coordination of obligations

• Low productivity - poor input; weak inter-sectoral linkages; ageing operators etc.

• High risk of investment

• Non competitiveness – informal marketing structure.

• Weak domestic policies/institutions

• Dilapidated infrastructure - rail, waterways, ports, and roads as well as environmental constraints and piracy,

• Institutional reform and resolution of legal disagreements between States and Federal Govt.

• Inadequate funding

• Disjointed and Inadequate policies plus weak/absent legal and regulatory frameworks;

• Weak PPP framework (barrier to participation by Private Sector)

• Poor state of the nation physical and social infrastructure particularly power


1

1 Figures refer to estimated minimum public sector investment required to achieve objectives set out in the Vision 20:20:20 Plan

Building Global Partnerships require a vibrant private sector........

• Foreign Direct Investment is coming into the private sector and not government

• Domestic private sector hindered by the same things that constrain FDI

• Absorptive capacity of the Nigerian private sector– Organised private sector is small relative to GDP– Most industry sectors are fragmented – Large informal market– Rent seeking tendencies – Poor productive capacity


Building global partnerships require .....

– Consistent sectoral policies and demonstrable political will to execute

• Particularly where investments have long gestation periods e.g. infrastructure

• Also requires alignment of interests of Federal and State governments around the country’s competitiveness

– Predictability of doing business• Increasing predictability with respect to taxes payable, labour

laws and incentives; and strengthening contract enforcement and the rule of law

– An ability of government to engage the private sector constructively

• Public and private sectors play different but interrelated roles in creating a productive environment. Public sector should seek to create conditions that engender productivity and foster private sector development

• Requires knowledgeable and competent public sector representatives in discussions and negotiations with private sector


Building global partnerships require.....

– Demonstration by country of internal skills and capacity to leverage investments in its economy

• Where skills and capacity are absent country must demonstrate a commitment to build capacity

• Should be complemented by improvements in social infrastructure including Sanitation, Housing, Health, Security and Education

– Strengthening the financial market, in particular creating a liquid and transparent capital market

• Increases channels through which businesses can access capital and also provides exit opportunities for international investors

• Continuation of reform of financial sector– Collaboration between MDAs to implement cross cutting

initiatives• Promoting and achieving seamless interactions between

businesses and various public institutions• Collaboration on initiatives is also required between States and

Federal Government


Attracting FDIs and Building Global Partnerships in the Nigerian ICT Sector

The Global ICT Industry

Telecommunications• Mobile Network Operators• Satellite Operators• Fixed-wireless Operators• Fixed-wireline Operators• Internet Service Providers• Network infrastructure

Providers

Value Added Services• Technology Consulting• Shared Services• Content Development• Content Providers• Training and Educational

Services• Transaction

Services/Switching

Infrastructure Services• Disaster Recovery /

Business Continuity• Infrastructure Outsourcing• Application Hosting• Data Center

Equipment Suppliers• Assembly• Sale and Distribution• Maintenance and Repairs

Devices• Assembly• Sales and Distribution• Maintenance and Repairs

Support Services• Distribution Channel

Operators• Sale and Distribution of

consumables

Software• Development• Sale and Distribution• Installation and

Customisation• Support & Maintenance

Business Process Outsourcing

• HR• FInance• etc

Call Center Operations• Outsourced


Legend High growth

Medium growth

Low growth

Mobile Network

Operators

Satellite Operators

Fixed WirelessOperators

Fixed Wire-lineOperators

Internet Service Providers

Device Sales & Distribution

Device Maintenance & Repairs

Device Assembly

Infrastructure Services

Training & Education

Transaction Services

Equipment Maintenance & Repairs

Equipment Sales &

Distribution

Equipment Assembly

Call Center Operations

Research & Development

Support Services

Software Development

Access Provision

Business Process Outsourcing

Converged Services (Data, voice & media)

Annual Maintenance & Support (servers & storage)

Software Maintenance & Support

The Nigerian ICT Industry

SoftwareInstallation & Customization

Software Sales &

Distribution

Value Added Services


Infrastructure Service Providers

Attractiveness of the ICT Sector in Nigeria: What are we doing to attract investments?


• Harmonise disparate policies into a single national ICT policy

• Develop and implement targeted initiatives for identified priority sub-sectors– Expand definition of Universal Access beyond basic voice to include

provision of broadband and thereby bring to the fore the deployment of nation-wide backbone infrastructure

– Promote and support initiatives that focus on the development of the last-mile

– Promote local development of software - e.g. through establishment of Software Innovation Venture Capital Fund

– Establishing ICT Parks equipped with physical/service infrastructure; security; proximity and access to skilled human capital etc.)

• Promote regulation to increase competitiveness in the market and achieve level playing fields in a broad range of sub-sectors

Attractiveness of the ICT Sector in Nigeria: What are we doing to attract investments?


• Promote legislation that facilitates/supports the digital economy and information society (cybersecurity, electronic transactions, privacy, intellectual property etc.)

• Partner with other MDAs (Trade and Investment, Finance, Labour) to create incentives for local device production and call centre operations– Tax and other incentives, waivers, pioneer status etc

• Create and implement frameworks to guide the establishment and governance of collaboration and partnerships between Nigeria and countries with developed IT industries– Emphasising “partnerships of equals and/or peers” and optimising the

matching of skills with (Nigerian) markets

• Promote/Facilitate industry consolidation and industry clustering

• Align Federal and State interests regarding taxation and levies on the ICT industry

ATTRACTING FOREIGN DIRECT INVESTMENT THROUGH GLOBAL PARTNERSHIPS

presentation made at the: 17TH NIGERIAN ECONOMIC SUMMIT

Thursday November 10, 2011

THE HONOURABLE MINISTER OF COMMUNICATION TECHNOLOGY MRS OMOBOLA JOHNSON

Ministry of Communication Technology

Documents

ATTRACTING FOREIGN DIRECT INVESTMENT THROUGH GLOBAL PARTNERSHIPS presentation made at the: 17 TH NIGERIAN ECONOMIC SUMMIT Thursday November 10, 2011 THE