Home / News and Insights / News / Event round up: bridging the infrastructure gap – opportunities for investing in Nigeria
13 October 2017

Event round up: bridging the infrastructure gap – opportunities for investing in Nigeria

On Thursday 21 September 2017, Bircham Dyson Bell hosted an evening seminar on ‘Bridging the infrastructure Gap: opportunities for investing in Nigeria.’ Below is a summary of what was discussed during the event.


  • George Etomi – Director, Eko Electricity Distribution Company Plc; and Partner, George Etomi & Partners
  • Daniel Magnowski – Senior Analyst for West Africa, Control Risks
  • Yetunde Odedokun – Associate, FBN Merchant Bank
  • Kash Balogun – Head of Africa team, Bircham Dyson Bell LLP
  • Cecilia Akintomide – Independent Non-Executive Director, FBN Holdings

George Etomi – Director, Eko Electricity Distribution Company Plc; and Partner, George Etomi & Partners

George explained the importance of infrastructure. Citing the World Bank, he noted that for every one percent of national revenue spent on infrastructure, there is a corresponding one percent growth in gross domestic product.

The Risks

He went on to explain why he believes infrastructure development is lacking in Nigeria. He stated that many well-conceived projects have failed in Nigeria due to the political climate and political risk. There is a need for consistency from politicians, as when governments change, the positive work of previous governments is often undone. Routinely, existing contracts with suppliers are disregarded when there is a change of government. Investors also feel anxious to recoup their investment before the current government departs. George noted that the political situation in Nigeria has recently calmed but still has some way to go to ease the concerns of investors.

Other problems faced by Nigeria include the lack of a skilled and youthful workforce. New entrants in the job market such as engineers, are hindered by a negative attitude towards them. Consumer expectations, especially in relation to price, are also often unrealistic. George referred to how government tariffs on electricity, often set low for political gain, have caused electricity suppliers to suffer losses.

The Benefits and Opportunities

George also discussed the benefits of investing in infrastructure. He stated that over $3 trillion of investment was required in Nigeria over the next thirty years, which would lead to a higher standard of living and higher quality jobs for ordinary Nigerians.

The availability of power is one of the key current issues in Nigeria. Economic productivity could increase if Nigeria had uninterrupted electricity. George discussed the costs ordinary Nigerians incur in paying for diesel powered generators. Generators are expensive for Nigerian businesses and those costs are passed on to consumers. George noted that further privatisation of the power sector is one way of bringing about investment in the sector.

He went to discuss the investment opportunities that were available in Nigeria. This included investment in Rail, such as the Lagos Metroline Network project; investment in Power; and investment in the refurbishment and extension of the international airports which are the subject of new concessions recently approved by the Federal Government of the Nigeria.

George used the telecommunications sector as an example of successful privatisation. Project finance helped make this a success and there are now a number of competing telecommunication companies within the sector. This is obviously good for consumers and at the same time it is clear that investors can make a return in Nigeria.

  • Security risk – the physical risks to persons and property;
  • Political risk – the stability of the government and the chances of contracts being cancelled if there is a change in government; and
  • Integrity risk – how an asset has been dealt with or how a company has been run, for example, What are the company’s relationships with the local government? Is the company dependent on a particular individual in government?

Daniel stated that the main concern for investors is quite obviously, how they will receive a return on their investment. Following on from George’s comments on the cost of power, Daniel commented that that price of power in Nigeria may need to stay low for social stability. Low tariffs work politically but will put off investors. Sometimes governments offer indemnities to encourage investment, but rather than having to rely upon making a claim against a foreign government, the majority of investors would rather recoup their investment through the actual project. Daniel noted that there is often not enough money in the system to be able to fund infrastructure projects.

Yetunde Odedokun, Associate, FBN Merchant Bank

Yetunde stated that investors need to think differently when investing in Nigeria, particularly when it comes to infrastructure. There will not be instant returns and there is considerable risk, but there can be also significant returns. Infrastructure investments are long term equity investments and investors need to be thinking this way. Yetunde noted that there is a large amount of capital entering Nigeria (Foreign Direct Investment), but once investors make a return a considerable amount of that money leaves.

Yetunde discussed the success of the telecommunications sector and noted that the sector is not comparable to other areas of infrastructure such as power. Telecoms were aimed at the wealthy and had few initial uptakers, whereas the power sector was serving all Nigerians. The immediate benefits of telecoms were also easier to see for investors than with power.

Yetunde’s proposed solution to the lack of infrastructure investment is to increase engagement with Nigerians. She stated that people should be prepared to pay for the power they consume and should begin to understand that prices may rise.

Kash Balogun – Head of Africa team, Bircham Dyson Bell

Kash considered the risks covered by the previous speakers and advised on how these risks could be managed from a legal perspective. Although investors do not want to see themselves in disputes, by being properly advised from the start, disputes can be avoided and risks can be mitigated.

Kash noted that Nigeria is a member of the New York Convention meaning that investors may include an arbitration clause, allowing them to choose where their dispute is to be heard. This helps avoid the Nigerian courts which may be slow. Commenting on political risk, Kash stated that a stabilisation clause could force parties to renegotiate parts of the contract when there is a change, for example in government or a tariff.

Cecilia Akintomide – Independent Non-Executive Director, FBN Holdings

Cecilia drew on her experience working for the African Finance Corporation and the African Development Bank to explain infrastructure funding issues in Nigeria.

When the UK government needs to raise funds for a project, it issues bonds, takes out loans, and encourages private investment. In contrast, often the Nigerian government only borrows money. This is inefficient and leads to funding problems down the line.

Cecilia suggested that the way forward for investors in infrastructure should be through Development Finance Institutions (DFIs). Their experience is vital as they know which types of transactions have succeeded in the past. Cecilia explained that using a DFI can make the process longer as they require more transparency and usually ask for environmental impact assessments, but the benefits outweighed the these drawbacks..

Cecilia also went on to explain the currency risk faced by investors asiInvestments in infrastructure usually produce returns in the local currency which can pose a number of issues unless carefully managed.

Cecilia stated that although an international law firm will handle the main legal elements of the infrastructure project, investors should not be afraid to use the networks and relationships of their local firm.

Related Articles