After the publication of this piece where I noted how entrepreneurs can use the accumulation of capability to improve their abilities to create wealth, as Dangote Group does, most people noted that Dangote Group has been receiving government support. The assertion is that Dangote Group gets perks from Nigerian government and that has driven its success. In this piece, I explain how you can also get the same level of government support that Dangote gets. It is called Conglomerate Tax and it is done all over the world. The more a firm operates at the upstream, asset heavy, high risk, and long-term view level, the more it needs goodies from governments.
And for governments that want help to put infrastructure at high pain levels, they always listen. U.S government could give Carnegie free land for rail-roads but may not give any to a man that wants to build a toothpick factory. Similarly, Nigerian government can give goodies to Dangote Refinery and may struggle to offer same to a businessman that wants to import toothbrush.
The good news is that Nigeria needs airports, semiconductor plants, seaports etc and anyone with the north of $2 billion to invest will get nice goodies. But if tomorrow, Dangote comes to them, when they become his interests, do not think he is special to government. Government is looking for people to get such as we write. I know that Akwa Ibom State wants someone to invest $4 billion for a deep seaport with many goodies. But you need to have the cash to get the goodies. If Dangote wakes up in 15 years to do so because none has taken action, some will say he is getting another goody. A person that wants to invest $1 billion in a developing economy, and fails to get a goody from government is a bad businessperson.
The secret of great Nigerian business plans is Selling to Governments. Every business plan structured for business in Nigeria must have a strategy for that. If you have a business plan, without a plan to make government your customer, go and get a job. In this videocast, I explain things to consider:
Make products and solutions government can be your direct customer
Make products and solutions governments’ anchor contractors can sub-contract to you
Follow government policies to make sure that your business priorities align to government interests. Because government has the money, that sector will have more opportunities than the ones it has no interest. Government runs on budgets and I hear people conceive ideas (nice ones indeed) in London and New York, and then working to impose them on Nigeria. They ask you for help on what they are doing. Most times, I remind them that Nigerian government does not have a row for that area in the budget. Simply, you cannot find relevance.
Most Nigerian entrepreneurs do not like to do anything with government. They fear the bureaucracy and the epidemic of corruption in the land. Yet, they want to run successful and growing companies. Unfortunately, they are wrong. It is very challenging to build a successful business in Nigeria while being agnostic of government. Government does not need to be your direct customer but you must build something that matters to the government.
Why? Our economy is still dominated by daily decisions of government. Unlike say U.S. where the government was shut down for many days, and things progressed as normal, Nigeria will not survive with government spending. From the herdsman to the banker, everyone is watching budget and subsequent release of government money into the economy, to provide liquidity and stimulate the economy. When government delays the release of many money, the nation goes into stasis – nothing happens.
If you are building a company and you think Abuja does not figure in the success, you need to quickly stop, and get a job – entrepreneurship is not for you. In short, when I see business plans without how government can be a customer, I tell the person to go back to the drawing board. In reality, the government should be the first customer, because that is where the money is. The private sector should come later.
But where you cannot work directly with government, it then means that you must work with anchor companies that deal directly with government. That means your solutions must be such that those companies can make use them, as they serve government. You cannot afford to begin a business in Nigeria without recognizing that our economy begins and ends in Abuja with the private sector simply cheering it. This truism applies to every sector including banking, insurance, oil and gas.
This is not to say our private sector is not making progress. I am saying that the biggest market segment is public sector at different levels – local, state and federal. If you lose that insight, it is very unlikely you can build products that will arrive at the right time when the markets need them. Growing and building a business largely in the private sector is possible, but that is very marginal and challenging. Your growth will take years and you will snail into it because as s startup, the biggest firms must have morphed the best customers.
Most banks have branches in some government offices whereas we have many local governments in Nigeria without a single bank branch. They do understand that the money is there and floats around government offices and buildings.
Understanding Nigerian leaders’ interests is strategic for your startup as that is where money will be
Where you cannot work directly with government at any level, and you cannot be a contractor to those dealing directly with government, you still need to study the government policy to understand its priorities. The aim is to see how what you are doing can be relevant to government since government writes the cheques and drives policies which seem to have immediate impacts across sectors in Nigeria.
Agriculture is hot now and anything on agriculture will find opportunities because the present federal government is doing all it can do to stimulate and grow the sector. If your interest is on building models for space exploration, good luck. Also, if government has decided it wants to import certain types of vaccines as a policy, and you go ahead to be planning to setup a plant in Nigeria, you may wait longer for your lucky day.
Government Service is the Secret
To serve government and grow your business, these are three things to consider:
Make products and solutions government can be your direct customer
Make products and solutions governments’ anchor contractors can sub-contract to you
Follow government policies to make sure that your business priorities align to government interests. Because government has the money, that sector will have more opportunities than the ones it has no interest. Government runs on budgets and I hear people conceive ideas (nice ones indeed) in London and New York, and then working to impose them on Nigeria. They ask you for help on what they are doing. Most times, I remind them that Nigerian government does not have a row for that area in the budget. Simply, you cannot find relevance.
My Experience – A Case Study
During my NYSC, I made money in Jos, Plateau State, whee I served. I sold more than 500 computers and continued that business post-NYSC even when I had moved to Lagos. I had a simple secret, I read newspapers to get ideas when government would pay accumulated arrears to lecturers, across Nigeria. Quickly, with my team, we would visit them to help them buy computers. Every lecturer needed a PC and with the money in the bank, it was easy to close the deal. That was the time most people were getting their first computers and it was not yet a policy that their schools could buy computers for them.
From the Vice Chancellors to teaching assistants, I supplied computers. Within two weeks of the fund release, you will not see me anywhere because by then, they must have spent all the money, and there was no need of wasting time. You need to meet them within two days the money arrived. That model was used as I retained “staff” to pursue such opportunities across universities in Nigeria. The timing was important and understanding government policy that it was going to pay lecturers and following that on news was critical. By the end of my NYSC, I had money to buy a car and fund multiple post-graduate education. In short, I imported my Honda Accord (American edition) from Belgium. (Not really a small move people, to have spent that kind of money, on a car, in retrospect) . The first day I cared to check NYSC allowance was the day I closed the account where the money was going. Till today, reading and understanding governments remain the core of my business strategy.
Another example is the starting of Zenvus, a precision agriculture startup; I will explain in another post. The decision to start that company was finalized on May 28, 2015 because that was the day I read President Buhari’s draft inaugural speech. (I had arrived from U.S. to attend the Inaugural Ceremony). At the end, I made up my mind that agriculture would be huge, and quickly developed a plan to be in it, at the technology level.
We intend to attack the problem frontally through revival of agriculture, solid minerals mining as well as credits to small and medium size businesses to kick – start these enterprises. We shall quickly examine the best way to revive major industries and accelerate the revival and development of our railways, roads and general infrastructure
Notice that he listed Agriculture first in that speech. That was all I wanted to see. We went immediately to build solutions for Nigerian agriculture. Business is growing and we are doing well, to support excess of 2,700 jobs in Nigeria this year alone.
Editor’s Note (July 13 2017): Etisalat Nigeria has re-branded to 9Mobile. Read here
Etisalat brand will cease to be operational in Nigeria, within three weeks, reports Premium Times
Etisalat is set to phase out the telecom group’s brand in Nigeria, Hatem Dowidar, the chief executive of Etisalat International, said on Monday.
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On Monday, Mr. Dowidar said all UAE shareholders of Etisalat Nigeria, including state-owned investment fund Mubadala, had exited the company and left the board and management.
This is the moment for Airtel or Glo to take action. MTN Nigeria cannot do that owing to its pending debts with the Nigerian government and also the fact that it is #1. Looking at new statements from the company, Etisalat is extremely diluted. This is captured by the statement credited by its parent company.
Mr. Dowidar said parent Etisalat had written down the value of the Nigerian business on its books and that transferring its 45 percent stake to the lenders after loan renegotiation talks collapsed had no impact on the group.
Etisalat Nigeria has a pending $680 million in this loan; it had repaid a big portion of it. Does it mean that its parent wants to abandon it for just $680 million? This does imply that Etisalat Nigeria will have to work harder to find a buyer that will give it much higher value. If the parent writes off 45% of the company for it owing $680 million, it means it thinks the 45% of the company is not worth the trouble saving, by pumping extra $680 million.
Update: Etisalat Reacts – Emerging Markets Telecommunication Services Ltd. EMTS, on Monday said it would consolidate on its Nigerian identity in spite of Etisalat Group’s withdrawal from the Nigerian market.
“Indeed, discussions are ongoing between EMTS and Etisalat Group pertaining to the continued use of the brand, and EMTS will issue a formal statement once discussions are concluded …The final outcome on the use of the brand in no way affects the operations of the business as our full range of services remain available to our customers,”
The implication is thus: Anyone that brings $680M could in theory take 45%. That is the opportunity cost the parent parted by abandoning the firm. This implies, currently, Etisalat Nigeria, is worth less than $1.5 billion.
The Federal Government has appointed a director general for the Debt Management Office, DMO. She is Patience Oniha.
Ms. Oniha, whose appointment took effect from July 1, succeeds Abraham Nwankwo who retired from service last week.
The DMO is the government agency responsible for coordinating government strategy for the management of public debts.
Ms. Oniha began her career at Icon Limited Merchant Bankers in 1986, during which time she rose to the position of a Manager, before joining First Securities Discount House Limited (now FSDH Merchant Bank Ltd.) as a pioneer staff in 1992. She rose to the position of General Manager/Director before joining Ecobank Nigeria Limited in 2000. Between 2004 – 2008, Ms. Oniha was in Standard Chartered Bank Nigeria Ltd. as a General Manager.
After a fulfilling career in the banking sector spanning over 22 years, she left after acquiring skills in Credit, Marketing, Treasury and Investment Banking. Ms. Oniha made a career move to the public sectors when she joined the DMO in 2008 as Director, Market Development Department. In this capacity, Ms. Oniha brought her banking experience to bear on various aspects of the DMO’s activities.
Amongst her achievements during her eight years at the DMO was the introduction of Benchmark Bonds to develop the domestic bond market in order to improve liquidity and to create a sovereign yield curve which created opportunities for State Governments, Multilaterals and corporates to raise long term funds. The purpose behind this drive was to create a debt capital market where the public and private sectors can access long term funds to finance Nigeria’s growth and development.
For sustainable development of the debt capital market, she actively engaged with local and foreign investors, regulators and other stakeholders to develop a large and diversified investor base for FGN Securities and Bonds issued by other borrowers.
Oniha recorded quite a number of “firsts” during her time in DMO as she managed the successful issuance of Nigeria’s debut USD500 million Eurobond in January 2011. The debut Eurobond opened a new source of funding for the Federal Government and Corporates. Thus, it was not a surprise when in 2013, she also managed the issuance of the dual-tranche USD1 billion Eurobond which was subscribed to the tune of about 400%.
A number of Nigerian banks also tapped into this funding window by issuing Eurobonds. She was also responsible for the inclusion of FGN Bonds in the J.P. Morgan Government Bond Index – Emerging Markets (GBI – EM) in October 2012 which made Nigeria the second country in Africa, after South Africa to have its local currency sovereign bond included in the Index. The inclusion of FGN bonds in this Index attracted foreign investors to the domestic bond market as a whole. This was followed by the inclusion of FGN Bonds in the Barclays Capital Emerging Markets – Local Currency Government Bond Index (EM – LCBI) in March 2013.
While still at the DMO, Ms. Oniha was appointed as pioneer Head of the Efficiency Unit at the Federal Ministry of Finance. To execute the mandate of the Unit which was to moderate government’s Overhead Expenditure and generate savings from the procurement process, Ms. Oniha leveraged on her experience and global best practice to introduce a number of initiatives. Amongst them were the issuance of 7 Circulars to control expenditure on specific Overhead items and the negotiation of discounts with airlines. These delivered savings estimated at N17 billion to the Government. She was working on the introduction of new processes for payment and procurements when she was appointed Director-General of DMO with effect from July 1, 2017.
This lady of distinction bagged a B.Sc. Economics, First Class Honours from the University of Benin in 1983 and went on to earn an M.Sc. Finance from the University of Lagos in 1985. She widened her scope and horizon by becoming a member of the Institute of Chartered Accountants of Nigeria in 1990 and a Fellow in 2008. Ms. Oniha is also an Associate Member of the Chartered Institute of Taxation of Nigeria.
