The Boko Haram insurgency and a change of government haven’t swayed investors’ interest in Nigeria
Q: What has been the impact of the recent elections on Nigeria’s business community? Has the new government proposed any legislative change that could have a positive impact for the legal and business market in the country?
Chike Obianwu
Chike Obianwu, partner, Templars: Without a doubt, the recent elections have had a salutary effect all around the business community. The outlook has been generally positive since the elections, in spite of the current challenges that face the economy largely as a result of the drop in the global price of crude oil, which is the major source of public revenue in Nigeria.
Part of the reason for the general sense of optimism is the direness of some of the predictions that preceded the elections. A lot of pundits feared the elections would be bloody or possibly inconclusive, and that whatever the outcome of the voting, it would be roundly and violently rejected by one or other of the two major candidates. Fortunately, none of this materialised.
The incumbent president lost to his challenger, a first in the history of Nigeria and – again a first – conceded defeat. So the reaction overall has been positive. Also, the business community has been generally positive about the president-elect’s proclaimed agenda to curb corruption, tackle insecurity and insurgency, and fix the economy.
Oludare Senbore, partner, Aluko & Oyebode: The new administration is less than seven days old and the new National Assembly is yet to be sworn in, thus there is limited insight as to the legislative programme of the new administration.
However, there are strong expectations based on the manifesto of the APC (the new ruling parties), as well as statements made by the president Muhammad Buhari that one major legislative development in the next administration is going to be the reform and privatisation of the National Oil Company and the privatisation of the Transmission Company of Nigeria.
Q: Do you think the recent rise in terrorism in Nigeria is putting clients off investing in the country?
Obianwu: I would not say there has been a rise in terrorism of late. Not at all. On the contrary, the outgoing government has been more muscular, ferocious and successful in combating the Boko Haram insurgency in the three-month period since February 2015 than it has been in the preceding five years. Hundreds of girls and women that had been abducted by these insurgents have been freed by the military in the past month or two.
So, strictly speaking, the discerning investor looking at recent developments in this area should be more confident in Nigeria, not less. Also, the insurgency is essentially limited to the north-eastern region of Nigeria, an area that has not historically been a natural FDI [foreign direct investent] destination. So this subject is a lot more nuanced than what you might see on cable or satellite TV.
That said, I would be the first to tell you that during the height of the insurgency, the atrocities and the accompanying bad press certainly cast a shadow on the attractiveness of Nigeria as an investment destination among certain investors. In one particular example, a client of mine, who was a first-time investor in sub-Saharan Africa, was just about to close a huge investment that we had worked very hard on for several months.
But on the eve of its final investment committee meeting to clear the investment, the abduction of the Chibok girls was announced, and the investment committee shot down the deal.
Senbore: The insurrection in Nigeria has largely been limited to the northern parts of Nigeria, which historically have not been a significant recipient of FDI in Nigeria. Thus the reduction of FDI in Nigeria has not been caused solely by the rise in terrorist activities.
The major inhibitors to FDI in Nigeria have been political instability arising from the pending elections, the significant depletion of Nigeria’s foreign reserves, the fall in oil prices and the instability of the Nigerian currency.
Expectations are that with the successful transition to a new administration – along with expectations that other economic factors such as leakages in the foreign currency earnings of the country and clear direction regarding the government’s policies, will be properly harnessed – FDI in Nigeria will improve.
Q: What sort of changes do you think there need to be in the legal market to continue its development?
Obianwu: We need to see changes at two levels. Change among legal services providers and change in the environment within which those services are provided.
At the service provider level, the market requires improvement in legal and business skills and in how law students and young lawyers are trained. We need to see a lot more emphasis on responsiveness, efficiency, business savvy and value addition. The right pricing is also a major concern.
At the environmental level, a lot is required in terms of basic reform. I am not a litigator, but I would say that the courts are probably the first place to start any meaningful programme of environmental change.
We need to fix the courts and restore the faith of the public and the business community in the courts’ capacity to resolve disputes speedily and fairly.
So you have to modernise the rules and procedures of the courts, introduce modern technology, disincentivise deliberate delays on the part of litigants and their lawyers, and strengthen the enforcement of court decisions.
Our public needs to have confidence in the sanctity of contracts. Our governments must perform contracts that they enter into, and when they don’t, they should be willing to submit to normal commercial rules.
We also need to develop and grow local and regional arbitration centres as well as discourage the tendency for arbitral proceedings and arbitral awards to end up in courts, effectively defeating the idea of arbitrations being private.
These sorts of changes will go a long way in increasing confidence in our legal services market.
Senbore: The Nigerian legal market needs to harness technology to improve legal practice and deliver efficient legal service and better service delivery to clients. There is also a need to develop proper continued legal education to ensure that legal practitioners continue to keep up to date on developments, new skills and knowledge of the law.
Q: How is your firm addressing the continued internationalisation of the legal market in Nigeria and the way you work with foreign firms?
Obianwu: We continue to maintain close relationships with the leading London and US firms. We have non-exclusive best-friend relationships here and there, and close personal contacts with leading individuals, but no tie-ups.
Obviously, we constantly strive to grow our capacity to deliver, because the story of internationalisation does not need to be a one-way street.
M&A trends
We have been placed in the driver’s seat on some of the work that we have done with a few of the larger international firms – so there is scope for more of that to come.
We are very adaptable and fairly well positioned to respond to any developments in this area at the appropriate time and pace.
Senbore: We see our ourselves as an international law firm practising in Nigeria rather than a local law firm.
We invest significantly in improving our standards of legal practice, legal technology, development of legal skills and improvement of education of both legal and non-legal resources within the firm so
as to enable us to maintain our standards and reputation as a first-tier law firm delivering exceptional service to clients.
We have good working relationships with all the major law firms that have an interest in Nigeria and we see the opportunities to work with all such law firms as a mutually beneficial relationship.
The view from London
Nigeria is a reasonably popular destination for foreign investment, with many seeing immense potential in the country’s growing consumer sectors.
Linklaters London corporate head Stuart Bedford, who has acted on a number of private equity transactions in Nigeria, says he has seen no sign of foreign investors being put off either by the recent elections or the Boko Haram insurgency in the north.
Instead, Bedford says regulatory uncertainty – such as over oil and gas regulation – is a more common reason for “deals coming to a grinding halt”.
He describes recent transactions in a number of sectors, including insurance, energy and consumer packaging. Although Bedford says the jurisdiction retains complexities for foreign investors, he adds that if you make sure the fundamentals are right transactions can run fairly smoothly.
“If you get the right management team in the right sector, you’ll be okay,” Bedford adds.
This is aided by a better understanding of the needs of foreign clients by local lawyers, who are now used to the common issues arising in investments in their country – such as the foreign ownership rules for energy companies.
While Bedford warns that “there are still people who don’t do well there”, he believes Nigeria remains a good stepping-stone for investors making their first forays into the African continent, with the country’s growth potential still enormous.
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