Day 2 – “Free zones”

Leslie: Day 2, we got right into answering a key question some of us came in with: if West Africa is  hot right now, how much of that is about oil?

The day included a visit to the African Capital Alliance, a private equity fund with investments in energy, telecom, infrastructure, and real estate. Their fund sizes have been growing (reflecting their optimism), and they’ve invested across a variety of sectors. Their returns have been outstanding. But they did appear to be the only game in town – there isn’t, according to the managers we spoke with, much in the way of private equity competition in Nigeria right now. When others see the opportunity, will they compete away these 30-40% IRRs?

At Oando, we learned a bit more about the oil industry in Nigeria. The company is largely a gas station operator, but has expanded upstream all the way to exploration, and hopes to make those operations more important in the future. In some ways, this mirrors the hopeful path of the rest of the country: going from exporting raw, crude products and importing refined, processed products into processing products domestically should help create jobs and provide a more stable footing for the economy than commodity prices.

We explored some of the needed factors for success in that effort at LADOL, the Lagos Deep Offshore Logistics base. Its leader explained that the base depended upon government concessions on taxation and trade that allowed it to attract foreign companies as customers for its cleaning and storage facilities. The base is part of a “free zone” that allows more foreign ownership, less taxation, and less complicating regulation than the rest of Nigeria. Such reduced regulation and government support for infrastructure might also help the rest of the country to grow into value-added areas like logistics that can create Nigerian jobs from the development of domestic oil resources.

At the Motor Boat Club in Lagos, we sipped Onu’s father’s signature drink and enjoyed scenery that could have belonged in Southern California. The bar might have been the only one that didn’t have a signature drink with an embarrassing name: that night at the alumni event, anyone who wanted could order a “Slow Comfortable Screw.”

At the mixer, we got one more answer to our question about the sources of West Africa’s growth: there are, in fact, some startups that are poised to grow and transform the economy. Tayo Oviosu of Pagatech (a mobile payments company) made a powerful impression on all of us not just that night, but later in the trip.

In short, to me, it seemed that oil has been a key to growth, but it appears it’s not the only thing that holds promise for Nigeria.

Andrew:  This day made me realize what a positive impact business can have on a developing country.  It seems a big theme of Nigeria is bringing jobs which have previously been sourced to foreigners back to Nigerians. 

Also a couple of memorable stories: one is at the motor boat club Ann Tran shared that her friends call her “Trannie.”  In fact, she has the @Trannie handle on Twitter.  Hayley also won the dubious distinction of being the only person to be cold-called the entire trip when our alumni called on her to ask “What question do you want to have answered about Africa?”