Exits: Multinationals Make Rationale Decisions; More Policies Needed To Attract Investment- Chioke

Summary

The business discussion on Horizon News focuses on the 'great miscalculation' of multinationals exiting African markets, particularly Nigeria, due to economic challenges. Despite exits in sectors like FMCG and manufacturing, new capital flows into fintech, renewable energy, health, and education are observed. Dr. EK Chok of Afra Invest Limited discusses the impact of macroeconomic factors, exchange rates, and leadership quality on investment decisions. He emphasizes the need for political leadership to stabilize the economy and pay a living wage to Nigerians, suggesting this as the key policy catalyst for economic growth.

Takeaways

• 🌐 Multinational companies are exiting African markets like Nigeria due to macroeconomic challenges, not inherent issues with Africa itself.
• 📉 Exchange rate fluctuations have significantly impacted multinationals' operations in Nigeria, with the rate moving from 170 to 360 between 2014 and 2018.
• 🏭 Sectors like FMCG and manufacturing have seen exits, with companies like Nestle and Unilea PLC shutting down operations in Africa.
• 💡 Despite exits, new capital inflows are occurring in emerging sectors such as fintech, renewable energy, health, and education.
• 📊 Nigeria has experienced a decline in FDI, dropping from $4.7 billion in 2014 to $2 billion in 2023, compared to other African countries that have grown.
• 💰 The disparity between the official and parallel market exchange rates has created disincentives for multinationals to stay in Nigeria.
• 🛑 Economic arbitrage and mismanagement by the Central Bank have been cited as reasons for the trend of multinationals leaving Nigeria.
• 📈 The Nigerian equities market has seen an increase in foreign participation, driven by high-interest-rate policies and strong earnings in the banking and industrial sectors.
• 🏢 The banking sector's recapitalization is aimed at stabilizing the economy and supporting customers, with the need for an estimated 4 trillion naira in capital.
• 🔑 Leadership quality and discipline are critical in attracting and retaining multinational investments in African countries.
• 🗓️ For Nigeria to achieve economic growth, political leadership needs to demonstrate restraint and discipline, focusing on the social contract with citizens.

Q & A

What did AOS Jar mean by 'the great miscalculation' regarding multinationals in Africa?

AOS Jar referred to the optimism of multinationals entering the African market and their subsequent exits, indicating that they miscalculated the difficulties of doing business in Africa due to the stage of the continent's development.

What were some of the recent exits of multinationals from African markets mentioned in the script?

Recent exits include Nestlé shutting down its chocolate milk production facility in South Africa, Unilever pulling out of home care and skin cleansing product manufacturing in Nigeria, and pharmaceutical giant GSK outsourcing distribution in Kenya.

Despite the exits, which emerging sectors in Africa are attracting new capital inflows?

Emerging sectors attracting new capital inflows include fintech, renewable energy, health, and education.

What macroeconomic challenges did Nigeria face that contributed to the exits of multinationals?

Nigeria faced multiple challenges, including two recessions in the last decade, significant currency depreciation, and the spread between official and parallel market exchange rates, which created economic disincentives for multinationals.

How did exchange rate fluctuations impact multinational operations in Nigeria?

Exchange rate fluctuations significantly affected multinationals by creating challenges in repatriating profits and reducing the purchasing power of Nigerian consumers, making it difficult for companies to operate profitably.

What role did political leadership play in the economic challenges faced by Nigeria, according to Dr. Chok?

Dr. Chok highlighted that Nigeria's leadership has not done enough to create an attractive environment for multinationals and emphasized the need for stable political leadership to maintain consistent policies that encourage foreign investment.

How did the performance of the Nigerian equities market fare this year, and what were the main drivers?

The Nigerian equities market performed well this year, driven by strong earnings momentum from sectors like banking and industrial, as well as international investor participation in the high-interest rate environment.

What impact did banking sector recapitalization have on Nigeria's economy?

Banking sector recapitalization aimed to stabilize the economy by providing banks with the capacity to support their customers and absorb potential losses, thus fostering economic growth and stability.

What were some potential policy catalysts for improving Nigeria's economic outlook in the second half of the year?

Potential policy catalysts include new listings in the equities market, capital raising by banks, and improved political leadership to address the social contract and ensure living wages for citizens.

What is the significance of the consumer purchasing power in Nigeria's economic environment?

Consumer purchasing power is crucial as it directly impacts the profitability of multinational companies operating in Nigeria. The significant decline in minimum wage value over the years has compressed purchasing power, making it challenging for companies to sell their products profitably.

Outlines

00:00

🌐 Multinationals' Exit from African Markets

The script discusses the 'great miscalculation' of multinationals who entered and are now exiting the African market, particularly Nigeria. It highlights the challenges of doing business in Africa due to its stage of development rather than inherent issues. Examples of companies like Nestle and Unilea PLC exiting sectors like FMCG and manufacturing are given. However, the narrative also points out new capital inflows into emerging sectors like fintech, renewable energy, health, and education. The conversation with Dr. EK Chok, MD of Afra Invest Limited, delves into the macroeconomic challenges Nigeria has faced, such as recessions and exchange rate fluctuations, which have impacted multinationals' operations and profitability.

05:01

📉 Economic Factors Influencing Multinationals' Decisions

This paragraph explores the reasons behind multinationals' decisions to exit certain African markets, focusing on Nigeria. It emphasizes the impact of exchange rates on consumer purchasing power and multinationals' ability to repatriate profits. The discussion also touches on global portfolio rationalization and the role of homegrown factors in multinationals' strategies. Dr. Chok provides insights into Nigeria's economic environment, comparing it with other African countries that have managed to attract and retain foreign investment more effectively, pointing out the need for a more attractive investment climate and stable political leadership.

10:02

💼 Capital Flows and Investment Opportunities in Africa

The script examines the types of investments flowing into Africa, such as FDI and portfolio flows, and their impact on the continent's economies. It discusses the selective investment approach of multinationals, choosing countries with stable political environments and attractive policies. The conversation highlights the importance of leadership quality in African businesses and the need for international investors to consider this factor. The paragraph also addresses the potential of African markets, with examples of companies like EXO Mobile choosing to invest in Angola instead of Nigeria due to policy and regulatory environments.

15:03

📈 Performance of Nigerian Equities and Market Drivers

This section of the script focuses on the performance of the Nigerian equities market, discussing the factors that have driven its growth, such as policies from the Central Bank that have attracted international investors. It mentions the high interest rate environment and strong earnings momentum from various sectors, including banking and industrials. The script also covers the impact of capital raising by banks and the potential for new listings to further boost the market. The discussion includes the effects of banking sector recapitalization on economic stability and the importance of political leadership in fostering an environment conducive to investment and growth.

20:04

🏦 Banking Sector Recapitalization and Economic Outlook

The final paragraph delves into the implications of banking sector recapitalization for Nigeria's economy, discussing the rationale behind the increase in capital requirements for banks and the potential benefits for macroeconomic stability. It also addresses the challenges faced by the economy, such as inflation and exchange rate fluctuations. Dr. Chok suggests that the most significant policy catalyst for Nigeria's economic improvement is strong and disciplined political leadership that can address social inequalities and create a more conducive environment for investment and growth. The conversation concludes with a reflection on the importance of leadership in driving the Nigerian economy forward.

Keywords

💡African Market

The African market refers to the economic landscape of the continent, encompassing various sectors and industries. In the video, it is discussed in the context of multinational companies entering and exiting this market due to various challenges and opportunities. The script mentions the 'great miscalculation' of multinationals who were overly optimistic about the African opportunity, indicating the complexity and unpredictability of the African market.

💡Multinationals

Multinationals are large companies that operate in multiple countries. The script discusses the challenges faced by these companies in Africa, such as economic downturns and regulatory issues, leading to exits and divestments. Examples given include Nestle shutting down a production facility in South Africa and Unilea PLC ceasing manufacturing in Nigeria, illustrating the impact of these decisions on the African market.

💡Divestments

Divestments refer to the selling off of investments, often due to strategic or financial reasons. The script highlights a 'wave of exits and divestments' from sectors like FMCG and manufacturing in Africa, indicating a trend of multinational companies pulling out of the continent, which is a key theme in understanding the business dynamics in Africa.

💡Economic Arbitrage

Economic arbitrage involves exploiting price differences of identical or equivalent assets across different markets. The script mentions this term in the context of the Central Bank's mismanagement of the exchange rate, which created disincentives for multinationals to remain in Nigeria, thus affecting the business environment.

💡Exchange Rate

The exchange rate is the value of one country's currency in terms of another. In the script, it is emphasized as a critical factor affecting multinationals' operations in Nigeria, with fluctuations impacting consumer purchasing power and the profitability of businesses. The discussion on the widening gap between official and parallel market exchange rates is a central point in the narrative.

💡FDI (Foreign Direct Investment)

FDI refers to an investment made by a firm or individual in one country into business interests located in another country. The script discusses the decline in FDI flows into Nigeria compared to other African countries, reflecting the investment environment and economic attractiveness of the country.

💡Portfolio Rationalization

Portfolio rationalization is the process of optimizing a company's portfolio by divesting or acquiring assets to improve performance. The script suggests that multinationals may be rationalizing their global portfolios, which could be a reason for their exit from certain African markets, indicating a strategic business decision rather than a solely market-driven one.

💡Fintech

Fintech is a portmanteau of 'financial technology' and refers to technology used to improve and automate financial services. The script mentions new capital inflows into emerging sectors like fintech, suggesting that while some sectors may be experiencing divestments, there are also growing opportunities in innovative areas within the African market.

💡Equities Market

The equities market refers to the collection of exchanges and over-the-counter markets where stock representations of companies are bought and sold. The script discusses the performance of the Nigerian equities market, driven by policies from the Central Bank and strong earnings momentum from various sectors, indicating a positive trend in investment attraction.

💡Banking Sector Recapitalization

Banking sector recapitalization is the process of increasing the capital base of banks to improve their financial stability and ability to lend. The script discusses the impact of recapitalization on economic stability in Nigeria, suggesting that it is a critical policy initiative aimed at strengthening the banking sector and, by extension, the economy.

💡Policy Catalyst

A policy catalyst is a government action or initiative that triggers significant change or improvement in a particular sector or the economy as a whole. The script concludes with a discussion on the importance of leadership as a policy catalyst for Nigeria's economic growth, emphasizing the need for political will and discipline to drive economic recovery and stability.

Highlights

Economist AOS, jar discusses the 'great miscalculation' of multinationals entering and exiting the African market.

Multinationals face challenges not due to Africa's inherent issues but because of its developmental stage.

There has been a wave of exits and divestments in sectors like FMCG and manufacturing in Nigeria and across Africa.

Nestle SA closed its chocolate milk production facility in South Africa due to falling demand in 2023.

Unilea PLC ceased manufacturing home care and skin cleansing products in Nigeria to maintain profitability.

GSK outsourced product distribution in Kenya to independent companies.

New capital inflows are seen in emerging sectors like fintech, renewable energy, health, and education.

Dr. EK Chok discusses the investment environment in Nigeria and the impact of macroeconomic challenges on multinational exits.

Nigeria experienced two recessions in the last decade, affecting the business environment for multinationals.

The significant exchange rate fluctuations have posed challenges for multinational profitability in Nigeria.

Dr. Chok highlights the importance of economic arbitrage and its mismanagement by the central bank.

The exit of companies like Diageo and Microsoft from Nigeria reflects broader economic trends.

The Toam Group's acquisition of Diageo illustrates the potential for local companies to fill market gaps left by multinationals.

Dr. Chok emphasizes the role of individual leadership quality in the success of businesses in Africa.

Nigeria's foreign direct investment (FDI) flows have significantly decreased compared to other African countries.

The banking sector's recapitalization is crucial for economic stability and supporting customers in Nigeria.

Portfolio flows and capital inflows into the Nigerian equities market have been influenced by central bank policies.

Dr. Chok predicts potential growth in the Nigerian capital market driven by new listings and capital raising.

The potential for Nigeria's economy to reach a $1 trillion GDP is discussed, highlighting the role of homegrown businesses.

Dr. Chok identifies political leadership as the most significant policy catalyst for Nigeria's economic improvement.

Transcripts

welcome back you're watching business

week on Horizon news well one Economist

calls it the great miscalculation AOS

jar senior fellow research fellow at the

Clayton Institute at Harvard was

referring to the optimism of

multinationals who had entered the

African market and were now exiting he

later goes on to argue that doing

business in Africa is hard not because

there's something particularly wrong

with Africa but simply because of the

stage of Africa's development we have

had a wave of exits and divestments from

sectors like fmcg and Manufacturing in

Nigeria and across Africa Nestle saay in

South Africa in August last year shut

down its production facility for

chocolate milk in that country citing

falling demand in 2023 un Lea PLC pulled

the plug on the manufacturing of Home

Care and skin cleansing products in

Nigeria to sustain profitability while

farmer giants like GSK have outsourced

distribution of their products to

companies independent companies in Kenya

but we we also seen New Capital inflows

into emerging sectors like fintech and

renewable energy Health as well as

education are we reading too much into

these recent exits aren't infrastructure

policy or regulatory challenges common

across many economies of the world don't

these exits provide ample opportunities

for local companies to gain market share

in key sectors well to help me answer

some of these questions and much more on

Nigeria's investment environment is Dr

EK chok MD of Afra invest limited who

also recently became the chairman of the

enugu State security trust fund good

morning Dr CH great to have you on

business week for the first time good

morning pleasure to be here yes indeed

of course a much talked about story has

been the exit of multinationals yes is

there a trend with this exits that you

can point to well the trend typically

happens when you have a m macroeconomic

uh sort of Challenge and you've see for

example in Nigeria in the last um say 10

years we've experienced two recessions

the first was in 2016 and then we went

through that and came up in 2020 with

the covid recession um so around 2016

when we had a recession you can see the

variables moved quite a lot so something

like growth we were at about 6.55% GDP

growth that went down to 1.9% but what

was more important was exchange rate

went from about 170 at the official

Market to 360 wow by 20 from 2014 to 360

by 2018 so that again created a

challenge for multinationals and that's

why you saw for example the initial size

of uh unil downsizing GSK um we then had

obviously companies like um even HSBC

leaving Nigeria U uh UBS shutting down

their rep offices so that gives you a

signal of what what can happen move

further up to 2020 era uh with covid we

saw again contraction at that time

Nigeria went into negative growth rate

exchange dat now was around 360 official

but you also notice that there they have

began to creep a spread between the

official market and the par market and

we had something like 440 at the parel

market now by time you now coming to

2023 that in January 2023 we were still

sort of around uh 360 while the par

Market was now 740 the Gap had widen

so in addition to sort of that mro that

uh change in the variables the

macroeconomic parameters something I

call economic Arbitrage which the

central bank did not manage well at the

time also created a problem which is

what has created the recent Trend you

see Jia Foods has exited um Microsoft

has shut down um even back in 2017 it

salad left Nigeria so those kind of

variables can often create um the

capacity to wipe out the entire Equity

capital of a company that has operated

in Nigeria for years you know more

recently you seen diio has just exited

and sold to toam group yeah and and you

know that's an interesting example

because you have diio that exited but it

sold to another foreign investor right

so the to group is interesting because

actually a Nigerian company originally

but they've been here for a very long

time and uh haresh who was the group

managing director hares haresh aswani

has doggedly managed Nigeria and grown

his Enterprise from Nigeria locally to

the point where he now is based in

Singapore but it's someone who has a

familiarity of the Nigerian challenges

and can see that sometimes there are ups

and sometimes there are downs but you

know when you think about the economic

Arbitrage that crept into crept into our

economy between I would say probably

from 2016 until 2023 where there was

this massive spread between official and

a power Market that can

impose very strong disincentives for

multinationals to remain a salite is a

particular one where you had the

official Market at 360 and they needed

to sort of repatriate their their

profits but they couldn't they didn't

have liquidity in that market it was to

go into the parel market and that

created some of the concerns that led to

the company leaving leaving uh Nigeria

and you know one common SC part of

everything you said has been the

exchange rate so we can't you know

overemphasize the role of the exchange

rate but a lot of these multinationals

also have uh businesses and subsidiaries

in other countries so how much would you

attribute it to more Global portfolio

rationalization maybe to Homegrown

factors in their own home economies

versus primarily driven by factors in

Nigeria or the countries they operating

okay I'll answer the Nigerian one the

exchange rate is also a driver of the

consumer capacity to purchase of course

um there's only so much you can do in

fragmenting that product so someone like

Pro gambo you know you cannot fragment

the soap you're selling you know into

small into smaller pieces there's a

there's a limit you get to and then you

realize actually these consumers cannot

afford it anymore I cannot operate

profitably because if you think about

the Nigerian consumer environment that

take to a point in time like uh 2004

just after the banking capitalization of

that time at 188,000 NAA per per month

minimum wage that worked out $138 per

month wow today that's at 30,000 na

minimum wage you're barely at $20 per

month so you can actually see the

complete compression of the purchasing

power of Nigerian consumers relative to

Goods that are made by manufactur uh

multinationals

now then profile the rest of Africa

multinationals make rational decisions a

Nigeria I have to say hasn't done very

well in creating um what I call an

attractive environment to at to bring in

multinationals and keep them and keep

them for a long time if you look at FDI

flows foreign direct investment flows in

2014 Nigeria and Egypt were comparable

Nigeria got $4.7 billion that year Egypt

got $4.8 billion fast forward to

2023 Nigeria has collapsed to $2 billion

of FDI flows Egypt is at $107 billion if

you think about Kenya it was only9

billion in 2014 it's grown to 2 to 2.1

as of last year Morocco was $3.7 billion

in 2014 it's grown to $21 billion so

clearly multinationals when they faced

with these issues of a what I call an

economically hostile environment and

they are seeing other economies where

they can go in and their money holds

value and there's a consumer demand and

they don't have to deal with other

extraordinary factors like you know what

I call State capture particularly the

issue with between the official market

and the power Market there's one single

exchange rate then that enables them or

that encourages them to make that

rational decision very interesting

conversely some of these countries

actually make a deliberate effort to go

and Pitch to multinationals and give

them a basket of incentives to bring

them into their countries I don't think

we've done a credible job sufficiently

in that in that area those are very

interesting comparisons because Egypt

even has its own macroeconomic

challenges but we're still seeing inest

even South Africa has challenges South

Africa is at20 billion of FDI flows last

year yeah that's that's very inter so I

want to ask you because you know at the

top of the show when I was introducing I

referred to this article that had been

done by a chap at Harvard F where he

said the great miscalculation which is

that multi aals and investors had

miscalculated maybe over um were overly

optimistic on the African opportunity

which I don't believe is the case I

think Africa is a ripe ground for

investment but do you think there's an

element of people overstretching

themselves and assuming because they're

big consumer markets that it would be

plain sailing in many of these economies

I think uh there is that element but if

I think about the way at AF investment

we make a decision to partner with a

company it's not really the fundamentals

of the business they're doing that's

important it's not even the fundamentals

of the industry they're in that's

important it actually goes back to the

individuals that are running the company

sure so the character and the discipline

and the track record and I think

sometimes International investors have

not looked too closely at the leadership

quality in some African countries and

some of the economies I referred to

they've had more stable political

leadership environment that has helped

them maintain a consistent policy

environment to grow and sustain and

attract foreign investment in other

areas where Nigeria quote unquote has a

democratic environment but I think that

we have been challenged by leadership

that hasn't done enough of sacrifice in

order to encourage and support Nigeria

to attract the sort of investment

environment it requires yeah so across

Africa of course you've got natural

resources you've got arable land you've

got a low penetration of Technology

you've got um the opportunity to build

infrastructure so there are fundamental

gains for international companies to

come and what they are doing is

selectively selectively choosing the

right countries to be in Absol I

wouldn't say that they've uh missed they

miscalculated what you can see is that

there are in some cases they pull back

and simultaneously they move into

another region Nigeria remember the

recent EXO mobile announcement they

decided that you know what they have not

invested a dime in Nigeria in the last

two decades but they just announced a

$15 billion investment in the angolan

oil and gas industry and that's because

we spent 20 years working on an oil and

gas bill and the last current version is

still not attractive enough and they

decided to move their business elsewhere

yeah very interesting on FDI let's move

to another type of investment so the

capital flows the hot money the

portfolio flows much of which goes into

our fixed income markets government

bills you know bonds as well as equities

let's talk about the performance of the

Nigerian equities markets what's been

the main driver performance on the

equities markets this year um we've seen

that a basket of policies from Central

Bank have also attracted International

investors uh the high interest rate

environment we've noticed for example uh

foreign participation in the Equity

Market has gone from just about 99.1% in

the last quarter of last year to 20%

okay so that's encouraging that's that's

a different narrative because on the FDI

side we're seeing some divers correct

you know so people are then saying okay

well and on the back of that you also

see strong earnings momentum from the

banking sector from industrial sector

from consumer goods albeit some of them

have come from FX revaluation sure like

in the banking sector um dividends have

been good although banks have been

constrained in the dividend side all of

that has driven up the market we've also

seen some announcements of transactions

you know like seat has you know now

announced the conclusion of this exom

mobile asset is acquiring similarly

oando on the aib fields and more

recently uh okan saffron yes uh it's an

entity that belongs to the Saro Africa

yeah that bought into seat which owns

presco and if I think about the

fundamental momentum on those stocks all

of them have gone up about 50% year to

date the market overall is at 33% year

to date um of bit the banking sector is

down 88.1% and the banking sector is

obviously challenged because some people

are taking are thinking H

recapitalization what's the impact the

Dividends are a bit lower this year

because CBN has constrained the banks

from paying dividends out of FX gains

right so and of course these guys need

to shop their capital and they're

thinking of do I need to pay out

everything in terms of dividend so all

together uh we see there's momentum in

the equity Market that's also driven by

the fact that you see um you know some

of the monetary policy parameters are

encouraging money to stay a little bit

longer in Nigeria before exiting yeah

that's very interesting you know earlier

in my show I was talking about the fact

that India had now entered the JP Morgan

uh index okay and Indian government

bonds were were going to uh now be more

attractive for inflows um I mean Nigeria

was removed from the MSC index and I

think if you speak to a lot of foreign

investors that's one of the things they

tell you has not really brought them

back to the volumes we saw in in

previous years so from a attracting

inflows to the market in terms of our

fundamentals looking ahead to the next

half of the year what do you expect

should further Drive investor confidence

in in the capital markets

um you see I mentioned that the banking

sector is down 8% if the banks begin to

recover if we see more momentum for

example in the current capital raising

Fidelity has announced their you know

hybrid of their offer which is um offer

for subscription and and uh rights issue

we expect more Banks to begin to

announce their offers by the second half

of the year um so once that begins to

come up uh dang Dango sugar is a bit

down as well we think that could to move

the market from the 33% threshold to

about

45% now there are also Rumors in the

market that dangote Refinery could be

listed uh such a listing if you think of

a 20 billion investment coming to hit

the market at say valuation of 30

trillion there that would be incredible

that would be incredible that cap is at

about 55 trillion trillion trillion and

there's a aradel as well that could be a

1 trillion Nar addition so potential new

listings can also help the mark Market

you saw for example when trans power

came in earlier in the year that was a

$1.6 trillion addition to the market so

the momentum on new listings the

momentum on Capital raising from the

banks and the correction of some of the

recent undervaluation in some sectors

could leave the market we think our base

case would be around that 45% year end

okay um but our optimistic case if this

new listens come in could be much higher

I mean thinking of some of these big

National Giants you actually also

Regional Giants cuz some of them have a

presence in other African countries the

potential um is huge indeed you know the

government has an ambition of a$1

trillion doll economy I know some people

sort of scowl at that and say how we

will get there but if you look at the

trajectory of many of our companies

homegrown businesses it's not

inconceivable that they could contribute

to Nigeria's GDP in a big way but

there's one policy issue I'd like to

sort of hear from you your thoughts on

how it's like to impact the economy

which is the overall banking sector

recapitalization what what impact do you

think it will have on economic stability

in Nigeria as a whole well economy has

been challenged I've mention some of the

parameters you know if you think about

even inflation it's gone from 24% last

year to 33 34% now the exchange rate has

gone from sort of average of about 4 400

or so last year to now 1,500 luckily now

there's no spread much between the par

market and the official Market but for

the banks remember it was in 2010 that

we created this tiered banking structure

where International banking license you

needed 50 billion nirra to be there

National was 25 billion uh Merchant

banking 15 uh Regional 10 and a

non-interest banking at five now Central

Bank has gone up with policies that say

International banking license you must

have 500 but if you actually look at 50

billion in 2010 in real terms in real

terms adjusted for the dollars to 500

billion now it's only a 30% increase not

a whole lot not a whole lot uh the

change for National license is more

significant is going from 25 to 200

that's about an 80% jump but the others

actually have gone down you know if you

think about 5 billion in dollar terms

but overall the rational for the banking

recapitalization is obviously to help

stabilize you know the economy whole

macroeconomic challenges as the banks

are raising money they're also having

more capacity to be able to support

their customers and be able to operate

at the same level as they used to do

because a bank that had the equivalent

of $300 million of capital in 2010 and

today that has gone down 90% to

something like you know $40 million of

capital definitely needs to come back up

if you want to support the same oil and

gas players that are in the same Market

absolutely whose revenues are in dollars

and whose borrowings are in dollars so

that's important for macroeconomic uh

growth momentum it's also important to

stabilize the banking sector and give

them the buffer to take in any losses

and you know in a difficult

environment uh some companies may have

borrowed and they may not have the

capacity to pay back absolutely so the

banking the industry must have that

buffer to take in some of those losses

and last but not L is the momentum it

gives to the economy because in this

case the amount of capital the industry

will require we've estimated is

something like 4 trillion naira we don't

think all of that is available in

Nigeria so we're likely to see some con

some not just consolidation but some

Capital inflows might come in to support

so that foreign direct investment that

is needed and that also helps to

stabilize the exchange rate stabilize

the Nigerian economy and that's all

positive overall so I have time for one

more question I don't want to put you on

the spot but looking at the we're in

June now July to December if you were to

say that there is a single policy

Catalyst that would ensure that Nigeria

ends the year well from an economic

perspective now it could be a policy

Catalyst that's already in play and we

just need more of it what would it be

where do you think the focus should be H

that's interesting Dam question I know I

think the biggest policy C is actually

at the political arena is not something

from the central bank or the Ministry of

Finance okay okay I think the biggest

policy cut list is the leadership I

think and that's my personal opinion

sure that we have seen a complete

disconnect between the

leadership and the citizens and the

social contract has been severed and you

see all this noise about the Des

spending at the top political ellence

meanwhile at the bottom we're still

discussing whether we should pay a a

living wage so

30,000 30,000 naira per month works out

$20 a month whereas only a few years ago

the minimum wage was equivalent to $138

a month we have to recognize that and

that policy catalist would require some

restraint and discipline from the

political leadership and allow the

savings particularly the hidden hidden

aspect of the budgeting is what they

call overheads there's a whole lot of

numbers that go into that overhead thing

I've looked at it and I don't understand

it but the more you can Pierce through

you find there's enough fluff in there

to pay living wages if you did that then

that will catalyze the discipline of

leadership and the opportunity to pay

lead living wages willly Ginger the

Nigerian economy in the world and I and

I and I think we can take a leap from

Kenya's page because it's a similar

story really well yeah we don't want to

get to that point we don't want to get

to that point but in terms of leadership

listening absolutely to the voices of

the people Dr CH it's been a fantastic

conversation thank you so much for

coming and offering your wealth of

insight and experience my pleasure thank

you thank you well that's all we have

time for business week this week uh I'm

R if you want to continue the

conversation you can find me on X you

have a lovely rest of the weekend and

I'll see you next time