Essien Lore: Nigeria needs to focus on economic diversification

Nigeria is a mono economy that focuses very much on the oil sector. This is according to Eme Essien Lore, the IFC’s country manager for Nigeria. CNBC Africa’s Gugulethu Cele caught up with her for a discussion about the importance of Nigeria’s diversification agenda and more.

When we think of Nigeria, we think of one of the leading economies on the African continent, populous numbers and dynamism when it comes to the entrepreneurial society within the country, give us an understanding as to how as a representative of the IFC, you are constantly looking for fresh, innovative sectors to invest in and just how you are managing the appetite in regards to risk.
I would first say yes, Nigeria is known for its dynamism in regards to entrepreneurs and that is very important, its actually the engine of the economy but in addition to that, there are certain foundation parts of the economy that are critically important and the key thing for Nigeria now is around economic diversification. What we are doing is focusing our energies around supporting the government’s agenda in that regard, so when you have good alignment around policy and investment in that direction, that’s very encouraging. It’s key that we focus on economic diversification because Nigeria is a mono economy dependent very much on the oil sector. Most people are surprised to know that the oil sector is less than 10 percent of Nigeria’s GDP but it fuels government revenues, export earnings, so it’s a key part of that for the government to focus on that area. If you look at healthcare, downstream petroleum, technology, there are a whole list of sectors that can actually support that agenda.

How would you say the level of interest is in regards to investing in these new areas of opportunities in Nigeria’s economy?
We would love it to be a bit faster, it’s a bit slow and with the creation of the importer and exporter exchange rate window which has now offered quite a bit of liquidity for the naira, that’s positive, but what we want to see if foreign direct investment. That is going to be key for the economy so from my perspective, going forward we would, I think there is quite a lot of interest in sectors where there is a good understanding of the policy environment and its very clear. There are other sectors where I think there is still more work to be done, in terms of the policy environment. We see the investors in healthcare, in downstream petroleum but for some of the other sectors, like agriculture, will require some more support when you think about the policy environment in order to attract more investor interest. So the key thing going forward to actually achieve this diversification is going to be policy environment and then staying the course for policy in the medium term.

Let’s talk about policy certainty. We know that the Nigerian populous is expected to go into elections next year, in 2019 and that can create a sense of slight unease for investors what collaborative efforts and considerations have IFC and members of the private sector and government having in order to ensure that there is a level of comfortability in regards to the level of policy certainty?
Probably the best sector to focus on in that regards is power. Power is probably the key constraint to the private sector actually achieving its real prosperity for the country. For the power sector, there’s been a lot of work so far on the part of the government in terms of actually creating an agenda to address the constraints of the power sector. But it needs to go beyond that so implementation is going to be key. They have a grand plan about how to address all these issues but how do we do it? You can imagine that the power sector is an area where there is a lot of sensitivity, most Nigerians will say that they are disappointed with the level of service delivery, the cost of power so there is quite a bit of disappointment and its been going on for decades. So going forward, what we see is that there is commitment to addressing some of the major power problems but we recognise that it has to be a step wise fashion, you can’t take a sector that is in a very difficult stage and try to fix it overnight. It’s going to take some time; it’s going to take several years. So as long as we see a step wise process to addressing the issues and then the policy that underpins that, then you will see investors coming on board. IFC funded the first independent power project for the privatisation in 2013, so that’s funded, it’s now operational, it started operations earlier this year. We are watching that carefully, it is called the Azura Edo, and we are watching that carefully because it could be a signal for investors about how the government, donor community and other investors work together to make sure that a critical project like that can work. But whether its local investors or international investors, the policy environment is key and yes we need to see these smaller steps over time and consistency in order to attract that investment.

The power project that you allude to is quite a significant one because that has the potential to alter the lives of an average Nigerian family. For that average Nigerian who is reading this interview, who views the IFC, together with its partner the World Bank as this foreign concept that comes in and provides some sort of capital. Explain to them how these conversations translate to capital investment and the betterment of their livelihood.

Good question, it’s a challenging one because the agenda is going to be a medium to long term agenda. If you think about an average power project, it takes three or four years to actually construct it and get it online. So the work that we are doing is very much in the medium to long term. I would say to the average Nigerian who is wondering, how does the work of a development institution like the IFC affect me? I would say, it’s really important to have engagement on these policy issues, to have government understand the need to have consistency from government to government. It’s really important to have development institutions to put capital at risk, Nigeria is the fifth highest exposure to risk globally for the IFC, so we have demonstrated that Nigeria is very important to us as an institution. I would also state that Nigerians should be patient, there is a very important role for civil society to engage with us.