Nigeria’s economic outlook has improved markedly in the last six months. Companies are benefitting from greater availability of foreign currency and lower inflation, while more investment is flowing in and the government’s fiscal position is improving. Investment into non-oil sectors is accelerating, with positive developments in manufacturing and agriculture contributing to positive sentiment in the market.
My latest visit to Nigeria formed part of a research project that aims to collect insights for a series of reports about opportunities in Sub-Saharan Africa’s public sector. With this in mind, I spent time in the country’s capital, Abuja meeting officials in the budget and national planning ministry, the power sector regulator, the investment promotion commission, and the government’s procurement office. Everyone I met expressed confidence that economic policy was moving in the “right direction” and that President Buhari’s administration is committed to taking positive steps for the economy and the business landscape.
A common message heard during most meetings was that the government wants to reduce its involvement in sectors in which the private sector operates more efficiently. With a cross-party political consensus in favor of the government’s reforms, MNCs should expect more opportunities to emerge from the government’s pro-business plans in the coming years.
The officials I met gave me the impression that opportunities in Nigeria’s public sector are heavily focused toward addressing the country’s large infrastructure deficit. For example, the government plans to borrow US$30 billion in total between 2017 and 2020 to invest in rural road construction, in projects such as the Lagos-Kano railway and the Mambilla hydropower plant, and there are plans to privatize the running and rehabilitation of Abuja’s and Lagos’ main airports. Government also wants to use the services of the private sector to make its departments more efficient, for example through the procurement of equipment, training of staff, or implementation of new processes. With a dearth of local skills or expertise, government departments view MNCs as being well positioned to help them achieve their policy and project goals.
Nevertheless, this optimism over government policy is being undermined by delays to the 2018 budget, which was meant to come into effect in January, but was only approved by the president on June 20. Contrary to expectations, the implementation of the budget has not been caused by a lack of resources – the government’s fiscal position continues to improve thanks to steady increases in receipts from the oil sector. Instead, the delay results from political infighting between senators, and ongoing changes to the budget. Each amendment must be approved by the president before the entire 2018 budget can be rolled out.
Capital investment projects—such as the construction of new roads, railways, and hospitals—are starting to suffer from this six-month delay. Government officials play down the significance of the delay by insisting that projects are progressing according to plan, but in practice private sector firms are complaining that the funds, especially for projects yet to break ground, are being withheld. This has made it difficult for private sector firms to plan for public sector tenders, but it also jeopardizes the government’s flagship Economic Recovery and Growth Plan, which forms the basis for more resilient growth and economic diversification.
Nevertheless, meeting government officials across various departments provided insights into best practices that MNCs should adopt—and the pitfalls to avoid—when bidding for public sector tenders. Officials were frank about the persistent problem of corruption; while many government departments and state-owned enterprises have become more transparent and accountable in recent years, several officials noted that North American and European companies may continue to struggle to win tenders because of the strict anti-bribery policies in the US and UK.
However, there are ways that MNCs can raise their chances of winning government tenders. Spending time on the ground in Nigeria getting to know the landscape, gathering information, and developing relationships with government departments puts MNCs at an advantage vis-à-vis competitors who aren’t prepared to make such an investment. Furthermore, many MNCs do not bid for tenders that they could win simply because they do not know that these tenders exist, often because they lack a local presence and tenders are rarely published online or in the international press.
Therefore, having a presence on the ground is not essential but it can be beneficial, both from the perspective of how favorably the government views bids from companies with some local content, but also in terms of how it helps MNCs navigate the peculiarities and challenges of engaging with, and selling to, the public sector in Nigeria.