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Asian Firms Step Up as Multinationals Sour on Nigeria - BLOOMBERG

JUNE 18, 2024

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Surging inflation, a volatile and depreciating currency, rampant insecurity and electricity shortages are driving US and European multinationals out of Nigeria.

But where they see adversity, Asian firms and local companies see opportunity.

Singapore’s Tolaram last week took control of Guinness Nigeria from the UK’s Diageo, while Turkey’s Hayat Kimya and Nigeria’s Fouani Group have stepped into the gap left in the diaper market by Procter & Gamble’s exit. Lagos-based Fidson Healthcare is picking up the slack created by GSK’s departure by expanding its range and exporting its products.

They face many of the same obstacles that hindered the multinationals’ operations, but are managing to succeed — in part because they have higher risk tolerance and have adopted different strategies.

Tolaram is a case in point. It has sought to localize its costs over the past few decades, milling flour, refining palm oil and exploring the option of growing its own crops within the country.

That’s given it less exposure to the naira’s swings and shielded it from foreign-exchange shortages. It has also been well positioned to expand when competitors have left.

Should Nigeria’s economy turn, the companies that have stayed will reap the rewards.

“We believe in the power of 230 million people,” said Girish Sharma, an executive director at Tolaram. The “Nigerian situation will correct and when that happens, we will be the biggest beneficiaries.’’

News Roundup

South African political parties that agreed to form a governing alliance after May 29 elections failed to produce an outright winner are limbering up for a tussle over cabinet positions. While five parties signed up to join the so-called government of national unity last week, the bulk of the coveted posts will go to members of President Cyril Ramaphosa’s African National Congress and the Democratic Alliance, its biggest rival. The structure of the next cabinet will be closely watched by investors anticipating an acceleration of economic reforms under a more centrist-leaning government.

French nuclear company Orano could lose the right to mine one of the world’s largest uranium deposits this week after Niger’s military junta rejected its plan for developing the asset. Orano continues to operate a single large uranium mine in Niger, but its proposal for the development of the Imouraren deposit “doesn’t meet the authorities’ expectations,” Niger’s mining ministry said in a June 11 letter. Niger accounted for about 4% of global uranium output in 2022, according to the World Nuclear Association.

DP World plans to spend $3 billion over the next three to five years on new port and logistics infrastructure in Africa to meet long-term demand. The port operator is expanding in Dar es Salaam in Tanzania and has recently assessed whether to invest in harbors in South Africa and Kenya. DP World intends spending $2 billion on ports and $1 billion on its logistics business, according to Mohammed Akoojee, its chief executive officer for sub-Saharan Africa.

Shipping containers at South Africa’s Durban port.Photographer: Waldo Swiegers/Bloomberg

Angola’s central bank said there’s high risk that the nation’s commercial lenders are being used for money laundering and medium risk they are being utilized to process terrorist financing. The warning comes as Africa’s third-biggest oil producer battles to keep off the Financial Action Task Force’s global illicit-finance watchlist. The banks should take steps to mitigate the risks, including raising employee awareness about suspicious activity, Banco Nacional de Angola said.

Ghana’s economy grew at its fastest pace in more than two years, driven by an expansion in the industry sector. Gross domestic product increased 4.7% in the three months through March from a year earlier. The data is a boon for the ruling New Patriotic Party, whose handling of the economy has been criticized by the opposition as the West African nation prepares for presidential elections in December.

Africa Currency Monitor

How key monetary units have performed against the dollar since June 10

The chief executive officer of Life Healthcare is pivoting the biggest South African hospital chain by market value to diagnostics and health-care services as clinical admissions plateau. The company is expanding its capacity to check for early signs of disease such as cancer by building two particle accelerators near Johannesburg. It’s introducing positron emission tomography scans to help doctors detect early signs of health problems, said Peter Wharton-Hood, who retired from Deutsche Bank AG and joined the hospital chain following a serendipitous encounter at the golf course.

Thank you for your responses to our weekly Next Africa Quiz and congratulations to Kwasi Ampofo who correctly identified Ethiopia as the country that decided to give its citizens preference over foreign investors when selling a stake in the state-owned telecommunications company.

Chart of the Week

South Africa’s stock benchmark rallied the most this year on Tuesday, suggesting investors are turning positive on the nation’s equities following a protracted selloff. The gains followed Ramaphosa’s reelection as president after the ANC agreed to form a governing alliance with business-friendly rivals. Foreign investors were net sellers of South African shares for 25 straight days through Friday, data from the stock exchange show. Outflows deepened in the days following last month’s national vote, in which the ANC lost its parliamentary majority for the first time since 1994, raising concerns it may partner with populist parties to stay in power.


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