The relationship between South Africa and Nigeria has come under the spotlight since MTN was heavily fined by the Nigerian Communications Commission (NCC), raising questions about how business and trade may be affected by the issue.
“I don’t think this is enough to deter investors looking at the Nigerian market or any market in Africa, I do think however that this is definitely going to be a big bleep on their radar in terms of corporate governance and regulatory compliance,” said Hameed Abubaker, Director at Africa Practice.
Abubaker believes this would at least result in a more positive view in terms of regulatory activity, considering it is seen as “sleeping dogs or toothless bulldogs” but in the same breath, the size of the MTN fine will be a concern to people in similar highly regulated industries he says.
“I think that the government will be willing to take a view and work with MTN to make sure that they are held accountable but they are also allowed to go about their business and perform to a higher standard going further”, Abubaker said.
He adds that it’s very hard to say conclusively if the NCC would reduce the fine but that should come to light within a few days.
Abubaker says there are a few themes that cut across the board when it comes to a company entering the Nigerian market.
“Issues around local ownership and directorship, operating in any African market especially in a place like Nigeria requires you to have strong local understanding and be able to at least lay claim to a local investment story not just a story that is about a foreign investment with capital repatriation,” he said.
He adds: “The other thing is to never underestimate, especially in Nigeria with regards to regulatory compliance, the power of relationships over time.”
He uses the MTN case specifically because there has been a lot of change meaning “a number of those relationships would have been somewhat shaken”.
To invest in Nigeria, he suggests having some local ownership and strong shareholder management, starting from grassroots to the regulators.
“An understanding that one size does not fit all in Africa – it’s a massive continent, it is very hard for you to replicate one success in another market using the exact same approach,” Abubaker suggests.
It’s important to be considerate of local skills and allowing participation in the market you are trying to enter and not simply take value without giving back.
“Most companies will want to be able to hit the ground running with their own people however because of that relationship issue it is important that people get their recruitment strategy.
“Today I think people are quite confident about investing in Nigeria, the serious companies have a longer-term view in terms of shareholder value creation and their operations, just weathering a short-term storm while Nigeria settles into this new dynamic.
A new dynamic he explains as low oil prices, a new government, and an incoming cabinet.
They are often asked about the government’s ability to manage fiscal dynamic and there is concern of the central bank of Nigeria’s restrictions.
“There’s a growing acceptance that these are temporary turbulent times whilst the economy readjusts”.