TOGY talks to
Open for business in NigeriaApril 20, 2018
Temitope Samagbeyi, business tax services partner at EY Nigeria, talks to TOGY about the business climate in the country, legislative changes and downstream development. EY Nigeria provides assurance, tax, transactions and advisory services.
On financing: “Interest should be looked into. It has to be addressed from the top. Focus should be given to potential investors. There should be room for exceptions to the rule, too, for job creators and investors.”
On reforms: “There are pools of funds in Europe, the US and China, and different countries are calling to tap into these funds. If you want to take advantage of these funds, you’ve got to make good fiscal policies to make Nigeria attractive.”
On downstream development: “If we start refining here, that corridor would be opened and we create more jobs. Instead of sending this crude oil offshore, we are creating capacity and adding value.”
On the local workforce: “We have good human capacity. We have people who have undergone different kinds of training, local and offshore, qualified engineers, qualified doctors, qualified accountants and so on. The skills are here.”
Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of our interview with Temitope Samagbeyi below.
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How do you assess the business environment in Nigeria?
About a year or two ago, recession crept in and things weren’t going so well. The price of oil currently is about USD 60, and this has continued to engender additional investment and instil hope in the IOCs and investors in the oil and gas industry. Talking about the business environment generally, whoever wants to come to Nigeria: This is the time. However, we have pockets of issues here and there, such as the recent Dapchi kidnapping of students in the northeast and the Boko Haram attacks. The Chad Basin is a very important area to us in Nigeria. Oil and gas exploratory activities are currently going on there. That costs the federal government of Nigeria billions of dollars, so we have to be very, very careful and not pass negative information to potential offtakers and investors willing to come in Nigeria.
By and large, if you look at the southern part, it has been calm and peaceful. In the Niger Delta area, the agitators have been in discussion with the Nigerian government and the government has given them reasons for negotiation. We have also had infrastructure challenges in Nigeria for quite a while. Because of these, so many things were left undone in many parts of the country. But, the relevant arm of the government is waking up. Another rail transport system in Lagos is being built. It might be slow, but gradually we are getting there. This started about four years ago and it will go to the border town between Nigeria and the Republic of Benin. When this is completed, that part of the country will open up big time.
What reforms are needed to promote investment?
The government’s sincerity is something that we have lacked. In the petroleum industry, they have been working on this for years. It has held back billions of dollars of investment from Nigeria for years. Some companies go to Ghana or Angola instead. But this administration appears to be showing some level of seriousness about the passage of the Petroleum Industry Bill. They recently passed the governance part of the Petroleum Industry Bill. The fiscal reform, however, is very important because it touches on a critical part of the petroleum industry. We will now have increased transparency in the way things are done.
With regards to the cost of capital, it is indeed very high here, but there are things that can be done. The UK is talking about 5% interest rates, but for people here, if they have a 20% interest rate, that’s a good deal. Interest should be looked into. It has to be addressed from the top. Focus should be given to potential investors. There should be room for exceptions to the rule, too, for job creators and investors. By and large, there are vast opportunities in Nigeria. Where there are people, there is business to be done. That is why China, India and the US have those good numbers.
How would a new fiscal bill benefit the oil and gas industry?
We know where we are coming from. We have been using the Petroleum Profit Tax Act. That act has its issues currently. Nigeria is not the only investment destination in West Africa, let alone the world. There are pools of funds in Europe, the US and China, and different countries are calling to tap into these funds. If you want to take advantage of these funds, you’ve got to make good fiscal policies to make Nigeria attractive. The contents of the bill/reform need to be well looked into to enable every interested party see the inherent advantage because Nigeria is not the only destination for foreign investment. In Ghana, for example, they give multiple years tax holiday and other incentives, so will other countries. These are supposed to stimulate investments into their economy. You don’t give those incentives away for fun; they are to address certain needs of the economy and diversify it as well, and Nigeria needs more of this.
What is your view on the upcoming developments in the Nigerian refining sector?
We have huge refining capacity here, but only about 15% of what is consumed is refined in Nigeria. Where does that 85% come from? It is not good. Looking at cost efficiency, Nigeria is at a disadvantaged position if it has to export and re-import exported products into the country. On the refining capacity, the Dangote refinery is coming up. It will really drive the change that we crave for in the industry. That will give us 650,000 barrels per day. It is not just for us alone, we will have opportunities to earn for foreign exchange because there are plans for exports, also.
Once that particular model works, it’s just a matter of expanding it and having other business interests come in. If we start refining here, that corridor would be opened and we create more jobs. Instead of sending this crude oil offshore, we are creating capacity and adding value. Even if you look at the tax system, Nigeria stands to benefit more. We are all very optimistic and hopeful. The Nigerian government and its people stand to gain a lot from this project. There will be less stress of forex, too. The stock that is being used is not purchased in naira now and it will still be in forex, but everything is happening within Nigeria so there will be free flows and it will help stabilise the naira in a very good measure.
Is now a good time to invest in Nigeria?
The message is clear: Nigeria is a very peaceful place to invest in and the return on investment in Nigeria is quite good. We have good human capacity. We have people who have undergone different kinds of training, local and offshore, qualified engineers, qualified doctors, qualified accountants and so on. The skills are here. They are also not overly expensive to get. The cost of labour is cheap here. Government also provides land at cheap rates if you want to do big business to encourage investors. Even in agriculture, significant diversification is going on to reduce our over-dependence on oil. The climate and the borders are open for investors to come in, first to add value and second to get back values in terms of return on investment. It hasn’t been easy in the past years, but now is the time to invest in Nigeria.
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