As SDI’s Regional Manager for Africa (based in Accra, Ghana since June 2014), I have a fairly extensive patch to cover, from Ghana, Nigeria and Angola in the west, to Mozambique, Tanzania, Uganda and Kenya in the east.
A significant part of my remit involves developing trade and investment relations with Nigeria – a country offering huge opportunity for the Scottish-based supply chain, thanks to its status as Africa’s biggest economy and biggest oil producer.
Opportunities abound
I have recently paid my fourth visit to Nigeria, and have returned with a renewed sense of optimism about the scale of the opportunity which exists for our ambitious Scottish supply chain companies.
Whenever I go to Lagos I am struck by the dynamism of the place and the entrepreneurialism of the business people I meet.
And, while doing business there might provide a different set of challenges to other regions, I truly believe that Nigeria is too big and too important a market for the Scottish-based supply chain to ignore.
It’s clear that opportunities abound for those who are prepared to see a challenge as an opportunity and are prepared to devote sufficient time and resource to developing business there.
Political change opening doors
Following elections in Nigeria earlier this year, former minister for oil, Muhammadu Buhari was voted in as president on a strong anti-corruption ticket.
In the time since his appointment – and possibly given his former role – he has made clear his intention to restructure the Nigerian Government’s oil and gas machinery, breaking up the state oil company (NNPC) into two parts: one part becoming the industry regulator and the other to act as the country’s investment vehicle in the sector.
He also wants to introduce an independent, transparent system for the awarding of drilling and exploration rights by removing any political interference in that process.
Given that the country currently relies on oil and gas for some 95 per cent of its export earnings, it is important that he gets this right.
But Nigeria is not the only country in Sub-Saharan Africa whose economic fortunes are tied so closely to the price of oil and the impact of low(er) oil prices has inevitably affected all producers in Africa – and by extension the supply chain – greatly.
Operators in west Africa and their suppliers have not been immune from costs and job cutting exercises and it is expected that on the jobs front at least, it will get worse before it gets better.
And to some extent, in markets such as Nigeria, it has also helped to change the dynamics of the market as IOCs have stepped back from some of their smaller operations which have been sold to independent producers.
Nonetheless, the very largest projects are progressing, albeit at a slower pace – and where possible at lower cost – than hitherto.
A balancing act
Opportunities exist for subsea components, flowlines, compressors, valves, tubing, hydrocarbon accounting and pipeline equipment for example, but operators are looking for – and expecting – cost efficiencies, accountability and transparency.
In addition, there is the requirement to upskill the workforce at all levels and to ensure that, in time, the industry is run by the host country’s own nationals.
But Nigeria – like others – is facing an energy deficit with around a 170GW power shortfall.
The country is dedicating significant effort to developing the gas infrastructure that the country so badly needs so that their huge reserves (they have the ninth largest conventional gas reserves in the world) can be used more efficiently, especially in gas to power projects but also in GTL, CNG and LPG related projects.
Collaboration key to success
Local content is going to be key to success and valuable opportunities exist for Scottish companies to partner with Nigerian companies to help build their capability and to meet increasingly demanding local content rules and much attention will be paid to the local content elements of any bid.
Thus, key to the success for Scottish companies entering this potentially lucrative market, will beto find a reliable partner with whom they can work and bid jointly, and who can also act as their "eyes and ears" on the ground without having to invest in putting a Scottish resource on the ground.
Time to make valuable connections
SDI is working closely with PETAN - the Petroleum Technology Association of Nigeria - to help bring together potential joint venture partners - and during Offshore Europe we will bring together a range of Nigerian and Scottish based companies interested in partnering in pursuance of Nigerian business opportunities.
Additionally, SDI will be taking its first trade mission to Nigeria (and Ghana) in January 2016 to coincide with Offshore West Africa in Lagos, 26-28 January 2016, where there will be a strong Scottish presence and country pavilion.
SDI has resource both in Scotland and on the ground – including some excellent GlobalScots – who can help companies navigate their way through the challenges that entering the Nigerian market can bring.
So the door is open. Are you ready to step through it?
- For more information about Doing Business in west Africa or to find out more about the events mentioned, please contact Gary Soper (Gary.Soper@scotent.co.uk)