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Spotlight on Nigeria’s Investment Opportunities and Success Stories

Monday, 08 December 2014, 14:30 – 14:50

Ministry of Communication Technology

THE HONOURABLE MINISTER OF COMMUNICATION TECHNOLOGY MRS OMOBOLA JOHNSON

presentation by

atITU Telecom World 2014, Doha, Qatar

• Est. population of 170m makes Nigeria the 7th

largest country in the World; and the largest in Africa

• 42% of Nigeria’s population are < 15• Nigeria’s GDP has grown at close to 7% over

the past 5 years• Now has Africa’s largest economy after recent re-

basing exercise– Revised GDP for 2013 is now $ 509.9 Bn.– Up from old estimates of $ 269.5 Bn.

• Nigeria’s consumer class is growing– approx. 23% of the population1

• Nigeria’s active infrastructure projects have total value close to $ 100 bn2

– Nigeria Ranks 2nd in Africa in terms of number of active infrastructure projects and in terms of capital allocation.

1 ‘African Development Bank2 ‘Africa by numbers: focus on Nigeria’ issued for the World Economic Forum on Africa 2014 by

EY.

Nigeria: a key part of the improving African scenario

© 2014. Federal Ministry of Communication Technology 2

Nigeria: The Services Sector as a whole constitutes over half

of Nigeria’s GDP

INFORMATION ANDCOMMUNICATION

19%

FINANCE ANDINSURANCE

41%

REAL ESTATE15%

PROFESSIONAL,SCIENTIFIC AND

TECHNICAL SERVICES7%

PUBLICADMINISTRATION

5%

EDUCATION4%

OTHER SECTORS

44% SERVICES SECTOR

56%

Information and

Communication services

contributed 19% to the

Services sector

Source: National Bureau of Statistics

“Revised and Final GDP Rebasing Results by Output Approach”


Nigeria: an ICT industry that enables the economy

1 National Bureau of Statistics, Nigeria

• The ICT industry has significant enabling effect on other sectors of the economy, contributing a combined 2.56 % of added value

• This is apart from direct contribution of 10.44% to 2013 GDP

© 2014. Federal Ministry of Communication Technology

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

Value added (%)

INDIRECT CONTRIBUTION OF ICTs TO VALUE ADDED BY TYPE OF ECONOMIC ACTIVITY AT CURRENT PRICES, 2013

4

Nigeria: Growth prospects of ICT sub-sectors; 2011 - 2015

Legend High growth

Medium growth

Low growth

Mobile

Network

Operators

Satellite Operators

Fixed Wireless

Operators

Fixed Wire-line

Operators

Internet Service

Providers

Device Sales

& Distribution Device Maintenance

& Repairs

Device Assembly

Infrastructure Services

Training & Education

Transaction

Services

Equipment Maintenance &

Repairs

Equipment

Sales &

Distribution

Equipment

Assembly

Call Center Operations

Research &

Development

Support Services

Software Development

Access Provision

Business Process

Outsourcing

Converged Services

(Data, voice & media)

Annual Maintenance & Support

(servers & storage)

Software Maintenance & Support

Software

Installation &

Customization

Software

Sales &

Distribution

Value Added

Services

Network

Infrastructure

Service Providers


INVESTMENT OPPORTUNITIES AND SUCCESS STORIESinfrastructure services, integrated services, end-user devices, e-commerce

Nigeria: Infrastructure

• Federal Ministry of Communication Technology Policy Focus and Priority– Accelerated roll-out of robust, reliable, and cost effective ICT infrastructure to increase

citizen access to ICTs

• Market Indicators– Four undersea fibre-optic cables (combined design capacity approx. 10 T Bps)– <100,000km of terrestrial fibre-optic cable– Approx. 28,000 2G; 15,000 3G transceiver stations– 134 Million mobile phone subscriptions representing 96% teledensity– About 74 million Internet users; internet penetration of 52%;

– Existing broadband penetration of 6%

• Opportunities exist for entities active in:– Deployment of terrestrial fibre-optic networks (including fibre over power-line)– Deployment and management of cell tower infrastructure– Deployment of wireless broadband infrastructure– Satellite networks (in particular those providing connectivity to rural areas).

© 2014. Federal Ministry of Communication Technology Slide

7


• Implementing a national broadband strategy and roadmapthat seeks to increase broadband penetration from 6% to 30%by 2018:

– 3G/LTE Wireless Broadband Coverage to 80% of the population– Fixed broadband to 16% of population based on fibre by 2018– Minimum download speeds of 1.5 Mbps– Open Non-Discriminatory Access

• Facilitating increased investments in ICT infrastructure– Spectrum auctions– Regional Infrastructure (fibre) Companies (Infracos)– Smart States initiative (to reduce cost of infrastructure deployment)– Universal Service Provision Fund

• Subsidized access mechanisms for un-served and under-served areas or demographics

– Critical National Infrastructure.

© 2014 - Federal Ministry of Communication Technology 88


© Hamilton Research Ltd., 2013

Fibre-optic network: undersea and terrestrial

Source: Universal Service Provision Fund (2012)


• IHS is a Nigerian and African Telecoms success story and one of the most attractive asset backed infrastructure business in the telecom sector

• Through mobile infrastructure, IHS is accelerating a mobile enabled economy

• Founded in 2001 in Lagos, Nigeria; now operating in five markets: Nigeria, Cameroon, Cote d’Ivoire, Rwanda and Zambia

• IHS manages over 21,000 towers with 14,500 in Nigeria

• The recent 9,151 mobile tower deal with MTN in Nigeria makes IHS:– No1 in Africa

– No1 in EMEA

– Top 10 in the World

• In 2014 IHS successfully raised US$2.6bn in debt and equity bringing the totalcapital raised by IHS since 2012 to US$4.5bn.


Success Story - IHS Towers

Success Story - IHS Towers

• Over 1,000 employees: 80% engineers and over 2/3rds from Africa

• Recent expansion has led to the creation of up to 40,000 jobs through sub-contracting and the establishment of new related entities

• Bold, profitable and innovative business committed to;– Highest quality service – uptimes in excess of 99% are market leading

– Seeking the best energy efficient technologies

• Over 350,000 towers needed to meet demand across Africa– Over 20,000 in Nigeria alone

• IHS anticipates adding 2,000 Towers yearly to further Nigerian NationalBroadband Plan 2013 – 2018 targets

• Capex investments in New Gen DCDGs, Solar energy, Hybrid solutions have brought in a 25% reduction of diesel consumption along with reduced carbon emission.


Nigeria: End-user Devices

• FGN Policy Focus and Priority:

– Increasing adoption of ICT tools by the population and increasing local participation inrelevant sub-sectors of the ICT industry.

• Market Indicators:

– Consumer spending in 2010 was US$115bn; projected to increase to US$167bn by 2020

– PC penetration of 4.5%

– Four PC assembly plants in country; producing an average total of 130,000units. Of allPCs sold in Nigeria in 2011, 30% were assembled/manufactured in the country

– All mobile phones used in Nigeria are imported

• Opportunities exist for entities active in:

– Assembly and manufacturing of personal computers, laptops and mobile devices (tablets, phones etc.)

– After-sales support (Return / repair and warranty Service Centre)

– Original Design Manufacturer (ODM) facility setup.


12

Success Story - TECNO Mobile • Launched in 2006

– As a subsidiary of Transsion Holdings in Hong Kong

• In 2007, TECNO launched its first Dual SIM mobile phone T780 in Africa

• In 2008, TECNO decided to focus on Africa as its key market

• By 2010, the TECNO brand was one of the top three mobile phone brands inAfrica

• By 2013, the TECNO Mobile brand had achieved volume sales of more than 37million units

– Smart phones and feature phones

• Factory to assemble feature phones being setup in Nigeria– 1st phase will be completed in Q1 2015

– Customer Service network branded “Carlcare” provides after-sales service and skilled employment opportunities .


Nigeria: Integrated Services (hardware, software,

communication services)


14

• Ministry Policy Focus and Priority:– Increase the scale and scope of the domestic Information Technology market and

facilitate its growth

• Market Indicators:– No singular dominant player in this space– Per capita PC ownership still far below global averages– Growing domestic data center market and emerging position as regional hub for data

centre services in West Africa

• Opportunities exist for entities active in:– One stop shop IT consulting, supply and service companies – Data centre deployment and management– Application hosting / Cloud computing– Business Continuity / Disaster Recovery– Network security solutions– Power solutions (inverter, UPS).

Success Story - Resourcery


15

• Almost three (3) decades old, Resourcery accepted external investment in 2001

• Strategic focus on the then-key area of core network technologies

• Relationships with world leading technology firms and today the company is a major partner for Cisco, Microsoft, HP, SAS and Systimax Solutions.

• An oversubscribed 2008 private placement widened the shareholding of the company to 1,200 shareholders.

• Currently has 200 employees

Solution Areas

Enterprise Applications

Data Centres

Cloud

Big Data

OutsourcingManaged Services

Business Continuity

Disaster Recovery

Industry Specific

Solutions

New Market

Penetration

Power Sector

Retail Sector

Healthcare

Education

Building & Construction

SME

Success stories – Resourcery

Nigeria: Electronic commerce

17© 2014. Federal Ministry of Communication Technology

• Retail infrastructure– Wholesale and Retail Trade sector accounted for 20% of GDP in 2012; making it the

second largest contributor to GDP (after Agriculture)However:– Retail occurs in predominantly informal, fragmented market places– There are few shopping malls and fewer established nation-wide retail chains

• Demographic characteristics of demand– Young population – an average of 50% of the adult population is under the age of

33 years– Low (formal) salary levels mask informal/other sources of income – about 43% of

adult population earn incomes in the range of N18,000 to N70,000However:– Increasing middle class + increasing levels of disposable income increasing levels

of aspiration spur growth of e-commerce– High usage of mobile phones, particularly for social purposes, increases

opportunities in “culture” markets – such as music, books and films - that areshaped by social influences

Nigeria: Electronic commerce


InfrastructureProducts

and Services

PaymentWarehouse

& LogisticsDelivery

Companies that provide connectivity.

Including network infrastructure as well as network service providers, entities that build and manage platforms on which services are provided and those providing security for sites and payment channels

Companies that sell products and services to customers online; includes aggregators of products and services

Companies that enable payment for goods and services online.

Including companies that verify payments and security of payment channels; as well as those that build interfaces between payment channels

Companies that make it possible for customers to receive physical items that have been purchased online

Companies that ensure (on behalf of sellers) that bulk products are located close to clusters of consumers

An attractive space for investment by a broad range of stakeholders

POTENTIAL MARKET

AND OPPORTUNITY• 300,000+ orders/day

Nigeria: The growing e-Commerce ecosystem

© 2014 - Federal Ministry of Communication

Technology

$35MM Market

Size

2012• 1,000 orders/day

• $100 average basket size

$550MM Market Size

Other Impact

• Job Creation– 15,000 jobs created since 2012

• Service Industry Expansion

– Infrastructure

– Warehousing

– Advertising

– Logistics

2014• 15,000 orders/day

• $100 average basket size

$200M foreign

investment in

eCommerce To

Date

$10BNMarket

Size

Source: A-Post 19

Success Story - Konga

• Launched in July 2012 with eight (8) staff members– Received over $15 million in funding from investors including Naspers and Kinnivik

• By Q4 2013, moved into 11,000 sq. meter warehouse and fulfilment centre

• In less than 3 years, the company has built an operation that leads themarket in customer satisfaction, merchandise shipped and innovation.

• Today Konga has offices in Lagos, hubs in South Africa and China; withwarehouses and distribution centres all over Nigeria

• In Q4 2014, opened software engineering centre– 100 engineers

– Focused on developing software services and applications that will be used in-house.


20

Success Story - Konga

• Konga is growing extremely quickly, 11X in its first year of operations and 4.5Xin the second year

– Company delivers orders across the whole of Nigeria – to every state

– Konga.com now employs over 700 individuals

• Opened Seller HQ - Konga’s Marketplace Platform – in April 2014.– Allows business owners to display and sell their items on Konga.com

– Seller HQ’s growth has been rapid with "marketplace" derived orders now accounting for over50% of sales.

– Tens of thousands of sellers are registered and trading on the site today.

• Spectacular figures for 2014 “Black Friday” – 1440% year-on-year revenue increase

– Processed NGN 50 Million ($ 272,000) worth of orders every HOUR

– NGN 600 Million ($ 3.5 Million) in revenues over Two (2) day sales

– 100,00 items processed; 500 % more items sold during two (2) DAY sale than in all of 2012).


Nigeria: VC / PE funding in the ICT sector

• The ICT sector needs non-traditional sources of funding• ICT companies currently being funded by international VC funds

– Deal pipeline is not robust enough– Typical deal size still quite small

• Government’s role in supporting the fledgling VC / PE industry– Enabling environment for innovation and ideation– Government seeded ICT focused VC fund to support first round of funding– Paves the way for larger VC investments in the most promising companies

• Government-seeded ICT VC Fund– “Echo VC Pan African Fund”– Recently closed at $ 16.2 Million

• Federal Government recently launched $ 50 Million SME VC Fund.


Nigeria: a preferred investment location in Africa


• In 2001 The Economist described the continent, perhaps with undue harshness, as the “hopeless continent”1

• In 2013, the number of new FDI projects in Africa declined for the second consecutive year, by 3.1%

– Job creation resulting from FDI projects also slowed in 2013, largely caused by the decline in North Africa, due to regional political uncertainty

• Despite the challenges it faces, Africa has recorded progress in a number ofareas:– Africa has moved from the third-from-last position in 2011 to become the second-

most attractive investment destination in the world

• More positively, the number of new FDI projects in Sub-Saharan Africa increased 4.7% in 2013

– Capital investment into Africa also grew by a healthy 12.9%– With a higher average project size of US$70.1m in 2013, from US$60.1m in 2012.

1 Economist Intelligence Unit: Africa: open for business -

The potential, challenges and risks

Nigeria: the preferred investment location in Africa


• Of all the African markets, investors believe Nigeria offers the best overallprospect for investment returns over the next 3 years1

• FDI projects in West Africa grew at a CAGR of 27.7% between 2007 and 2013,the strongest growth on the continent

• Nigeria is the gateway to regional West African market (ECOWAS)– 15 West African countries– Nigeria makes up 60% of ECOWAS’ 300 million population– Nigeria accounts for about 71 % of ECOWAS GDP– and over 50% of the region’s manufacturing capacity

• Together, the 15 member countries of the ECOWAS have a population in excess of 300 million, with Nigeria alone accounting for more than half2

• Nigeria’s ICT Sectorial contribution to GDP:– 10.44 % in 2013– and currently 9.58% in real terms for Q3, 2014.

1 Economist Intelligence Unit (EIU) 20122 Africa by numbers 2013–14, EY, November 2013

Spotlight on Nigeria’s Investment Opportunities and Success Stories

Monday, 08 December 2014, 14:30 – 14:50

Ministry of Communication Technology

THE HONOURABLE MINISTER OF COMMUNICATION TECHNOLOGY MRS OMOBOLA JOHNSON

presentation by

atITU Telecom World 2014, Doha, Qatar

ministry of communication technology › doc › itu_telecom_world2014_qatar.pdf · online....

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