Kenya’s central-bank chief and the CEO of Nigeria’s investment authority discuss their nations’ growth prospects.
Africa today is a continent with starkly contrasting growth stories.
Kenya, with its diversified economy and relatively strong institutions, weathered the recent crash in commodities prices fairly well, while nations more dependent on oil and mining, such as Nigeria, took a hit.
Patrick Njoroge, Kenya’s central bank governor, and Uche Orji, chief executive officer of the Nigeria Sovereign Investment Authority, talked with Joe Parkinson, The Wall Street Journal’s Africa bureau chief, about where investment in Africa is flowing now and what new opportunities and risks are emerging. Edited excerpts follow.
A better year?
MR. PARKINSON: Kenya has emerged as a poster child of resilience, not least because you’ve had more success than many of your peers in diversifying your economy.
What enabled you to get that leg up?
GOV. NJOROGE: The most important thing was just having a very robust and dynamic private sector. That without a doubt allowed us to benefit from an obvious advantage related to geography—we are very close to a lot of the other countries—and in terms of diversifying production sectors and exports.
Patrick Njoroge, Governor of the Central Bank of Kenya, speaks to WSJ Africa Bureau Chief Joe Parkinson on how technology has driven growth in Kenya at the Wall Street Journal Investing in Africa event in London.
It wasn’t a specific policy that led to this outcome. Rather, the private sector saw opportunities and capitalized on them. Now, external investors are seeing the benefit of that diversification, and they’re investing in Kenya, using that as a launchpad for potential activities in sub-Saharan African.
MR. PARKINSON: Uche, the outlook in Nigeria over the past couple of years has been very different. What has the sovereign-wealth fund been doing to mitigate the impact of the downturn, and are you starting to see the beginnings of a shift in the cycle?
MR. ORJI: For Nigeria, the latest statistics will probably suggest that we’re nearing a bottom.
My view had always been that 2017 will be a much better year than 2016 was. And to that extent, we started to shift the investment focus of the Nigeria Sovereign Investment Authority from external-focused investments to domestic. Up until now, our domestic focus was less than 6%. We anticipate by the end of the year we should be nearing somewhere in the teens in terms of the investments we’re making domestically, as the downturn has turned up significant buying opportunities.
The other thing I would point to is that it’s also an economy in transition. Nigeria’s economy is more diversified than people give it credit for. What isn’t diversified is government revenue—90% comes from oil—but oil accounts for less than 20% of gross domestic product. Agriculture is about 30% to 35%. There’s manufacturing, and other sectors.
So the challenge is trying to link the diversified economy to government revenue, improving tax collections and ensuring that we can manufacture to a standard for exports.
MR. PARKINSON: Kenya has been a continental leader in technology. But there has been criticism that some of these technology companies perhaps are better at getting headlines than actually making profits. How is the sector evolving in Kenya, and what can the government do to provide the best possible environment to make it profitable?
GOV. NJOROGE: The government has been pushing them to focus more on solving particular problems. Whatever innovation or innovative tool these firms come up with, they need to ask themselves: “What is the problem that this thing is going to address?” So don’t create an imaginary problem and try to solve that; see what problems are out there—there are tons of them—and work on those. Be focused on the customer.
And all of those opportunities, of course, are good for the bottom line.
The Trump effect
MR. PARKINSON: Clearly there are opportunities in Nigeria, but there also are concerns about the policy environment. What message do you have for people who may want to get back into Nigeria, but would like more clarity?
MR. ORJI: We are trying to make it easy for people to do business in the country. That’s everything from visa policy to the ease of opening accounts to the ease of setting up businesses. A lot has been done.
It’s very clear what’s happening in agriculture. The sovereign-wealth fund is investing a lot in agriculture in Nigeria. We’ve done it two ways. One is direct investment, and the second is we’ve created an investment fund with a South African-based company to invest in agriculture in the country.
It’s amazing what there is to do. Nigeria has fewer than 5,000 tractors for the size of the country. What an opportunity that is.
Of course, the oil sector is a little bit confusing, but I believe that will get clearer.
MR. PARKINSON: If the Trump administration’s protectionist rhetoric becomes reality, how will that affect Africa?
GOV. NJOROGE: We consider the Trump effect and the policies of the new U.S. administration to be the biggest risk for Kenya and, from my perspective, for all of Africa and the entire world.
If they [don’t implement] policies that are protectionist, that would have us growing at rates of 3% or so. That isn’t very high, but it’s good.
But if we get a very aggressive, protectionist policy, that will be detrimental to emerging markets and, in the long run, to the U.S. as well.
And so you can very well see a scenario that will end up being negative for global growth. That is terrible for Africa. That’s terrible for Kenya. We are very open, our economies. So to the extent that we depend on the global economy, we will actually get hurt in all this.
MR. PARKINSON: How does it look in Nigeria?
MR. ORJI: First of all, there are relationships that exist between Nigeria and large U.S. corporations like General Electric and a few others. I don’t think they are going to change.
But the one thing that has happened is oil prices have rallied, and that’s been good for the Nigerian economy. It’s helping us recover. So from a policy standpoint, we will just wait and see.