5 EMERGING NIGERIAN BUSINESSES THAT WILL THRIVE IN THE NEXT 5 YEARS

While addressing the audience at The Economist's Nigeria Business Summit on March 19, 2013, Nigeria's Finance Minister, Mrs. Ngozi Okonjo-Iweala, told potential foreign investors that if they were not in Nigeria, then they were not in Africa.

Well, if you're a foreign investor looking to start or support a business in Nigeria, then this article is for you.

You're probably already familiar with the bad (mostly real) and ugly (mostly perceived) side of Nigeria. The good thing about this country of 167 million people is that there's hardly any sector of its economy bereft of entrepreneurial opportunities.

Still, you should be careful where you invest. Many businesses are unattractive because they are fiercely competitive, have low barriers to entry, are threatened by emerging businesses, or just don't create much value for customers. Such businesses, like GSM recharge card vendors and pure-play "cyber" cafes, won't be around for much longer.

Conversely, based on my on-the-ground observations, the following businesses are primed for the big times in the next few years:

• Mobile Money 
• Mobile Applications Development
• Agricultural Produce Storage/Warehousing
• Plastic Waste Recycling
• Securities Investment Services

1. MOBILE MONEY

Mobile money is an African innovation rooted in Kenya, where more people now have mobile money accounts than bank accounts.

In Nigeria, less than 30% of the population have bank accounts but over 60% have mobile phones, so the potential for mobile money is just huge. In January 2013, Minister for Communications Technology, Mrs. Omobola Johnson, predicted that the value of mobile money transactions will increase from USD1.2 million currently to USD1 billion in 2015.

The Central Bank of Nigeria (CBN) officially introduced mobile money in November 2011, through the issuance of licenses to a wide array of providers, including retail banks, independent financial transaction providers, and micro-finance banks. Unlike in Kenya though, the CBN excluded GSM providers to avoid a "cartelization" of mobile payments - GSM providers can still forge partnerships with license holders.

Currently, there are 16 licensed mobile money operators and not all have commenced operations.  Therefore, opportunities exist for financial service providers to partner with these licensees to roll-out services.

You may also want to become a mobile money agent, which is a potentially lucrative point-of-sale representative of a mobile money provider. Mobile money agents will be crucial to the success of mobile money in rural Nigeria, where half the population live.

2. MOBILE APPLICATIONS DEVELOPMENT

App development is no longer just for geeks or nerds. It's now an industry that was growing at around 15,000 apps per week in 2011. Furthermore, the average smartphone now houses 41 apps.

Gone are the days when technological revolutions like app development took years or even decades to reach Africa. Africa now leads tech revolutions, like the aforementioned mobile money, which is transforming banking and payments worldwide.

From the regional tech strongholds of Kenya and South Africa, tech hubs are now springing up all over Africa. In Nigeria, innovation centers like the Co-creation Hub in Lagos have emerged to support the nascent app development industry.

Although banks and telecommunications firms have taken the lead in launching apps for their customers, app usage in Nigeria hasn't yet hit critical mass. Therefore, as an investor you could build, or support indigenous developers to build, locally relevant apps.

To get up-to-speed on Nigeria's burgeoning app development industry, your best bet would be to plug into innovation networks like the Co-creation Hub. This interview with one of Nigeria's earliest voyagers into app development is captivating, insightful and informative.

3. AGRICULTURAL PRODUCE STORAGE/WAREHOUSING

Nigeria is not a huge agricultural exporter partly because it lacks modern storage facilities for its exportable produce.

Last year, while in my ancestral hometown of Ijebu-Ode in Ogun State, i had an insightful conversation with a middle-aged woman who sold roasted corn by the roadside. She told me that due to lack of proper storage facilities she had to do two things everyday: in the morning she had to go directly to a farm to buy corn cobs, and in the evening she had to dispose of all unsold fresh cobs by any means necessary.

Rural farmers in Nigeria usually store popular grains like rice and red beans in jute sacks, baskets, or barns made of bamboo, where microorganisms easily infest the grains. To avoid overage and minimize loses, farmers try to cultivate just enough produce that they can safely sell without a need for prolonged storage.

Rice is the most widely consumed grain in Nigeria. According to the Ministry of Agriculture and Rural Development, Nigerians consume about five million metric tonnes of rice annually, almost half of which is imported at a cost of N356 billion (about USD2 billion). By 2050, Nigerians will consume 35 million metric tonnes of rice annually.

Obviously, the cost of rice importation is unsustainable. Therefore, there's a strong drive at the federal and state levels to massively boost local rice production and reduce imports.

To this end policy makers have touted strategies and incentives to enhance the rice value chain and attract private investors. However, they've paid more attention to the cultivation of rice than to its storage and transportation to markets, which remain the weakest links in the value chain.

This has created opportunities for private investors in the provision of modern storage facilities for seeds and grains, rice and beans in particular.

4. PLASTIC WASTE RECYCLING

Sachet water, popularly known as "pure water", is the biggest commodity in Nigeria. Over 70% of Nigerians reportedly consume at least one sachet of pure water everyday. That's about 120 million sachets daily!

While the pure water business has helped many Nigerians move up the socioeconomic ladder, it has now become an environmental nuisance. Everywhere you go in Nigeria empty pure water sachets litter streets, block drainages and canals, stuff dried-up water wells, and crowd-out landfills. Add to pure water sachets other plastic waste like used tires and water (PET) bottles, and you see that Nigeria has a huge plastic waste disposal problem.

Although there are other types of waste to battle, the explosion in pure water consumption seems to have compelled policy makers to prioritize plastic waste disposal.

In the past few years many states have commissioned more plastic waste recycling facilities than any other waste recycling facility. However, the scale of the waste disposal problem is now so huge that state governments are keen to involve private sector participants, especially in a Public-Private Partnership (PPP) context.

Both large and small private investors have become increasing active in plastic waste recycling, yet the business remains profitable. Lagos and Ogun states have been very aggressive in pushing PPPs, perhaps because they have large and growing industrial bases. You could begin your investigations into potential ventures in these two states.

5. SECURITIES INVESTMENT SERVICES

The growing interest of portfolio investors in Nigerian equities has encouraged the Nigeria Stock Exchange (NSE) to expand its product offerings, boost liquidity on its trading platform, and make trading more sophisticated.

In December 2011, Absa Capital of South Africa listed the first Exchange Traded Fund (ETF) on the NSE. The bourse says five more ETFs would be listed this year and that plans are advanced to introduce options and futures trading.

Although foreign investors still dominate trading on the NSE, domestic investor interest has picked up from the low levels reported after the 2008 global financial crisis, which wiped out more than half of the NSE's equity value as foreign investors pulled their "hot money" out of Nigerian equities.

Going by discussions on popular fora like Nairaland, domestic investors are very much interested in owning and trading foreign securities. With the NSE flood gate now open to ETFs, opportunities exist for investment service providers to offer ETFs that invest primarily in foreign-based companies and foreign securites.

This type of ETF will give domestic investors international exposure, enhance diversification of their portfolios, and generate more domestic interest in the NSE. The Director-General of the Securities and Exchange Commission (SEC), Mrs. Arumah Oteh, has in the past alluded to this sort of ETF, so regulators will likely welcome it.

Nigerians invest more in real estate than in stocks. Therefore, domestic fund managers have expressed interest in Real Estate Investment Trusts (REITs).

One of Nigeria's leading property development companies, UACN Property Development Company PLC (UPDC), is about to list a N30 billion REIT on the NSE. This IPO will be a real gauge of domestic investor interest in REITs. It will also serve as a signal to foreign investment services providers interested in offering Nigerian investors REITs.

AFRICANS, NOW THE IMF COULD FORCE YOUR GOVERNMENT TO SEIZE YOUR BANK SAVINGS AND DEPOSITS!

The International Monetary Fund (IMF) has a bad reputation in Africa. Many Nigerians, for instance, will tell you the country has never recovered from the debilitating effects of the IMF's Structural Adjustment Programs (SAPs) of the late 80s.

The fund's conditionalities for bailout loans to Africa often appear to be harsher than those for loans to other continents.

Now, because of a shocking, unprecedented development over the weekend in the little island of Cyprus, these conditionalities could get even harsher.

Cyprus, with Nicosia as capital, is a small east Mediterranean island of around one million inhabitants. You've probably heard that for years Turkey and Greece both laid ownership claims to the island, going to war over it in 1974.

What you may not have heard about Cyprus is that it's a tax haven for high net-worth non-resident individuals, from Russia in particular.

Tax havens like to keep a low profile to avoid much scrutiny, so i don't even know why Cyprus joined the 17-member Euro zone.

Anyway, the country seems to have been doing just fine until Greece got into financial trouble, and Brussels forced Cypriot banks to play good neighbor by loading up on toxic Greek government bonds to the hilt. It was only a matter of time before this heavy load became unbearable for Nicosia.

Well, the chicken has come home to roost.

On Saturday, the same Brussels forced down the throat of Cyprus a multi-billion bailout package with an unprecedented condition that has shocked the world: Nicosia must grab at least 6.75% of ALL savings and deposits in its banks and contribute this seizure to the bailout package. Otherwise, Brussels will simply cut off funding to Cypriot banks and let the country of one million go to the dogs.

This is a scary development for Africa because the IMF was heavily involved in thrashing out the bailout package.

Hate to say it but the IMF still tends to push Africa around. If it can support this kind of bank raid by a Euro zone country, albeit a small one, on its citizens' deposits, then it can surely push for stricter versions of this poison pill for African countries that seek bailouts.

African governments should see the writing on the wall.

6 HOT Global Trends You Should Invest In Now: ENERGY EFFICIENCY OR RENEWABLE ENERGY? (3)

Energy efficiency and renewable energy are flip sides of the same coin. They are two means to the same end we humans desire: a substantial and sustainable reduction in our consumption of fossil fuels, which we blame for global warming.

Energy efficiency technologies (EETs) reduce our fossil fuel demand while renewable energy technologies (RETs) replace our fossil fuel supply.

Which of these two techs will gain more traction over the coming decades, and how can you as an investor best position yourself to profit from this drive to save the planet? This article helps you decide.

There's little doubt that we humans need to ditch fossil fuels. However, this is proving to be a massive challenge.

According to BP's Statistical Review of World Energy 2012, fossil fuels still dominate global energy consumption, with a market share of 87%, while renewable energy accounts for only 2%. By 2030, these numbers are projected to be around 81% and 6% respectively.

So we won't be totally ditching fossil fuels anytime soon. Sorry tree-huggers.

Instead, what we'll continue to do is reduce our consumption of these fuels using:

• A "supply-side" solution of replacing them with renewables; and/or 
• A "demand-side" solution of becoming more energy efficient.

Unfortunately, substituting renewables for fossil fuels on a massive scale is not going to happen because of the following factors:

• Lack of International Trade: One big reason we consume so much oil, natural gas, and coal is that these fuels are internationally traded. This makes it easier for governments and corporations to manage their supplies. Conversely, you can't transport the sunshine from the Californian desert to Siberia;

• Single Use: While the use of say, natural gas, cuts across many industries like manufacturing, transportation, and electricity generation, renewables are used primarily in electricity generation. And even in electricity generation, renewables have to compete with  fossil fuels;

• Subsidy Burden: Governments around the world continue to heavily-subsidize the consumption of renewables, despite rapid reductions in the production costs of some RETs like solar and wind. This subsidy dependency suggests there is low "natural demand" for renewables. When these subsidies go, and they will have to go at some point, the artificial demand for renewables may fall off the cliff.

So the supply-side solution is constrained.

Fortunately, energy efficiency is not burdened by the aforementioned factors.

Moreover, studies show that EETs are more cost-effective to deploy and pay back faster than RETs. Some studies even say that EETs cut more carbon emissions than RETs.

I'm not saying RETs are doomed. Far from it. However, as an investor you should know that in order to accelerate the reduction in global carbon emissions, policy makers around the world are likely to shift their focus from RETs to EETs in the coming decades.

Therefore, the best way to play this hot global trend of tackling global warming is to buy and hold an energy efficiency company, or a clean-tech exchange-traded fund (ETF) with considerable holdings in energy efficiency companies.

Now, during my research for such a stock, I avoided large-cap companies like ABB (ABB) and Johnson Controls Inc (JCI) because they were not "pure-plays" on energy efficiency, i.e., they were involved in other businesses i'm already exposed to through other stocks i hold.

Rather, I zoomed in on a small-cap U.S. company called Ameresco, Inc. (AMRC), which primarily designs, manufactures, and deploys EETs to a diversified customer base. As an icing on the cake they also have a smaller RETs business. So the stock gives me exposure also to renewables.

Fellow individual investors. Right now renewable energy is all the rage. But energy efficiency is about to come out of the left field. Hop on this money train now before the bandwagon arrives.


This is the third in a series of posts that examine six hot global trends you should invest in now. In the next blog, i examine the hot trend of Scarcity of Freshwater.

HOW MY CURIOSITY ABOUT 3 SMARTPHONE APPS GOT ME A TRIPLE-DIGIT GROWTH STOCK

This is a story about how my effervescent curiosity led me to a little-known small company that may become the IBM of mobile application software in as little as five years.

Before i pick the stock of a company as a long-term investment i always do some fundamental research.

Sometimes, however, i go with my gut instinct first. I do this when the company I'm investigating is in an industry i perceive to be "futuristic" and highly growth-oriented.

This gut feeling got me into the stock of Chinese mobile security firm NQ Mobile Inc. (NQ), already up 66% year-to-date (YTD) as of closing yesterday.

There's no doubt that the future is mobile.

Therefore, for the past year i was already on the prowl for a stock to ride this hot global trend of mobile consumption like a horse whisperer. I didn't think it would be Microsoft (MSFT), which i dumped two months ago.

One day in October 2012 i noticed an in-app cross-selling ad linked three of the apps i used the most on my android phone. This aroused my curiosity so i dug deeper.

Boom! Lo and behold, the three apps - NQ Mobile Security, NQ Mobile Vault, and NQ Android Booster - were made by the same developer.

Wow, i reasoned, since these three apps did what they were supposed to do excellently, their developer must have an ace up its sleeve.

I quickly googled NQ and read EVERYTHING i could find on the company. I was even tempted to call China or a Chinese friend to ask about the company.

Luckily at the time, NQ was just over a year old as a publicly-listed company and was trading well below its IPO price. I thought that was weird because all my research indicated this young company was going places in an industry that was exploding.

I jumped into the stock without delay and now this small-cap tech company is 6% of my portfolio and already my biggest percentage gainer YTD.

I suspect NQ Mobile will eventually become the IBM of mobile security or it will be snapped up in the not-so-distant future.

Fellow stockmarket investors, you don't need your commissioned stockbroker to pick stocks.

Just tune in to changes around you and around the world. Then pick companies you believe are best positioned to exploit these changes going forward.

With a little intuition you can find a gem in the rarest of places.

WHY SAVING IS FOR LOSERS

The banks will hate me for saying this but it's nothing personal.

No one knows tomorrow, so by all means put some money aside for EMERGENCIES.

However, if your goal is to grow this stash of cash at a decent clip over more than three months, then the worst thing you can do is stash your cash in a bank savings account.

Why?

Because of INFLATION.

Inflation is simply the general rise in the cost of goods and services from one period to another.

When you were thinking of saving you probably didn't even remotely think about inflation right?

Please do so from now on.

You see, when inflation is higher than the interest rate on your savings, what you're essentially doing is lending money to the bank at a cost to you. It costs you because inflation "devalues" your savings.

Think about that for a minute.

It's like you lend someone money (the equivalent of your savings) today at a very cheap rate (the interest rate on your savings). Then by the time they pay back all your money (the savings plus the interest you earned) the whole thing is now worth less than what you originally lent them.

That's how inflation turns savers into losers.

Rather than dump your money in a savings account, which just makes your bank richer at your expense, consider inflation-protected instruments like Treasury Inflation-Protected Securities (TIPS), inflation index-linked Bonds, Money Market accounts and Certificate of Deposits.

So here's the bottom line: ALWAYS CHECK THAT THE INTEREST RATE IS HIGHER THAN INFLATION BEFORE YOU PLUNGE YOUR MONEY INTO A SAVINGS ACCOUNT.

All that said, you should know that nothing beats the stockmarket for growing money, inflation-protected over the long-term. Not even real estate.