West Africa: Potential In Nigeria, Progress In Ghana

Most of the biggest companies in West Africa are Nigerian and so the health of Africa’s most populous economy is vital for the level of West African contribution to our table of Africa’s Top 250 Companies.

Indeed, the 2011 downturn in African stock values is particularly marked in Nigeria. Although 19 Nigerian firms feature in our regional table of the Top 25 Companies in West Africa, this is down from 21 last year and the market capitalisation of most of those 19 is substantially lower than in our 2011 survey.

Dangote Cement retains top spot in the region, with a value of $10.5bn, down from $12.2bn last year, while even mining giant AngloGold Ashanti has suffered a fall in value from $6bn to $5.4bn. The number of companies valued at more than $1bn has fallen from 13 to nine while Nigerian Bottling Company needed just $330m to take 25th position in this year’s table, much less than the $527m that Cadbury Nigeria needed to secure the same ranking last year.

Dangote’s third cement plant was officially opened by President Goodluck Jonathan in Ogun State in February, transforming Nigeria from a major net cement importer into a potential exporter. Cement has a low value per weight and so it makes economic sense to produce it close to where it will be used. Reports in Nigeria suggest that it is the biggest cement factory in sub-Saharan Africa with production capacity of 6m tonnes a year.

Jonathan told visiting dignitaries: “Whenever you call me to come and commission new investments, I will come again because these are the kind of stories we want to hear in Nigeria. We are tired of hearing that there was a bomb explosion in Maiduguri and Bayelsa. We want to leave a better country for our children to inherit.”

Dangote Cement is now expanding into other markets. The company’s president, Alhaji Aliko Dangote, said: “In line with our long-term vision to be the number one cement producer in the world, we have embarked on a pan-African expansion drive. We are currently building new cement plants and setting up terminals in 14 African countries. We envisage that by the time we complete all these projects, we will be in a position to produce about 60m tonnes per annum of cement by the end of 2014. This will place us among the top eight cement producing companies in the world.”

Progress has recently been made on two of Dangote Cement’s schemes: a $100m project in neighbouring Cameroon and a $400m venture in Zambia. Dangote Group has two others subsidiaries in our regional Top 25: Dangote Sugar Refinery and Flour Mills Nigeria. It has a range of other interests including fertiliser production, petrochemicals, steel and property management across its 13 subsidiaries.

The international community has generally praised the current government’s economic policy. After talks with Finance Minister, Ngozi Okonjo-Iweala and President Goodluck Jonathan on Abuja’s reform strategy, IMF managing director Christine Lagarde said: “I was extremely impressed with the energy and pace at which he wants to transform the economy, create jobs and focus on agriculture.” Growth forecasts for Nigeria this year are generally in the range of 5.5-7%, down from 7.7% in 2011.

Ghanaian growth

Despite a tough four years, Nigerian banks remain prominent in our survey, taking seven positions in the regional table, and a recovery in their market values over the next year would come as no surprise. Further west, Ghanaian banks are already benefiting from that country’s economic boom.

The number of Ghanaian companies featuring in our survey of the Top 25 Companies in West Africa has doubled from two to four over the past year. AngloGold Ashanti and Golden Star Resources have now been joined by Standard Chartered Bank Ghana and Ecobank Ghana. Ghana recorded an impressive set of macro-economic figures for 2011. GDP grew by an estimated 13.6%, the highest rate in the country’s history, while the budget deficit fell from 14.5% of GDP in 2008 to 2% last year. Unlike in other countries in the same situation, the rate of inflation has actually fallen on the back of this boom, to 8.55% last year, which is the lowest rate since 1969.

Speaking to parliament in February, President John Atta Mills said: “The Ghana Investment Promotion Centre [GIPC] released figures showing an increase in projects registered at the GIPC amounting to over $7.0bn in foreign direct investment.”

The African Development Bank forecasts continued high growth of 8-9% for Ghana in 2012, roughly in line with the government’s own target. Initial growth estimates for the years beyond 2012 by most analysts also stand at around 8%, which is sufficient to rapidly create new employment and improve living standards if properly managed.

While rising oil production on the Jubilee Project accounted for a large proportion of growth in 2011, the government expects real non-oil GDP growth of 7.6% this year. Unlike in other countries in West and Central Africa that have experienced an oil boom, Ghana is benefiting from oil production after first establishing a strong economic base, with growing mining, agricultural and IT sectors.

The only non-Nigerian and non-Ghanaian firms to feature in our table are Sonatel of Senegal, which is listed in Côte d’Ivoire, and Ecobank Transnational International, which operates across the region but which is registered in Togo. These figures underline the lack of even regionally strong listed firms in the many countries of Francophone West Africa or the Mano River states. This situation is unlikely to change for the foreseeable future for most other West African markets.

However, Côte d’Ivoire is facing a more optimistic economic future. President Ouattara must rebuild national cohesion as well as the national economy, the former depending to some extent on the later. The economy contracted by 5.1% last year, while the previous decade saw little growth. The IMF is set to provide debt relief to enable the government to catch up with its Eurobond repayments.