Bullish Chagoury readies Lagos mega-project

I am very optimistic when it comes to Nigeria,” says Ronald Chagoury. As director of the Chagoury Group, the Nigerian multinational business conglomerate with interests in construction and property, hospitality and hotels, telecommunications and IT, Chagoury arguably needs to be: his fortunes are intimately tied to his home country.

Since the election of President Bola Tinubu 18 months ago the Nigerian economy has been subjected to something akin to shock therapy, with the imposition of drastic near-term consequences in the hope of achieving long-term stability.

Chagoury believes, however, that the juice will, ultimately, be worth the squeeze. He points out that there is often some lag between implementation of policies and the effects that they are meant to produce. A growth in reserves and a balanced budget will bring back confidence, he believes.

Indeed, there is some evidence that the government’s stern measures are beginning to deliver results. Olayemi Cardoso, governor of the Central Bank of Nigeria, said recently that the country has managed to clear a backlog of some $7bn in foreign exchange transactions.

In November the country’s foreign exchange reserves hit $40bn, the highest since May 2023. In the first quarter of 2024, according to the National Bureau of Statistics, foreign investments into Nigeria amounted to $3.38bn, a significant improvement on the $1.09bn it recorded in the previous quarter – though it fell to $2.6bn in the following quarter.

As an executive of the Chagoury Group and vice chairman of South Energyx Nigeria, the group’s subsidiary directly in charge of one of the most ambitious privately-funded infrastructure projects on the continent, Chagoury has considerable skin in the game – and needs Nigeria to win.

That project is the Eko Atlantic City, a large-scale urban development project located on reclaimed land along the Atlantic coast, adjacent to Victoria Island in Lagos. The company says this new city is designed with a comprehensive infrastructure system, featuring reliable power, clean water, an underground drainage system, and advanced communication networks. It is expected to offer a mix of office spaces, residential areas, retail zones, and public amenities, along with facilities for education and healthcare.

A long-anticipated project

The project, initiated nearly two decades ago, has not been immune to the crises that have dogged the global economy. Indeed, the story of the project has been one of navigating events with the potential to disrupt its carefully-laid plans.

“We had a very challenging year in 2008. Nigeria – possibly the world – was going in a very different trajectory before the crisis. That was a very big stress test at the beginning of Eko Atlantic as a project,” he recalls. The lesson from that experience, he says, was the group learnt to “tighten its belt when times are hard”. It has also learned that it is better to focus its energies on its areas of strength – construction, real estate, hospitality – rather than over-diversifying.

Having survived the commodity price crash and security challenges in the country, the group was perhaps more prepared for the Covid-19 pandemic when it struck in 2020. While it slowed construction and led to delays in reaching set milestones, the group had by then had some built-in resilience.

“Covid definitely had a major impact on the market. However, the lessons we learned in 2008 have helped us to navigate these crises,” he says. We’ve seen a lot of renewed interest post-Covid. We’re seeing a lot in the markets, from foreign companies; from Nigerians in Nigeria; and from Nigerians in the diaspora,” he reports.

This may be due to a perception that bricks and mortar are as safe as investments come, especially in times of uncertainty. Chagoury explains, however, that this has a lot to do with other factors. In places like Lagos, with a growing population and a shortage of available land, developers insist real estate is a solidly safe asset class in the medium to long term.

“I wouldn’t be speculative in the short term, just because of currency [volatility], but as a medium to long term investment, real estate is, I believe, a very strong store of value, especially in Lagos,” he notes.

It is helpful then, that the group has been able to secure long-term financing from both local and international backers. In the beginning, Chagoury recalls, local financing, while available, invariably had shorter tenures than were required to meet the needs of a project such as this.

That meant relying on international finance houses and the group’s own resources. After a period of major restructuring, Nigerian banks are now in a position to accommodate longer-term facilities. Nonetheless, managing their debt is central to their strategy, which means ensuring they are not over-leveraged.

“We are actually in a very good position today, because we’ve been very conservative over the years with how we approach the debt levels. If it means sometimes delaying by six months, we would delay it by six months. We were not in a rush to take too much debt for the projects.”

‘In two years we’ll see a different landscape’

Despite this conservative approach and the delays brought on by Covid and other crises, Chagoury is confident that the project is on track for the planned launch. Currently, he says, there are shopping malls, hospitals and schools as well as various residential and commercial projects underway.

It helps that the business model does not impose sole responsibility on the group to undertake these projects. Instead, independent developers procure land from the group to build out the city. According to Chagoury, the planning department is currently overseeing some 40 projects.

“There’s quite a lot happening that may not be very apparent just today but in about two years, by the end of next year, we’ll see a very different landscape in the Atlantic just because of the number of designs that we’re seeing in our planning department.”

What they are responsible for is the enabling infrastructure for the city. That includes the roads, drainage, fibre optics for data, water and power. Work on these is also on the right track and a power plant, connected to the national grid, went into operation last year.

The group’s own contracting company is also responsible for addressing one of the central propositions of the project – reclaiming parts of the city’s land at risk of coastal erosion. “We studied this extensively and added more layers of protection,” Chagoury explains.

“We even raised our seawall by a couple of metres as an extra precaution and raised whole roads in the city to make it easier to build underground parking,” he adds. With large parts of Africa’s coastline under threat, the success of Eko Atlantic in addressing this might offer a model for similarly bold measures in other parts of the continent.

Chagoury believes that the current government, with its business-friendly approach, can help Nigeria to take advantage of these opportunities. “We’re very happy that we have a government that wants to open Nigeria for business,” he says, noting that as governor of Lagos, President Tinubu was able to usher in a period of transformation.

“I believe that we will see the same happen with his presidency for Nigeria.” The government’s economic measures, the anticipated impact of the new Dangote refinery and the clear macro-economic measures all signal promising growth ahead, he believes. “All these elements are very positive signals for the country,” he says, adding: “I am very bullish on Nigeria. As difficult as it seems in the short to medium term, I can see how quickly we could get into recovery and even beyond that.”