Heady excitement damped by doubt

When the oil price is standing far above $100 a barrel, it is tempting to think Nigeria is one very large part of Africa on which the world can safely bet. Its once formidable external debt is written off. Foreign reserves have expanded more than 10 times in as many years. A total of $55bn in oil earnings flowed into the treasury last year. As much as $76bn is anticipated in 2008. This is despite a slowdown in production caused by investment shortfalls and violence by militants vying for more power and wealth in the oil-producing Niger Delta.

If a shortage of funds were Nigeria’s problem, there would be grounds for a sigh of relief. The country from which one in five black Africans hail is undoubtedly in a better financial position than it has been for generations to rehabilitate its creaking infrastructure, revive state institutions corroded by prolonged misrule, and fulfil its promise as a continental leader.

Moreover, in those parts of the economy where the state has relaxed its grip since the military handed power back to civilians in 1999, the private sector has mostly flourished. Demand for services, such as mobile phone lines and bank accounts, and goods from televisions to cement, has far exceeded expectations – proof to businessmen that statistics recording the extreme poverty in which more than half the population of 140m live, tell only part of the Nigerian story.

The flip side, they contend, is a business community buoyed by a steady trickle of professionals returning from the diaspora and a record flow of home-grown funds. The private sector is seizing opportunities regardless of the federal, state and local governments’ more questionable capacity to do the same.

“Even when oil was at $50 [a barrel] people were optimistic. We are at two-and-a-half times that and there is no sign of a drop. You can’t ignore that, even if we waste a third,” says Atedo Peterside, chairman of the recently merged Stanbic IBTC bank in Lagos.

Excitement about Nigeria’s prospects, broadcast by its fast expanding banks and amplified by the competition between Asia, Europe and the US for its market and resources, has proved infectious.

It has been transmitted by private equity groups such as Britain’s Actis, which has in Nigeria its largest portfolio of investments outside India, and other fund managers who have carved out lucrative niches on the – according to most analysts – now overvalued Lagos stock exchange.

When hopes for Kenya foundered in the bloody aftermath of a flawed election this year, Renaissance Capital, among the more bullish foreign investment banks tapping into sub-Saharan African growth, was quick to point to Nigeria as a healthy counterweight. That could be interpreted as wishful thinking, or as the sign of a remarkable image makeover for a country perceived until 10 years ago as an international pariah, hovering on the brink.

Yet it is hard to reconcile talk at investment conferences of Nigeria’s irrepressible ascent into the ranks of the world’s big, emerging economies, with the mood of uncertainty pervasive that has returned to some quarters of the business, intellectual and political elite.