Investment Opportunities in Nigeria

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December 2011
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Outline

Country Overview Sectoral Investment Opportunities

Mining Construction Agriculture

Conclusion

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COUNTRY OVERVIEW
Nigeria, Africa's most populous country, is composed of more than 250 ethnic groups
BENCHMARK INDEPENDENCE GOVERNMENT TOTAL AREA POSITION OCT 1ST 1960 Presidential Federal republic 923,768 sq km. slightly more than twice the size of California 155,215,573 (July 2011 est.) 50.48 million (2010 est.) Agriculture: 40%, Industry: 32%, Services: 38% (2010 est.) Agriculture: 70%, Industry: 10%, Services: 20% (1999 est.

POPULATION LABOUR FORCE GDP COMPOSITION BY SECTOR LABOUR FORCE BY COMPOSITION

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COUNTRY OVERVIEW../2
The country is located in West Africa and shares land borders with the Republic of Benin in the west, Chad and Cameroon in the east, and Niger in the north
BENCHMARK EXPORTS IMPORTS EXPORT PARTNERS IMPORT PARTNERS EXPORT COMMODITIES IMPORT COMMODITIES POSITION $73.7 billion (2010 est.) $53.46 billion (2010 est. US 37.4%, India 10.5%, Brazil 7.8%, Spain 6.9% (2010) China 15.4%, Netherlands 9.7%, US 9.3%, France 4.8%, UK 4.2% (2010) Petroleum and petroleum products 95%, cocoa, rubber (2010) Chemicals, Machinery, Transport Equipment, Manufactured Goods, Food and live animals

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Macroeconomic Indicators Snapshot

Parameter
Inflation (%) External Debt ($bn) Domestic Debt (Ntrn) Monetary Policy Rate (%) Fitch Sovereign Rating S&P

Position
10.50 5.6 6.8 12.00 BB- (Stable) B+ 23.90 33.06 13.20 7.40 120 of 187

Period
Nov - 2011 Nov - 2011 Oct - 2011 Nov - 2011 Oct - 2011 Nov - 2010 Oct - 2011 Nov - 2011 Sep - 2011 Oct - 2011 Aug - 2011
Chart 5

Unemployment Rate (%) External Reserves (US$bn) Current Account Balance ($bn) GDP Growth Rate (%) Ease of Doing Business Rank

Source: Central Bank of Nigeria, Debt Management Office, Fitch, World Bank, Trading economics

COUNTRY - 2012 OUTLOOK

Government

The key battle for the Federal Government will be the fuel subsidy removal debate Security and Terrorism issues will continue to be high on the 2012 agenda Wait and see attitude on corruption drive The focus of the Jonathan administration is on economic development, investment and reform 2012 Daily production target set at 2.4Million barrels daily US$75 per barrel price originally set, reduced to US$70 by Minister of Finance Private oil refinery (Orient Petroleum) to begin production 2012 GDP growth target is between 7 & 8% Gap between growth of potential GDP of 21.6% and real GDP growth of 6.3% to remain constant Non-oil exports such as agriculture likely to contribute positively to GDP Nigeria needs fiscal discipline to help keep the inflation rate below 10 percent. Public sector wage increments and rising fiscal spending are likely drivers of inflation in 2012. IMF and World Bank projects higher inflation rates for the country World Bank projections for 2012 inflation is 9% Likely devaluation of Naira to pile pressure on neighboring CFA Franc, Ghanaian Cedi and alter regional trade dynamics

Oil Sector

GDP

Inflation

Currency

Equities Market

Renewed interest in the market, driven by cheap valuations of and investors seeking investments in alternative markets Increased pressure on telecoms companies to list may boost market activity Banks stocks likely to surge as they are currently undervalued based on current PE ratios
Source: Businessday, Reuters, African outlook online, Bloomberg

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SECTORAL INVESTMENT OPPORTUNITIES

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ECONOMY GROWTH OPPORTUNITIES

Goldman Sachs in 2005 classified Nigeria as one of the Next 11 (N-11) emerging countries with potential of becoming the largest economies after the BRIC nations In its bid to become one of the largest economies, the Federal Government of Nigeria is actively searching for strategic investors all over the world The Presidency has established a Ministry of Trade & Investments (T & I) to strategically coordinate economic affairs of the country T&I Ministry targets a N34Tr investment in growth areas over 4 years as follows: Private sector : N15tr FGN: N10tr State Governments: N9tr Seven target growth sectors are agriculture, water resources, solid minerals, manufacturing, oil and gas, trade and commerce as well as culture and tourism

Source: www.panafricancapital.com; IMF Regional Economic Outlook, October 2010; 5/15/12 www.gs.com, Chart 8

Sectoral highlights
Sectoral Contribution to GDP
12

10 8 6 4 2 0

Agriculture accounts for approximately 40% of Nigerias economy whilst oil & gas, and wholesale & retail trade sectors account for 20% respectively The agriculture sector is seen as an area of potential growth
Chart 9

Source: National Bureau of Statistics Nigeria 2010, Renaissance Capital Report, May 2011 Report

2012 SECTOR OVERVIEW: AGRICULTURE Comments:

Federal Government is actively promoting the Agriculture Transformation Strategy to create new markets for farmers Ban on rice importation will boost domestic production Nigeria imports US$3bn worth of rice annually Federal Government emphasised food security and self-sufficiency Policy is targeted at reducing
Source: USAID, Businessday

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2012 AGRICULTURE OPPORTUNITIES

Possible Opportunities:

Partner with existing players to redirect capital to local production in anticipation of ban implementation Target players in fruit sub-sector, local producers and their distributors Identify and target the major players in cattle distribution Target Quick Service Restaurants suppliers Target farming cooperatives and
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MINING

Nigeria possesses more than 34 mineral types distributed at more than 450 locations across the country Significant opportunities exist to exploit the known reserves of gold, tantalite, lead, zinc and bitumen plus a range of industrial minerals

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MINING REQUIREMENTS

Nigeria possesses more than 34 mineral types distributed at more than 450 locations across the country Significant opportunities exist to exploit the known reserves of gold, tantalite, lead, zinc and bitumen plus a range of industrial minerals

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INCENTIVES

For mining investors willing to become development partners with the Government, some available incentives already in the form of rebates on infrastructure spending in rural areas are: INFRASTRUCTURE 1 2 3 4 5 No electricity No water No tarred roads No telephone No electricity, water and tarred roads INCENTIVE 10% 30% 15% 5% 100%

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FISCAL REGIME FOR MINING

For mining investors willing to become development partners with the Government, some available incentives already in the form of rebates on infrastructure spending in rural areas are:

TAX METHOD Level of royalty

INDUSTRY STANDARD 1-3%

ROYALTY/TAX SYSTEM Compared with industry standard of 05%, the royalty is relatively low and attractive Loss carried forward 100% on capital investment in year incurred

Availability of tax holidays Accelerated depreciation

No Yes

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FISCAL REGIME FOR MINING../2

TAX METHOD Deduction of exploration/other costs INDUSTRY STANDARD Yes ROYALTY/TAX SYSTEM 100% on recovery allowed in year incurred 100% allowed

Remittance of profits Yes and dividends Corporate tax

Low at 20-30% Industry standard is 15-35% of of net profit taxable income On total profit On agreed list of mining equipment Industry standard is 5-15%

Currency conversion Yes Exemption from custom duties Capital gain tax Yes Yes, at 10%

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INVESTORS KEY INTERFACE DEPARTMENTS

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INVESTORS KEY INTERFACE DEPARTMENTS../2

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MINERAL TITLE

Under the provisions of the law, the right to search for or exploit mineral resources in Nigeria is obtained through one of the following mineral titles

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INDUSTRY

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