UNITED STATES DEPARTMENT OF COMMERCE
UNITED STATES COMMERCIAL SERVICE
U.S. COMMERCIAL SERVICE,
COMMERCIAL SERVICE MARKET BRIEF,
U.S. COMMERCIAL SERVICE
Federal News Service
DOUG BARRY: Hello and welcome to another edition of U.S. Commercial Service market brief. Today we are talking to Larry Farris, our senior commercial service officer in Lagos, Nigeria. Hello, Larry. How are you?
LARRY FARRIS: I’m doing fine, Doug. How about you?
MR. BARRY: Fine, thanks. What’s it like in Lagos today?
MR. FARRIS: Well, I tell you, this is a really intense city. There’s a tremendous amount of activity here. People that haven’t been here would actually be surprised at how much bustle there is here. It’s a very active place and one that, you know, I enjoy being in. There’s a lot of business here and a lot of opportunities for U.S. companies.
MR. BARRY: Well, you know, I don’t know whether you were aware of this before you were posted there, but we here in the United States don’t get a lot of news about Nigeria. But one of the early impressions for many of us is getting an email on our account with some retired general or minister of finance from that part of the world saying they came into an unexpected $25 million that they have in a bank account in Switzerland and if we would only give them our bank account number, they’d be happy to share it with us. (Chuckles.)
MR. FARRIS: Yeah, I think we all get those. You know, I get those even here and they’re probably coming from an Internet café right around the corner someplace.
MR. BARRY: (Chuckles.)
MR. FARRIS: But, yes, that’s common and that’s an unfortunate side of Nigeria, but something that’s very real and something that raises issues that business people here really have to be careful about. A week doesn’t go by, hardly a day doesn’t go by, that we don’t get inquiries from someone in the U.S. about something like that, not so much falling for those sorts of scams, but there are other more sophisticated ones that do seem to draw in some U.S. exporters. So what we do is we look at them very closely, we look at who the – where the origin of an inquiry or even an order came from and get back to them, back to the company. And when we think there’s red flags we let them know and advise them to cut off any communications immediately.
Fortunately, those are only a small fraction of the number of legitimate business inquiries that come out of here, but it is an unfortunate fact of doing business in Nigeria, that you really have to watch out for that kind of thing.
MR. BARRY: Yes, and of course one of the major purposes of the series that we’re doing on Africa – we’re also talking to your colleagues in Ghana and in South Africa – is to dispel some of the myths and stereotypes about Africa that U.S. business people may have developed by attending to the media here which tends to look at one side, often the bad side or the unusual and freakish and we don’t really dig beneath the surface to find out what’s really going on. So I wonder if, for a couple of minutes, you might reflect on what the other side of Nigeria, which represents by far the larger one, and that is the opportunities for U.S. businesses there. What are they?
MR. FARRIS: Well, let me just give you a little bit of background. Nigeria is the most populous country in all of Africa. There’s somewhere around 135 to 140 million people. It’s incredibly ethically diverse, about 250 or so ethnic groups are here. It is a place that’s had very solid growth, economic growth, over the last several years and the projections look positive now, 6 percent or so per year. So that’s a solid base.
When you think of Nigeria, you think of the oil industry. And the oil industry does dominate the economy. It supplies a large part of the economy. It absolutely dominates Nigeria’s exports and their foreign exchange earnings. But it – but the rest of the economy is also growing and also – and offers significant opportunities for U.S. companies. One of the areas that we look at as offering the most – some of the most interesting areas is in the area of transportation infrastructure.
This country, unfortunately, suffered through several decades of lack of attention to its infrastructure: roads, ports, airports, rail. And a lot of that is not in very good condition now. But, fortunately, the current government and even the last government that was in power have been looking at and starting projects to address some of those issues. And that creates a lot of opportunity for U.S. companies: road building, port modernization, airport building, revitalizing railway lines, and all of the equipment and technology that comes into that. Those are very interesting areas.
Beyond that, telecommunications also – the existing telephone, especially the land-based telephone system, also fell into disrepair and is now on the verge of having a major injection of managerial expertise to address it and cash, hopefully, in the short term to address that. At the same time, wireless is developing very rapidly and, again, offers a lot of opportunity. Another infrastructure sector is electrical energy, where Nigeria, again, had not invested sufficiently, nearly enough for the last several decades and now is caught in a situation where they have nowhere near enough generating capacity.
But they are reforming the sector, modernizing it, and we believe there’s going to be some really good opportunities for U.S. companies to get involved in independent power production either as an investor or technology supplier or an equipment supplier. So all of those are interesting areas, areas that we’re seeing a lot of interest from U.S. companies and looking at the market and ones that we hope to see a lot more U.S. companies coming here and looking at.
MR. BARRY: Well, Larry, I wonder if you would deposit into our bank account not fake money, but real advice that’s valuable. Tell us or give us a sense of if you were a small- and medium-sized or medium-sized U.S. enterprise, what are some of the first things you would do in planning to assess the opportunities and risks in entering the market in Nigeria?
MR. FARRIS: Well, in terms of looking at the opportunities, of course, I would counsel people to look at our website, look at the export.gov, and look at the Nigeria website. Look at the opportunities we have posted there, look at our country commercial guide. All of those things are good sources of general information on areas of opportunity here. We have a number of events coming up. Fortunately, we’re seeing trade missions come to Nigeria, which they haven’t been coming for a long time. They’ve been coming in.
We had one in November led by the Export-Import Bank. We had the director general of the U.S. Commercial Service bringing one here the first week of March. Those all present good opportunities for people to come and look at the market. Beyond that, the thing that we counsel everyone is to really do your homework. Look at who you’re going to be doing business with. What we do here to help U.S. companies in that regard is we maintain a database of between 3 (thousand) and 4,000 Nigerian companies that we have vetted; we have visited these companies. We go back and we look at them again about every 18 months or so and we look at the company. We’re confident that they are who they say they are. They are doing the kind of business they say they are. And their business profile is consistent with who they say they are.
We make that information available to U.S. companies. We deal with those registered Nigerian companies exclusively when we’re promoting Commercial Service products and services to U.S. companies.
MR. BARRY: And, Larry, what’s your batting average in working with those companies that have been vetted? That is, you know, how many of them turn out to be bogus versus those that actually lead to some deals and partnerships for U.S. companies?
MR. FARRIS: Well, in terms of bogus, we screen out; we don’t of course accept all of them. As we go through the process of investigating them, occasionally we find one who are not who they say they are. And they don’t get into our program. And, as I mentioned a few minutes ago, every 18 months, minimum of 18 months, we go back and we reinvestigate the company again. So we go back and we touch bases with them periodically to make sure that their situation hasn’t changed and they continue to be a potentially reliable business partner for U.S. companies.
MR. BARRY: And do those 3,000 companies constitute most of the larger industry groupings where U.S. companies would find opportunity?
MR. FARRIS: Yes, absolutely. One characteristic of the Nigerian market, however, is that the industrial sector is not very well developed. So it’s relatively concentrated into a few industry and business activities. So we have a pretty good representation in all of those active sectors.
MR. BARRY: Okay, and what U.S. company activity have you seen come through your office recently? A sort of range of different sizes and levels of experience and things to sell?
MR. FARRIS: Right. We’re seeing a number of larger companies coming in, looking at, again, the opportunities in the transportation sector, everything from major aircraft manufacturers and trucks and vessel manufacturers to smaller companies that are selling technology or just are supplying consumer goods. So we’re seeing really a wide range from the smaller companies to the very large ones. And, again, they’re coming in looking at infrastructure, they’re coming in and building hotels, they’re looking of course at the oil and gas sector, and I haven’t really talked about that.
That is, by far, the largest industrial sector in Nigeria and the largest destination of U.S. exports to Nigeria. Over a third of what we export to Nigeria goes to the oil and gas sector and, again, it’s the large companies and also smaller service companies and independent Nigerian companies that are involved in exploration and extraction. And they’re all in – it’s a very dynamic, well-structured, well-equipped industrial sector and functions very well.
MR. BARRY: And are there few buyers in that sector or is it comprised of thousands of smaller entities including the government that all have purchasing capability?
MR. FARRIS: Well, I wouldn’t say thousands, but there are a number in the different portions of it in terms of the service – the oil and gas service companies and the equipment suppliers and the actual companies that are doing the exploration and extraction. In the latter group, of course, is a much smaller group because it’s a very capital-intensive industry. The service providers, of course, are well-known. There’s a larger number of those. And those in the downstream part of the industry, those that are actually supplying products to consumers are the much larger group.
MR. BARRY: And would you be dealing then with a well-known international brand name when you’re attempting to sell into that market or is it a lot of different Nigerian buyers who then sell onto the large multinationals?
MR. FARRIS: A little of both. One of the things that’s happening here is that there is a strong push from the Nigerian government to increase the number and depth of Nigerian companies involved in the industry. So they’re trying to create as many Nigerian-owned companies involved in the oil and gas sector. And a lot of those, of course, would not be familiar names from the U.S. But we know those companies. They’re the ones that we would want U.S. companies to do business with or ones that are registered with us and that’s who we would steer interested U.S. suppliers to.
MR. BARRY: And what typically is the transaction cycle in Nigeria? Is there a certain timeframe that U.S. companies should plan for or does it vary or what advice would you give?
MR. FARRIS: Well, I’m not sure that there’s, you know, a consistent pattern. There is one characteristic: that things in Nigeria generally move very fast. There’s a very short timeframe. Nigerians like to do things tomorrow. So they like to move things along very quickly. We counsel, again, that U.S. companies, you know, be aware of that and do their due diligence. Make sure that they know who they’re doing business with, they understand the business well. And one thing that we especially counsel smaller companies or all companies in the U.S., but especially smaller companies is not to ship anything until you’ve been paid in advance.
MR. BARRY: Mm-hmm. That’s good advice. And where do you think the economy is headed in the near term? Americans who are thinking about, you know, balancing their basket of clientele around the world and minimizing their risks, particularly in the U.S. domestic market now, what are the long-term prospects?
MR. FARRIS: Well, in general, they are good. Nigeria has, besides the oil and gas sector, they also benefit from good reserves of other minerals. They have the capability to develop a good agricultural sector. It’s one that’s been neglected for a number of years, but the potential is there. And there’s an emphasis on revitalizing the agricultural sector. So all of those things add up to look at a fairly favorable environment for continuing growth.
Now, having said that, it all depends on politics. And in that regard, the message is mostly positive. We’ve had a recent – last year, there was elections, the first peaceful transfer of power at the presidential level for one elected civilian president to another. It’s the first time it’s happened in the history of Nigeria since independence. Much of it was flawed, but it happened. And that does send a good signal. We just have to continue to watch and see how things develop in that area. Right now, we’re guardedly optimistic that the trends are going in the right direction.
MR. BARRY: Larry, you mentioned that there are more than 200 different ethnic or tribal groups in Nigeria. I arrive at the airport in Lagos, having done my due diligence with a smile on my face. What else do I need to know besides maintaining my good, friendly demeanor in order to make a good impression on my potential business partners there?
MR. FARRIS: Well, you mentioned the issue of ethnic diversity. One of the things you’ll need to understand is sort of who you’re dealing with again. The ethnic groups here break up into really two very large groups. In the north, it’s mostly a Muslim country so you deal there as you do in other Muslim countries and respect their traditions. You would be a little bit more conservative in the way you dress and in the way you present yourself.
The south is different ethnically. It’s much more diverse in the south, different groups. But there it’s not quite so conservative. You can be a little bit more American in the way you deal with people.
MR. BARRY: Well, would it be fair to say then that Africa is a project, a kind of great, new frontier for business development, in particular, and well worth the U.S. small- and medium-sized enterprise who has not necessarily a desire for high adventure, but is looking for a place in which to invest some time and effort that, you know, has a reasonable likelihood of a good payoff down the road. Would that be a reasonable summary of how to look at this picture of Nigeria, in particular, and Africa in the larger context?
MR. FARRIS: Well, I would think so. As you say, it’s a place of great potential. It’s a place where you have to be careful; you have to be prepared. You have to be, you know, willing to look at the local conditions and react to changes. There’s a lot of volatility here in terms of politics, in terms of policy. And you have to approach the market with that kind of a perspective. But if you’re willing to do that, you’re able to do that, there are great rewards here. Those U.S. companies that come, spend the time to understand how to do business here generally do very well and many of them do very well in this kind of a market. It all depends on you as an American exporter and the amount of effort you’re willing to expend in learning how to do business in difficult markets like this.
MR. BARRY: And is it also fair to say that Americans who come there do learn a lot of valuable things that are valuable to them as individuals, managers of their companies, but also valuable to the company itself?
MR. FARRIS: Well, I certainly think so. Again, this is a developing country with different characteristics. American companies that deal in Latin America or Europe and come here will see things very different. And it takes a little bit of time to understand, but I think once they do, they will appreciate, in the case of Nigeria, the dynamism of the local business community. They will welcome you very warmly and very enthusiastically. And, again, for those that are willing to spend the time and the effort to understand the market, do your homework, make sure that you know what you’re doing, I think that they will do very well and they will be very rewarded.
MR. BARRY: And the other very valuable side of this, Larry, is that Americans contemplating going there and actually going there don’t need to feel alone because they won’t be. You and your colleagues are there. And the embassy is there. And there are other support services that the U.S. government and others provide that really give quite a valuable leg up to Americans who consider doing business there.
MR. FARRIS: That’s right. We like to encourage people to use our services and here perhaps more than in some of the developed markets, they really offer a tremendous amount of value. Coming and participating in our gold (?) key program, for instance, and having your agenda set up and having your logistics worked out for you is of tremendous value. And, again, those companies that come and do that are often very satisfied with the results they get.
MR. BARRY: And can your office also help plan the itinerary for U.S. businesses who are contemplating jumping on an airplane and flying over there?
MR. FARRIS: Well, we don’t do – we’re not travel agents so we’re not going to book tickets for them, but we can certainly help them once they’ve arrived in helping them get transportation, getting – if they’re going to parts of the country – and there are parts of this country that are less secure than others – if they’re going to parts of the country where they need additional security, we can help make those sorts of arrangements. We can certainly recommend reliable, quality hotels and help them in ways like that.
MR. BARRY: That would be incredibly valuable. And so we’ve run out of time today, Larry, but we really appreciate you sharing your thoughts with us and your obvious excitement and interest in being there. And we wish you well. And in just 30 seconds, can you tell us how to get a hold of you?
MR. FARRIS: Well, people are welcome to contact me via email. My email address is larry – LA-R-R-Y – .farris – F-A-R-R-I-S – @mail.doc.gov (firstname.lastname@example.org).
MR. BARRY: And that’s Larry Farris speaking to us today from Lagos, Nigeria. And we thank him very much for being with us and we thank all of you. And on behalf of my colleagues in Nigeria and around the world, this is Doug Barry in Washington. Hope to see you again soon.