Project SPIRIT Phase 1 Benchmarks and Preliminary Findings

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Investing in Technology in Nigeria
September 30th 2004
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Characteristics of the Nigerian market
POSITIVE ELEMENTS
CHALLENGES

• There is a population of about 130 million
• Literacy rate is about 68
• It is rich in natural resources
• Its tertiary institutions produce about 338 000
  graduates a year
• GDP growth has averaged about 3.5 for the last 3
  years

• Economic and political reforms ongoing
  concurrently
• Condition of the 198 000 km national
  transportation network varies considerably
• Inadequate electrical supply
• Pockets of corruption prevail in certain sectors
  (Perceived and actual)

• The market has arguably the greatest upside
  profit and volume growth potential of any market
  within sub-Saharan Africa

• A long term perspective needs to be taken with
  well structured risk management measures in place

Source BMI Tech Handbook
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Nigeria Technology indicators
Internet PC usage

• Internet density 0.5
• Computer density 2.2
• Number of computers connected to the Internet
  683,866
• 73.5 of Internet access connections are
  dial-up
• Over 3 million people use the Internet at least
  twice a week
• Most people access the Internet from Cybercafés
• Average growth rate of Communications market
  127

Industry licensees

• The market is under managed liberalisation with
• 1 primary national carrier
• 3 active mobile licensees
• 1 SNO
• 2 National long distance carriers
• 1 800 communications license issues with over 200
  value added service and local/regional telephone
  licensees (50 are actively used)

Source NITDA Source Accelon Source
Mindbranch Telecoms in Africa Western Region,
2004. 1National long distance license has been
revoked
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Recent activities that have taken place in the
Technology sector to promote and protect
investments

• NITDA1 has created the National IT Policy which
  was approved by the Federal Executive Council in
  March 2001 and published to the public in May
  2001. Areas of focus include
• Integrating IT development with national and
  telecom development
• Encouraging local production of computer
  network components
• Supporting planning mechanisms for local
  infrastructure development
• Creating an enabling environment for private
  sector participation in the technology sector
• The Telecoms Act has been revised to provide
  investment protection and reinforce regulator
  independence
• The NCC2 has amongst other things
• Adopted a liberal and forward thinking approach
  to disruptive technologies such as VoIP
• Recently conducted an audit of certain license
  categories enforce proper licensed conduct and
  to better ensure that consumers are being treated
  fairly
• The NIPC3 has been effectively empowered to
  effectively protect foreign investment investors,
  identify and align priority investment areas with
  national policy and develop the overall framework
  to allow foreign investors and smoother, lower
  risk means of exploring opportunities in the
  Nigerian market

1 National Information Technology Development
Agency 2 Nigerian Communications
Commission 3 Nigerian Investment Promotion
Commission
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Local investment community attitude toward the
telecommunications market
Investor awareness survey on Nigeria
telecommunications market - Source IT Edge
magazine July/August 2004 eShekels
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Underexploited Opportunities in the Nigerian
Technology sector

• Business Process Outsourcing (BPO) such as
• HR services Payroll benefits management
• Insurance claims processing
• Fines processing
• Data processing
• Call centre outsourcing
• Applications design, programming and software and
  database development
• Sim card manufacture
• High-tech office space
• Office services centres
• Value added service provision

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Nigerias technology indicators are not very
different from Ghanas and Indias

• If managed properly, Nigeria can develop a robust
  IT and telecom services industry similar to what
  India has done and what Ghana is in the process
  of doing
• Intensive human capital development is extremely
  important and must receive the attention required
  within both the public and private sectors

Approximately 750 000 fixed and 5 100 000
mobile (GSM CDMA) lines Source United
Press International, Washington Times, 13/08/04
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Case study - Ghanas rapid approach toward
developing a Business Process Outsourcing (BPO)
industry

• Ghana is primed to participate aggressively in
  the 500 billion global outsourcing market,
  currently dominated by India and China
• Since 2000, 10 companies have either relocated
  operations from the US or Europe or established
  outsourcing centres in Ghana
• Ghana Cyber Group recently established a 10m
  project called the Ghana Technology Park
• The Ghanaian government has donated buildings and
  land to support private technology development
  initiatives

Source Inquire.net
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Key issues to address to improve the probability
of success when pursuing Technology opportunities
in Nigeria

• What are the most significant opportunities based
  on a detailed understanding of the market forces?
• What is the potential for leading edge or
  disruptive technologies?
• What is the path to realising value within each
  area of opportunity?

• What are the optimal level of investments in
  people, infrastructure and equipment?
• What additional investments will be required if
  the market entry needs to be accelerated?

• What are the system economics of the industry in
  general and can they be realised in this market?
• Based on the economics, are there any initiatives
  that should or should not be pursued?
• What are the key macro drivers of the business
  and how will a fundamental change affect the
  business?
• Are there ways to optimise the economics (e.g.,
  second hand plants, capacity sharing across
  products, co-opetition, investment sequencing,
  etc.)?

• What are the risks that need to be factored into
  the planning process?
• Are there any other political, competitive or
  executional risks that need to be managed or at
  least considered?

• Are there early stage pilots possible to confirm
  the potential opportunity?
• Are there early stage pilots required and/or
  possible to confirm the execution requirements?
• Have the human resource issues been properly
  addressed to take advantage of the local supply
  of skilled labour?
• What role should marketing play in the execution
  of the strategy?
• Are there any regulatory or policy items in the
  pipeline that might change the structure of the
  opportunity being pursued?

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• Thank you.