Nigerian troops wield AK-47s at the Hilton Hotel in the capital of Abuja, while security guards scan for car bombs at entry checkpoints, snarling traffic. Down the road, police block access to the Holy Trinity Catholic church on Sundays as worshippers congregate.
Nigerians have lived with high security alerts since attacks by an Islamist militant group named Boko Haram intensified with a suicide bombing of the United Nations headquarters in Abuja in August. The U.S. Embassy in Nigeria warned its citizens on April 17 that Boko Haram may be planning more attacks in the capital, including at hotels.
Investors in Africa’s largest oil producer are unfazed. The yield on Nigerian Eurobonds is near a record low, the currency is Africa’s second-strongest performer against the dollar this year and Nestle SA (NESN), MTN Group Ltd. (MTN) and Diageo Plc (DGE) plan investments to tap a market of more than 160 million people. The attacks have been isolated to Abuja and northern states, home to Nigeria’s Muslim population, leaving oil facilities and the commercial hub of Lagos in the south undisturbed.
“The latest escalation of Boko Haram’s terror attacks is disturbing from a security perspective,” said Christian Mejrup, an emerging-market portfolio manager at Kolding, Denmark-based Global Evolution AS, which holds Nigerian treasury bills. “From an economic perspective they are negligible since they are still isolated to the northern part of Nigeria.”
North vs South
Ninety-seven years after Britain merged its northern and southern Nigerian colonies to create Africa’s most populous nation, the two regions are looking like different countries.
About 74 percent of Nigerians in the north live in poverty, compared with 63 percent in the south, according to data from the Abuja-based National Bureau of Statistics.
The 17 southern states, which cover a fifth of the country’s territory, produce about two-thirds of the economy’s output, while the government spent 62 percent of its 4.4 trillion naira ($28 billion) budget in 2011 on the south, according to Lagos-based Economic Associates.
“All the sectors that are growing fastest are in the south,” said Jude Uzonwanne, head of the Nigeria office of Boston-based investment adviser Monitor Group. “The north’s economy is still geared towards subsistence agriculture.”
State of Emergency
Boko Haram has claimed responsibility for a surge in gun and bomb attacks, including on the UN building in Abuja, a Christmas Day bombing of a church there and multiple blasts on Jan. 20 in the northern city of Kano that killed about 256. The group, whose name means “Western education is a sin,” seeks to impose strict Muslim law in the country.
President Goodluck Jonathan in January declared a state of emergency in parts of the north, where Boko Haram, inspired by Afghanistan’s Taliban, told Christians to leave. The group began attacking police stations, government buildings and churches in the north since 2009, when security forces killed the militants’ leader, Mohammed Yusuf.
The government is “on top of” the threat, Jonathan said today in Berlin. Nigeria is “a safe place for investment,” he said. “We are a stable country.”
Boko Haram’s reach may yet extend to the south as it has shown it can adapt with technology and spread attacks outside of its north-eastern base, said Sebastian Spio-Garbrah, managing director of New York-based DaMina Advisors LLP.
“It may be only a matter of time before Lagos is attacked,” he said.
Still, the yield on Nigeria’s $500 million of Eurobonds due 2021 fell to a record low of 5.311 percent on April 3. The naira has gained 3.2 percent against the dollar this year and had its best quarter since 2007.
The Bloomberg NSE Banking Index (NGSEB10), which tracks the performance of Nigeria’s 10 largest banks by market capitalization, has advanced 8.9 percent to 300.13 this year and had its best first quarter since 2010.
Nigeria’s population will expand 2.5 percent a year from 2010 to 2015, according to data from the United Nations.
United Nigeria Textiles Plc and other textile makers, once thriving foreign-currency earners for Nigeria, have shut mills in the north in the past decade amid competition from China and other Asian producers. Meanwhile, construction of pipelines, refineries, power plants and factories is booming in the south. Dangote Cement Plc (DANGCEM), Africa’s biggest supplier, is building a 3 million-ton plant in Calabar, Nigeria’s southeastern seaport.
SABMiller Plc (SAB), the world’s second-largest brewer by volume, plans to build a $100 million plant in Onitsha, in southeastern Nigeria. Nestle, the world’s biggest food company, says it will double the size of its business within three years in Nigeria.
“There’s huge potential still and on top of that the population growth is just staggering,” Martin Woolnough, chief executive officer of Nestle’s Nigerian unit, said in an interview.