Star of Africa

Fresh from a round of bank restructuring, lawyers in Nigeria are eyeing up the myriad opportunities in their increasingly middle-class country

In the past few months Nigeria’s law firms have been playing host to an increasing number of international players. Global names such as Clifford Chance and Norton Rose have been spotted in Lagos, trying to forge closer relationships with the locals.

The reason for this is simple. Nigeria is one of the world’s fastest-growing economies, with GDP growth of more than 7 per cent per quarter last year. Its vast oil reserves have traditionally supported the country’s economy, but things are changing. Sectors such as minerals, telecoms, tourism and construction drove GDP growth in 2011 as oil production decreased, according to data released by Nigeria’s National Bureau of Statistics earlier this year.

Educated workforce

Although inflation and unemployment remain problems, the mood among Nigeria’s law firms is buoyant. Much of the past three years has been taken up with advice on the restructuring of the banking sector, which began in 2009.

A number of strategic investors have ploughed capital into some banks, while other banks have been taken over by the country’s central bank. The process is now largely complete, but there is plenty of activity to replace the banking work.

“We’ve got an educated workforce and a growing middle class, and the appetite of that middle class will probably account for a lot of the investment we’re seeing,” says Udo Udoma & Belo-Osagie’s corporate advisory co-head Olufolake Elias-Adebowale. “What’s been an interesting trend this year is that international luxury brands are showing a growing interest in Nigera, as are global private equity players and multinationals. The areas in which they are investing in the Nigerian economy are also expanding.”

Linked to the growth of the middle class is the increased need for infrastructure in telecoms and transport. Much of the investment in such areas in the past has come from the West, but lawyers see this changing.

“What we’ve seen in the past few years is that the investors are increasingly coming from Asia,” notes Aluko & Oyebode partner Olubunmi Fayokun. Much of the interest is from China, but Fayokun also highlights India as a source of capital.

“The Chinese are [some of] the few who can write cheques from their pockets right now,” says Ken Etim, Banwo & Ighodalo managing partner.

Direct action

Due to the large volume of international investment in Nigeria, cross-border work is key. Elias-Adebowale estimates that around two-thirds of Udo Udoma’s clients are foreign, while Fayokun says 80 per cent of Aluko & Oyebode’s work is cross-border. Historically, firms tended to be instructed by foreign counsel, but this is now less common than it was.

“We find increasingly that foreign clients are happy to deal directly with us, without also needing to involve a foreign law firm, unless there are multijurisdictional elements to the deal,” Elias-Adebowale says.

Regulatory restrictions make it tough for foreign firms to practise in Nigeria or establish formal alliances with domestic firms. Both Udo Udoma and Aluko & Oyebode have associations with SNR Denton, but Fayokun and Elias-Adebowale are quick to emphasise that this relationship is very much non-exclusive.

“We wanted to preserve our relationships with other law firms that we have traditionally worked with,” Fayokun explains.

Etim believes international firms would have entered Nigeria earlier, had the financial crisis not hit.

“Before the meltdown it was an inevitable conclusion,” he says. “Almost all the big international banks had set up or were about to set up shop here, so it made sense that the big firms would come in. Then the bubble burst and everyone realigned.

“I don’t know that the market has come to the point where the firms will come, but if the tempo is sustained then it would be the logical thing to do.”

Elias-Adebowale says she suspects few of Nigeria’s biggest firms are likely to enter a formal alliance with a global player, having all grown from sole-practitioner outfits to firms with several partners. “Nigerian firms are pretty jealous of territory,” she says. But she adds that smaller firms might accept the prospect of outside control more easily.

 

Local investment

Long-term, there is a distinct possibility that, while Nigeria will remain an important destination for foreign investors, the country will also become more self-sufficient.

Elias-Adebowale has already observed more local investment. “Early financing for telecoms ­infrastructure was predominantly provided by foreign lenders,” she ­reports. “More recent telecoms transactions have been dominated by local lenders.”

Etim can see a clear future for Nigeria in the context of the global economy. Although the differing legal systems and cultures of the ­surrounding countries means that it is unlikely that any one jurisdiction will turn into a regional hub, he says it is inevitable that the world will continue to flock to Lagos.

“There’s enormous potential for growth,” Etim concludes.

Slick without oil

Nigeria is one of the world’s fastest-growing economies, despite a slump in oil production. A range of sectors are booming and domestic law firms are being kept busy, while managing the expectations of their international referral partners.