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Nigeria: The Giant Awakens

Friday - 2/8/2013, 5:57pm  ET

The following commentary was originally posted on FoolFunds.com, the website of Motley Fool Asset Management, LLC, on Jan. 9, 2013. With permission, we're reproducing it here in its original form.

"That we are surrounded by deep mysteries is known to all except the incurably ignorant."
--
Chinua Achebe

Tony Arsta and I were sitting in a restaurant in Lagos. I'd ordered the "Nigerian assorted-meat stew." Halfway through our meal, the chef came out to greet us and see how our meal was because he'd "never seen an expat order that dish before."

Such is life in Lagos. Due to Nigeria's massive oil industry, Lagos has long been home to thousands of expatriate workers, many of whom have tended to lock themselves into high-walled, razor-wire-topped compounds, well isolated from the crowds, protected from the more freelance forms of crime prevalent in the city. You could live for years in Lagos and never try Nigerian food. Apparently, many do just that.

In Nigeria they tell an anecdote that captures very well the spirit of the country's largest city. When you step off a plane, you're greeted by a sign that says "THIS IS LAGOS." The sign offers none of the cheerful civic-mindedness of other cities. It doesn't bother to welcome you, but it does show that someone is minding things enough to put up the sign in the first place. It's an announcement of utter indifference. "You're here. If you don't like it, feel free to go someplace else."

Having heard this story, I found myself oddly disappointed upon spotting a "Welcome to Lagos" sign. I did find an odd comfort when Tony asked what kinds of meat were in the stew and was told that it was "assorted."

Nigeria? Seriously?
When you think of the world's great investing opportunities, I doubt highly that the word "Nigeria" crosses your mind. But our investing group had found an exceedingly interesting set of companies based in Nigeria that were profitable, highly capitalized, and seemingly blessed with highly skilled managers. In some ways, the challenges of operating in Nigeria offer their own sort of barrier to entry -- this is one of the most difficult countries in the world in which to get anything done. But in order to get any kind of comfort with investing in Nigeria, I thought it incumbent upon us to come to the country and speak to the companies, as well as to others who know the market best.

What we found was a country that is every bit as challenging as advertised. Nigeria has an incredible energy, an undeniable sense of commerce, and a surprisingly deep bench of professionals running many of its institutions and companies. Nigeria remains frightfully poor and horridly governed, a place where little things are often difficult or impossible to accomplish without knowing and/or paying off someone who can make it happen. Yet this is not a nation full of people who have given up. These people are busy. 

You say "Lagos," I say...
Lagos is a city of 16 million to 22 million people (no one really knows how many) seething with constant activity. Little of its infrastructure works very well: The roads are jammed, power outages are a daily occurrence, railroads have fallen into total disrepair. Even proud locals admit that the city is a result of a disastrous combination of overcrowding, poor planning, and a nonexistent culture of investing in maintenance. In my reading in preparation for the trip, the word I most often saw associated with Lagos was "hellhole."

And that's when it was mentioned at all. For the largest city in one of the most populous countries in the world, Lagos is, in many ways, invisible.

Lonely Planet, the world's most comprehensive travel publisher, offers guidebooks for obscure destinations like Afghanistan, Timor-Leste, Bangladesh, and even Antarctica. But its offerings on Nigeria are limited to a small section of the 17-country West Africa travel guide, or an even-smaller section of its 53-country Africa travel guide.

The only general travel guide I could find on Nigeria is published by Bradt, which seems to utilize a particular adverse selection process in determining what destinations it covers (it has an offering on North Korea, but not South Korea; Albania, but not France). The author of the Bradt guide uses her introductory paragraph to describe Nigeria thusly: "It is simply one of the world's most difficult places to travel in and the notion of travelling here conjures up a horrific reaction. It's far from a holiday destination, there's very little to see in the way of conventional sightseeing, and it's an environmental disaster." In its review of the Bradt Guide to Nigeria, The Independent, a British newspaper, states that "the author of this brave guidebook ... does not seek to over-sell the destination."

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