Foreign Direct Investment (FDI) in Telecommunications: The Success Story of MTN in Nigeria

Introduction In 1999, one of the worst post-colonial dictatorship regime in Africa comes to a end.  Sani Abacha’s military ruling in Nigeria is overthrown and a transitional regime led by Olusegun Obasanjo is put into place. The country, touted in the 70’s as one of the potential success stories of Africa following the discovery of huge oil reserves and the building of decent infrastructure in cities such as Lagos and Port Harcourt, is in ruins. Part of the challenge, second only to the need to restore the rule of laws, was to rebuild the country infrastructure. Very soon, it was obvious that the quicker fix could be done in the telecommunication sector, thanks to the introduction of advanced mobile technologies such as GSM, which reduces drastically the need of civil works compare to former fixed line technology. Hence, at the end of 1999, the Nigerian government announced their decision to offer 3 GSM licenses for a fixed price of 250 Millions US$ each. Nigeria was (and still is today) a challenging environment for foreign companies willing to invest in what represent potentially the 2nd biggest market in Africa after South Africa.  It is the most populated country in the continent (137 million people in 2003), with 50% of the population below 18 years and 60% living below the poverty line. Its religious and ethnic diversity (44% Muslims, 22% Christians, 34% Animists, over 250 ethnic groups) creates a fertile ground for internal conflicts.  The country is renowned for its flourishing scamming industry and its very high level of corruption (consistently rated by Transparency International in the 3 worst countries out of the 133 surveyed). Finally, the disastrous management of FDI in the oil sector created heavy resentment against expatriates, especially in the Delta Region.
TABLE OF CONTENTS 1 Introduction 3 2 MTN Success in Nigeria 5 2.1 MTN approach to investing in Nigeria 5 Strategy 5 Financial aspects 6 2.2 Results in March 2004 7 Sustainability of the results 8
3 Benefits of MTN’s investment to Nigeria 10 3.1 Economic Development 11 Job creation 11 Time and Expense Saving 12 Transparent Market Place 12 3.2 Social Development 12 Healthcare 12 Education and Knowledge Spillovers 13 Governance 14
4 Conclusion 14

TABLE OF FIGURES Figure 3 1: An ICT Based Development Model: New Virtuous Circles 10 Figure 3 2: MTN Nigeria value chain 11