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Could Virgin row hurt Nigeria’s image with investors?

August 26, 2008

virgin_logo.jpgRichard Branson’s Virgin group, one of the highest-profile investors in Nigeria, is locked in a dispute with the government about which airport terminal the Virgin Nigeria airline can use. At the heart of the row is an agreement Virgin says it struck with the previous administration of former President Olusegun Obasanjo, which the new government of President Umaru Yar’Adua is questioning.

Nigerian officials say past deals with international investors have not always been in the best interests of the country and that Yar’Adua wants to ensure Nigeria is no longer “short-changed”. Virgin has said it is in talks to sell its stake in Virgin Nigeria.

Is Yar’Adua’s administration right to review deals struck by his predecessor, or does this suggest that contracts with government can be subject to change and make the investment climate unpredictable? Are such rows really about the national interest, or are they triggered by a clash of egos? Would Virgin’s departure from Nigeria have any impact on the country’s image as an investment destination?

Comments

I thing government anywhere in the world has responsibility to its people, to ensure that policies are in public interest. Nigeria’s shouldn’t be an exception. There is nothing wrong in Nigerian government reviewing past policies that are against the national interest, as long as the investors are carried along. Nigeria has a very big market with a potential that foreign investors cannot ignore. You can see this from the turnover in the telecoms and oil and gas sectors despite the complaints and challenges. But because of the ease at which the government can make money from oil, past governments hardly bothered about the implications of most of the contracts that they entered into. This was what was responsible for the debt burden of the past. Government officials were just taken loans that were not needed. They just don’t care if the future of the country is mortgaged because their children are in living abroad at the expense of the country. So, if a new government believes that certain policy is not in the national interest, it should be encouraged to review it. I don’t think foreign investors should be worried. Nigeria is a democracy and government would still have no choice than to follow due process in reviewing any policy that needs to be reviewed. Mind you, the genuine foreign investors that understand Nigeria will not tell you that they are leaving. They may just make some noise to discourage their competitors from coming around. Look at it this way, with the hundreds of kidnapping cases in the last few years, you would have expected every foreign oil workers to have left Nigeria. But, no, the reverse is the case.

 

Branson can leave if he wants, its a freeworld. Business men around the world have a moral obligation to be straight in their dealings, he signed a business deal with the federal government and then went for more shady deals with a corrupt and hopeless minister of aviation (Isa Yuguda). So i fully support the new goverment stance, enough of multinationals thinking they can do as they please.

Posted by Nduka Tolefe | Report as abusive
 

Nduka, how can you claim he went after shady deals with the then Minister of Aviation. Is said minister not a member of govt? Or are you saying the minister of aviation has no right to sign deals pertaining to the Aviation ministry?

Posted by Chukwuemeka O | Report as abusive
 

He signed the original deal for VirginNigeria with the Federal Government and that deal never had anything to do with using MMIA for domestic flights, but he went back to Isa Yaguda and sought a different agreement which gave him unfettered access for both international and domestic flights, the short changing must stop. Why sign multiple deals anyways Nigeria has every right to change its policies that can be detrimental to its development.

Posted by Nduka Tolefe | Report as abusive
 

Well very very simple Stop making bad deals and don’t try to change deals retroactively . What does this say to any international investor? You have 4 years Maximum to make return on your investment before the New Government Breaks the terms of the agreement? Side Deals or not The one to blame is the former minister of Transport and I am sure he is an intelligent Adult . Segun dont be neive that this is not with Branson’s Financial Backers who include the Bank of Nova Scotia in Canada. Nigeria has potential but only if it lives up to a deal like is being done in China , India and other developing economies.Bad deals only happen if you sign them so you have to live with them adn learn to not sign bad deals down the road. Otherwise there will be no deals period after a while.

Posted by paul taylor | Report as abusive
 

I fully support the steps being taken by the current government to ensure that the country isn’t being shortchanged. The era of 80% (for foreign investors) and 20% for the country has to end and this is a good start!

 

It is right that a responsible government question any deals they see as not serving the national interest. Maybe one investor leaves today but maybe that gives other investors the opportunity to come in depending on how the case has been handled. The current investor has a right to be treated fairly for the credibility of the government but African governments must refuse to be held at ransom for fear of losing investors! In the case of Nigeria with almost 150 million people, who does not want to do business there? Neither party to this should benefit unfairly.

Posted by Dereck T | Report as abusive
 

We are learning the ropes in Nigeria and as such, it is very importent for business men to know that doing business in a third world country where they usually have the financial capabilities to ”take addvantage” of the people would certainly be short lived!
Its obvious that the Minister then, was not ”educated” enough, to know the securty implication of what he agreed with Branson.
As Long as it is seen as a national security issue for the country,then, it is worth while to have that reversed. PERIOD!
Foreign investors do not necessarily have to be worried over such. People should conduct their businesses in such manners that would not find them wanting.
If Branson wishes to sell off his stake, he very well should do so. We are awaiting this confirmation so as to buy off his shares!!! With or without him, the nigerian aviation sector is and would grow!

Posted by Emeka O | Report as abusive
 

Branson can leave when he decides, shares in Virgin Nigeria would be snapped up before they even hit the market. Gone are the days when a selective group of people hold others hostage because of some perceived business clout or their geographical location. The world has become a multipolar one and availed its inhabitants with more opportunities, so Branson’s loss is another mans gain.

Posted by Nduka Tolefe | Report as abusive
 

First of all, there shouldn’t be any double dealings.Why in the world should a local flight land and depart from the international wing.Why is ViginNigeria given such access…oh ..i think i know..probably..as we say in Niga..he greased the palm of the powers that be then.Good that the Yar’Adua administration is reveiwing such contracts.It serves Lord Ricard well..let him leave if he wants to leave.Why should he be given an advantage over the local operators by having his aircraft bound for local destinations fly out of MMA.
We should not allow multinational companies to take us for granted by doing things that they could not afford to do in there own country.

Posted by Ade Bolaji | Report as abusive
 

I do not know what made Branson make a deal of any kind in Nigeria. He should have known that it was worthless.
Nigeria is corrupt to the bone, and oil or not – waste of time.

Posted by A Nielsen | Report as abusive
 

Any responsible governent has a moral obligation to act on the interest of its citizen. The United Kingdom without hesitation will act on the interest of its citizens, so therefore i agree with the government of Yaradua to review and if deemed neccessary, change the terms or renegotiate any and all contracts to favor its citizen.

Posted by Kehinde Omishore | Report as abusive
 

Well, told you so. Change is inevatible. Any deal done during Obasanjo’s reign is a wash. Branson should have known with a reputation like Nigeria for shady deals…move on. Yaradua is the boss now.

Posted by everal geduld | Report as abusive
 

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