Letter from Lagos, Nigeria

Serge Gainsbourg at 5 am in Lagos and Observations on a Country Growing Rapidly

Ryan Floyd

Sept 11, 2012

After an overnight flight from London to Lagos, I refueled at my hotel’s restaurant for coffee and breakfast at six in the morning. The restaurant's speakers played Serge Gainsbourg's great, breathy, sensual and inappropriate "Je T'aime, Moi Non Plus" on repeat without the staff caring or noticing. I headed out for some meetings with various companies listed on the stock exchange and strolled around the city. Days and nights spent in Dhaka, Karachi, Mumbai, Jakarta, Lagos, Nairobi, and other cities with over ten million inhabitants have made me a bit of a megacity connoisseur. Each one presents a different set of challenges to life and work, with certain commonalities: heavy traffic, pollution, tightly packed public transportation, sidewalk traders selling watches, bananas, and even suits. I find these places inspiring. Every time I visit Lagos, I am encouraged by the economic activity, by seeing so many people trying to make their own living in this world.

Yet those pressures cause stress on infrastructure and the social fabric. I spoke to a colleague who was from Northern Nigeria who told me that Lagos was much safer now, but that his family in the northern city of Kano were afraid walking home from church on Sundays. You may have read about the explosions by "Boko Haram," an Islamist sect in Northern Nigeria protesting Western education and modernization. The group has claimed responsibility for explosions at the UN Office, military complexes, and even churches. The headlines are grim.

Why wasn’t I worried? Because I think we need a little step back to get some perspective. Nigeria faced terrorism in various forms before Boko Haram. A search of "Nigeria" and "bomb" on Google News flags frequent stories going back to 2001: "No fewer than 700 unclaimed corpses of victims of the January 27 bomb explosions in Lagos (2002)", "Bombs caused the weekend blast that killed at least 44 people (2003)," "Political, ethnic and religious violence has claimed more than 10,000 lives since...1999 (2005)" and more. Nigeria has faced ethnic violence for a long time. Although I never want to become numb to it, I also think about Samuel Huntington's observations, "The instability of the city—the instability of coups, riots, and demonstrations—is, in some measure, an inescapable characteristic of modernization.... Urban instability is thus minor but universal."

Back in the car, I had more time to think about the more mundane pressures of expansion. In other words: traffic. Every country has its own traveling style, and Nigeria’s is harder to bear than others. In Sri Lanka, most listed companies operate within one mile of one another and the traffic is so smooth that I can meet with 21 companies in three days. In Nigeria, an investor struggles to have three meetings in a day due to traffic.

I listened to one radio show with Dayo, a local analyst and my guide. It was hosted by a saintly woman who gave a space for irate callers to complain about terrible customer service. They weren't able to mention the names of the companies, but Dayo told me that astute listeners could identify the company based on the part of the city mentioned and the description of the branch. One woman called in to say that her ATM card had stopped working, and she complained that the person at the bank wasn't able to help her. The lady had to wait for one hour to speak with the branch manager, who ultimately couldn't help. I could feel my own heart rate rising just listening to her, and she seemed furious. The host commiserated: sometimes you just had to make a scene to get the branch manager's attention because the clerks are powerless.

Another man called to complain that his cell phone company continuously charged higher rates than he had agreed to in his contract, and the customer service on the phone was terrible. Each caller was earnest and upset.

I asked Dayo about his experiences with customer service. He shook his head and closed his eyes. "Yes, terrible,” he said, “just terrible." We laughed together. It seemed hard on all sides. Banks, phone companies, and airlines are the worst in every country, but this seemed to be at a much higher level. I tried to picture it from the company's perspective as I listened. I could also understand how challenged these companies were by hiring good people and getting their HR departments in order. The talk show supported the view that companies can have tremendous difficulty growing by 15-20% because their hiring and training practices just can't keep up with the demand.

The banks are attempting, though, to gain new customers by competing on improved electronic platforms. Many are anticipating a world in which loans, deposits, and money transfers mostly move through smarts phones and tablets. Mobile banking in Africa is a land grab right now. Banks are developing their own systems and small companies are each trying to become the PayPal of their countries. The local CEO to Standard Bank's Nigerian operations—shares of which we don't own—told me they want to expand to gather deposits from the 30% of the country who have cell phones but not bank accounts. This aggressive push will reduce banks' cost of funds and expand net interest margins temporarily. In the medium-term, it should also bring down the costs of risk because they will be able to price smaller loans more efficiently with much more data on their customers. More people will have access to credit as a result of this new technology, which should provide support to economic growth.

This is the endgame, both in Africa and throughout the world: a system in which most economic exchange happens electronically and is easy to capture in the formal economy. Few Africans even have a bank account now, and I can imagine a future in which Africans skip the banking-at-the- branch life and move straight to banking-through-cell phone, just as they skipped the landline and moved directly to the mobile handset. Even the Lagos State government in Nigeria has gotten in on the act, promoting a "Cashless Society" encouraging all shops to accept debit cards. I saw a fried chicken outlet that patriotically encouraged its customers to use a debit card to buy their $3 meal of chicken and jallof rice - a delicious stew cooked with onions, red peppers, okra, garlic, ginger, and chili peppers. Culinary tradition and financial future, all rolled into one.

Happily, bankers and the state can only monetize so much: a sphere outside the market suggests a growing civic life, with identifications based on commonalities, not accumulation.

I noticed small turf soccer fields throughout Lagos scrunched between shanty towns, highways, and what looked like lower middle class apartments. My guide mentioned that young men played there as part of a "banker's football league" on Wednesday nights, though apparently it includes professionals from different sectors. I don't want to overstate the tremendous impact such informal civic gatherings will have in a place like Nigeria, but I think this is pretty remarkable. Just a few decades ago governments would have feared local clubs because they would be nodes for political plotting and gossiping. Now they are cemented facts in society.

I have been thinking about the role of "civil society" in developing countries recently. I just finished reading Bowling Alone, in which Robert Putnam decries the declining state of civic participation in the United States since the 1960s. He offers mountains of statistics showing that fewer people volunteer, belong to clubs, attend religious services, and have friends over for dinner than in 1960. Civic life, to Putnam, provides the glue to modern city living, where people are removed from their rural homeland and extended family. Civic life supports more participatory governance and keeps crime low. I exchanged e-mails with Putnam to see whether he knew of any statistics of civic life in emerging markets and he said the data is very thin. He had heard anecdotally also of growing associational lives throughout developing countries.

I regularly ask people in Asia and Africa whether they belong to clubs or attend group meetings of any kind: book clubs, sports teams, or community griping sessions. They usually mention their intense attachment to their families and maybe their church. But urbanization follows hand in hand with smaller household sizes, and the traffic and distance that separate families. Civic life can help fill in these gaps. Illegitimate governments don't want people to get together in informal groups because they might criticize leaders and could plot a rebellion, but more comfortable regimes might be more forward-looking. Groups of wealthy men getting together for soccer and beer on Wednesdays could talk about financing a coup and provide a threat to an insecure government. They can also deepen ties across ethnic groups and sectors based on something so basic as someone's employer. I find the football league a sign, in Nigeria at least, of deeper civic involvement, and a more confident and secure relationship between the state and the citizens.

I read frequently about the growing pains countries face as their incomes rise put pressure on infrastructure and governance. I visit corporate managers who discuss the challenges of their countries. But people don’t live life as statistical data points, thinking about the percentage change in their happiness. They live minute by minute and hour by hour. It would be impossible for a manager—or anyone—to capture all these infinitesimally small movements to analyze where a country is headed. Tolstoy hits this note in his essay on history at the end of War and Peace, noting that The movement of nations is caused not by power, nor by intellectual activity, nor even by a combination of the two as historians have supposed, but by the activity of all the people who participate in the events, and who always combine in such a way that those taking the largest direct share in the event take on themselves the least responsibility and vice versa.

“All the people” does not mean corporate CFOs and CEOs. It means the larger stew, the other individuals in these emerging market cities, who are experiencing their own flushes of opportunity, which give way frustrations, which constantly summer, and sometimes boil over to antagonism. My trip ended on one such perfectly complex note, with a rain-drenched trip to Lagos’s airport. My flight was at 10:45 pm, and I planned to leave the office around 6:30, to give myself two hours to get there and then two or so hours before the flight. After my last meeting, the skies opened up with raindrops as thick as fingertips. Dayo suggested that I leave even earlier. I hopped in the car they had provided and headed to the airport.

We spent the next forty-five minutes traveling about half a mile.

It was hard not to see it all as a metaphor. At one point where four lanes merged to three, the car inched forward at what seemed like one inch an hour. To my left, a female driver in a blue Toyota merged right and knocked into a red Honda sedan’s bumper. The male driver put on the blazer sitting next to him, puffed up his chest to be twice its previous size, buttoned the top button, got out, and stood in front of her car. The lady, obviously embarrassed, got out of her car to fight in the rain. She moved her hands angrily as if to pin the blame on the man, but eventually she realized that it was her fault. He looked like he was holding back tremendous anger and showing almost English austerity. I didn’t see how it ended; our car moved on.

About an hour and a half later, on a "highway" moving at about eight miles per hour, another accident occurred, this time over a small bridge. The rain had let up, but the road was muddy. Each driver in the accident opened his car door, again, to fight. The men shouted as if their hearts were about to burst. Excited, they bent over and made motions as if preparing to fight, lunging as if they were dancing capoeira. They never actually made contact, but they made their anger felt.

I arrived at the airport after two and a half hours – much less time than friends expected.

The people behind the gate and behind security at the airport looked peeved. The initial security check was a joke: a very light pat-down and a roll of the eyes. After immigration, we were corralled into a spot outside of the gate at 9:45, one hour before the flight was supposed to leave. A few of us tried to form a line, but it didn't work: people kept pushing to the front. The men behind the gate called individuals out for preferential boarding, probably because they had slipped the agents some money beforehand. People's temperatures started to rise.

One woman in front of me said to her man, "Go do something. Go up there." Another man behind me yelled out loudly to the guy reading off the list and the lady in front poked her husband, saying, "See, like him." We all knew we had no control. I read my book and took deep breaths. I knew we'd be on the plane soon enough but couldn’t help making eye contact with dispirited fellow passengers. They looked worried, as if they feared we wouldn't be able to get on the flight at all. After 30 minutes, we were finally all through the line, at which point we went through our second bout with security. The United States doesn't trust the Nigerian screening process, so we had to open each of our suitcases for three people who worked for the U.S. government, at least one of whom had an American accent. Each person filed to his seat calmly—I noticed no complaints— and swiftly turned on the in-flight television.

Despite the tension throughout the process, I was heartened by the small human interactions on the margins; the calm Nigerian man in line who travelled frequently between Houston and Lagos and chatted about his work with a local volunteer group; the lady calmly reading her book on the waiting room; or the hundreds of drivers who made their way to the airport without any particular conflict or threats of violence.

I don’t think that any of these anecdotes provide support for investment decisions. A manager can evaluate risk and judge future growth through macro statistics and financial statements. But it’s still helpful here to consider the minute-to-minute actions that make up our companies’ customers’ lives. A country with incomes growing at 8-12% a year will always suffer growing pains, and Nigeria is feeling them like many other places around the world. We hope for the country's sake that the mindful people in line will balance out the others. And either way, I will continue enjoying Lagos' energy and Nigerians' passion for life.