Singapore’s Nigerian energy investment seen as a sign of confidence

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Singapore - The second major acquisition in Africa by Singapore’s state-owned investment company or one of its units in six months shows growing interest in the continent.

Temasek Holdings would buy a stake in Seven Energy International for $150 million (R1.6 billion), the Nigerian energy company said on Monday.

This follows the announcement in November last year of a $1.3bn investment in three gas blocks off Tanzania by Temasek’s liquefied natural gas unit, Pavilion Energy.

“It ticks all the right Temasek boxes as it is an investment in a fast-growing emerging economy and is an investment in resources,” Song Seng Wun, a Singapore-based economist at CIMB, said of the Seven Energy transaction. “They are slowly getting more comfortable with the region.”

Nigeria had the potential to be one of the top 15 economies in the world by 2050, Jim O’Neill, a former chairman of Goldman Sachs Asset Management, wrote in a column earlier this month.

Stephen Forshaw, a Temasek spokesman, said: “We are interested in investment opportunities in Africa where they fit our investment themes – in particular, around the transformation of economies and the demand for consumption by growing populations.”

Before the most recent investments, Temasek’s assets in the region including Africa, central Asia and the Middle East accounted for just 2 percent of its total holdings as of March 31, last year, according to its latest annual report.

That was on a par with investments in Latin America.

Song said investing just $150m in a Nigerian company made sense because the country was politically unstable.

With less than a year before a general election, the government is increasingly stretched in its efforts to quell violence across swathes of the nation.

Friedrich Wu, an adjunct associate professor at Nanyang Technological University in Singapore, said: “One has to have a very high risk appetite to invest in a failed state such as Nigeria.”

Referring to Brazil, Russia, India, China, he said: “After the Bric economies, investors are chasing the next frontier markets to pour their money in.

“Africa has been talked up by various analysts and the media, but it could turn out to be a nightmare or quagmire.”

Seven Energy focuses on Nigeria’s domestic gas market.

In addition to Temasek’s investment, Seven Energy said $75m would be injected by the International Finance Corporation (IFC), a unit of the World Bank, and $30m by the IFC’s African, Latin American and Caribbean Fund.

Temasek said in August 2011 that its Sennett Investments unit and the investment holding company of the Oppenheimer family, E Oppenheimer & Son, would form an African-focused private equity joint venture that would primarily buy stakes in consumer and agricultural businesses on the continent. – Bloomberg


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