What’s happening in the Private Equity space


Thursday, September 11, 2014 1.13 PM / Sriram Sekhar for TheAnalyst


Nigeria is amongst the fast growing countries on the African continent, indeed the biggest in Sub-Saharan Africa (SSA), and confidence in the Nigerian capital markets and the overall private sector performance has been growing year-on-year, with the Nigerian economy projected to be among the top 20 global economies by 2030 (with an estimated GDP of $1.6 trillion).


Over the past five years, Nigeria has shown a robust improvement in its political and economic outlook. Currently, the Nigerian economy is attracting a lot of investor attention, especially since it is now growing faster than South Africa.



Nigeria, is one of the most attractive destinations for foreign  and domestic investors, as it gives an entry in Sub-Saharan Africa, and also given that many MNC's have set up or considering setting up a base in the country.


Nigeria's capital market has now evolved into an important avenue to support long term savings especially in the segment of new pension regulations, though not much capital is able to flow from the pension funds as would be expected.


The appetite towards investing in private equities (PE) for higher returns has started to increase in the country. According to the private equity growth capital council (PEGCC) of Nigeria, PE fund have delivered nearly 10% returns annually over the last ten (10) years.  


Nigeria's National Pension Commission (PENCOM) regulations permits to invest 5% of the pension assets in PE funds, as a result the present Pension Fund Administrators (PFA) investments in PE funds accounts for 1% of the total industry asset.


Nigeria's PE regulation:

The Nigerian Stock Exchange (NSE) has brought about several rules and regulation to govern the PE funds in Nigeria, such as:

  • The Nigerian PE funds should hold minimum commitment of N 1 billion of investor's funds
  • PE fund managers are imposed with minimum capital requirement of N 20 million.
  • Funds invested in a single investment is restricted to a maximum limit of 30%.


Types of Private equity:

Leveraged buyout, Growth equity, Venture Capital are a few types of funds which are in practice in the country.


  • Leverage buyout: Firms in need of capital transition are provided with equity capital through leverage buyout .Small/Mid-sized buyout has lower proportion of debt in the capital structure. Generally in Nigeria, PE deals are in the form of management buyouts. 


  • Growth equity: These funds helps the firm to expand its business operation and to scale up the business. The returns under this type of equity is dependent on the cash flow growth.


  • Venture capital: Funding capital to start-ups or funding companies at its early stage of growth. Success in the business results in increased returns at higher risk.


Some deals happening in PE sector:

  • The African private equity ad venture capital association (AVCA) has invested $10 million in Nigerian small medium enterprises and association is still seeking to expand its investment numbers in the country.
  • The Carlyle group and Dangote industries Limited partnership is likely to invest across the oil & gas value chains, fast moving consumer products, financial services and agribusiness sector in Nigeria.
  • MTN Nigeria and Etisalat Nigeria, look forward in investing in companies that are highly valued in Nigeria.


References for further reading:

1.    Appraisal of the growing Private Equity funding markets in ..

2.    Private Equity in Emerging Markets & Africa - PenCom

3.    Guides to Successful Private Equity in Nigeria ...

4.    Private Equity and Venture Capital Report 2014 - IFLR.com

5.    Global Private Equity Report 2014 - Bain & Company ...

6.    2014 Preqin Global Private Equity Report

7.    Private Equity Trend Report 2014 An industry rediscoverin

8.    Private Equity in Nigeria: A rapidly evolving industry ...

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