Value of Private Equity deals in Nigeria hits $7.81 billion in 5 years
Source: African Private Equity Venture Capital
Private Equity investment in Nigeria continues to garner momentum, evidenced by a new report from the African Private Equity and Venture Capital Association (AVCA).
Overall, the country witnessed 112 Private Equity (PE) deals valued at $7.81 billion between 2012 and 2017, underscoring the potential in Nigeria’s investment scale amid a volatile and tough operating environment.
This is unsurprising given a slew of deals in the past two years as Nigeria’s rising urbanization, fast growing population that crave for consumption are increasingly attracting investment from PE firms.
In February, PE firm Milost Global Incorporated agreed to inject $350 million in Japaul and Maritime Services Plc in a deal that could salvage the beleaguered Nigerian firm on a life support machine.
BusinessDay investigations shows Japaul Oil is technically insolvent as its total liabilities of N51.41 billion as at September 2017, exceeded total assets of N27.10 billion. This resulted in a negative shareholders fund of N24.31 billion in the period under review.
On March 5, Milost agreed to invest $250 million in Resort Savings and Loans Plc.
The last time resort savings released its financial statement was the third quarter of 2015 when it returned to a profit of N34.26 billion.
Hitherto, Resort Savings had been recording recurring losses. It posted loss of N1.56 billion in 2013, N2.98 billion in 2014 as the bank grapples with a slump in revenue and huge allowance and impairment loss relating to loans and advances.
Milost had in January this year acquired the entire stake in Primewaterview Holdings Nigeria Limited, at $1 billion.
The outlook for PE funding into the Nigerian market appears bright in 2018 as the country continues to offer a large untapped potential for PE firms amid prohibitive cost of borrowing and the increasingly challenging operating environment, according to analysts at United Capital Research.
“This challenge offers PE firms the opportunity to intervene by using their technical competence to nurture budding mid-cap firms to turn them around, bridge the huge pre-IPO gap in the country and serve as a catalyst for much needed FDIs into the country,” said analysts at United Capital Research.
The gradual economic recovery experienced by Nigeria since mid-2017 could see more PE firms inject more capital into local companies as they are guaranteed a return on their investment.
The gross domestic product of Africa’s largest oil producer expanded for three straight quarters last year after a 1.6 percent contraction in 2016, with year-on-year growth reaching 1.9 percent in the final three months of 2017.
An increase in crude prices and the introduction of a new foreign-exchange system that ended a crippling shortage of dollars was responsible for the country’s exit from recession.
Data from AVCA also shows private investment in Africa is getting exciting despite political risk and headwinds.
West African region witnessed 267 PE deals valued at $10.7 billion between 2012 and 2017.
Nigeria accounted for 42 percent of the volume of the deals and a whopping 73 percent of the value of deals within the period, leading the region in both volume and value.
Ghana came behind closely at 27 percent of deals volume and 20 percent of deals value in the sub-region.
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