Nigeria, Africa’s most populous country is not a market without its challenges, but investors continue to see it as an attractive destination for deal-making thanks to its increasing population growth.
A total of $2.7 billion deals in Mergers& Acquisition (M&A) were recorded in 2018 same value that was recorded 12 months earlier yet investors are showing bullish sentiments of an increase over the next two years through 2020 if the Federal Competition and Consumer Protection Bill 2017 is passed into law, according to key findings from a survey by global consulting and auditing firm KPMG.
The survey captured responses of 50 senior business executives who have completed an acquisition or investment in Nigeria within the past four years, and currently, have operations in Nigeria.
Key findings from the survey showed that 80 per cent of the respondents expect deal activity to increase over the next year and more than three-quarters of respondents said they were more likely to invest in Nigeria as a result of their previous M&A experience in the country.
Furthermore, about 48 per cent of the surveyed sample said they are now significantly more likely to invest in Nigeria.
“Nigeria is turning out to be an investment haven,” says an EMEA-based director for a TMT corporation. “Investors see long-term opportunities in the country and these investors can start from the grassroots level moving vertically and growing fast.”
The year 2019 so far, appears to be a favourable year so far for M&A deals in Africa’s most populous nation going by the green light into major deals that was recorded in the early start of the year, according to data compiled by BusinessDay.
One of such was the $200million merger deal between Tier 1 lender, Access Bank and the Carlyle backed Diamond bank in January this year. Another was in the consumer goods space when Coca-Cola snapped a 100 per cent stake in fruit juice giants, Chivita Limited in a deal worth about $500 million, based on industry estimate.
In terms of sectors where investors see as being more attracting for investment, the consumer sector has continued dominating Nigerian M&A destination with more than 76 per cent of the respondents say the sector will be the country’s most attractive industry for M&A over the next two years.
Closely behind the consumer goods industry, the financial services sector has been tipped also to be a big driver of Nigerian M&A as 40 per cent chose the sector as their investment destination.
However, while there are reasons for optimism in the Nigerian M&A markets, challenges still await prospective bidders, according to responses from the investors surveyed.
One major concern identified by investors is the regulatory and legal obstacle in doing business in Nigeria together with the challenging compliance requirements.
To tackle these bottlenecks, 52 per cent of the investors said that doing business in Nigeria would become more attractive once the Federal Competition and Consumer Protection Bill 2017 is passed into law
The Bill applies to all businesses and commercial activities in Nigeria, with a series of fines to be levied for non-compliance, including a general penalty for offences of up to 10 per cent of the company’s annual turnover in the preceding business year.
Above all, the Bill aims to overhaul Nigeria’s complex competition laws, with the Federal Competition Commission to be handed supremacy over other government agencies. Increased competition and the prevention of monopolistic behaviour should result in a pay-off for M&A activity.
“The Bill will maintain the competitive nature of the Nigerian market and attract foreign investment,” the report says. “There is also the consumer protection [element of the] bill that could lead to a string of M&A transactions in the consumer sector as quality businesses will be promoted within the country now.”
MICHAEL ANI & BUNMI BAILEY
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