Private equity (PE) firms are seizing the opportunity rising demand for quality education is presenting in Nigeria and across the African continent as middle-class parents seek to invest and secure brighter prospects for their children and wards.
Six months ago, Actis, a global emerging markets investment firm focused on PE, energy, infrastructure, and real estate asset classes with $12 billion in assets, acquired the Nile University of Nigeria, Abuja, a private university. The acquisition means that the university now belongs to Actis-backed education platform, Honoris United Universities, Africa’s first and largest pan-African network of private higher education institutions platform, Honoris United Universities, Africa’s first and largest pan-African network of private higher education institutions.
Established in 2009, Nile University of Nigeria is a fully accredited university that offers a broad range of undergraduate and postgraduate programmes in the Arts and Social Sciences, Engineering, Law, Management Sciences, Natural and Applied Sciences, and Medical and Health Sciences.
Providing quality education in Africa has become all the more urgent because the future workforce of the world is projected to come from the continent in the coming decades. The success or failure of education on the continent is therefore a global concern.
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By 2035, the number of Africans joining the workforce will exceed the number for the rest of the world combined, making it imperative that its education systems can match students with developing workforce needs.
“In light of Nigeria’s strategic importance to the development of Africa, we are pleased to be making this investment in the educational system of the country,” Luis Lopez, CEO of Honoris United Universities, said.
PE firms are also expanding their investments in secondary school education in Nigeria and across Africa to meet the rising demand for quality education by the country’s expanding middle-class parents.
A 2016 Mckinsey report noted that by 2020, 128 million African households will earn $5,000 a year or more, enabling them to spend half their income on non-food items. Besides, the report notes that Africa’s middle-class families – those earning $20,000 or more outnumber
India’s, making the African market quite attractive for investment in education, especially as government funding for education is abysmally low.
Nevertheless, the sharp depreciation in the naira, which has led to a significant rise in the cost of educating children abroad, and the deplorable state of publicly funded educational institutions have increased the demand by middle-class parents for educational institutions that are located in the country but can provide an international standard educational environment, facilities and teachers.
PE firms have recognised this need and are beginning to invest in secondary school education in the country.
Nigeria- based private equity firm, Verod Capital Management, through its educational investment vehicle, Oreon Education, in July 2017 acquired a stake in Greensprings School, one of Nigeria’s leading private secondary schools located in Anthony and Lekki, both in Lagos, bringing the number of its investment in private secondary schools to five.
Verod disclosed that the investment was designed to enable Greensprings to restructure its capital base and fund growth initiatives.
According to the PE firm, it expects that the segment will continue to grow owing to increasing affordability for the middle class and the Nigerian government’s increasing role as a steward and enabler rather than a provider of public education.
Funding education is capital intensive, and profits are often not expected in the first decade of an educational institutions existence, making it necessary to explore novel models of funding such as long-term PE investment. Industry players say the average wage bill of a medium-sized private university is about N700 million per annum.
Setting up a well-equipped electronic engineering department costs about N90 million and profit is strictly a game of numbers. It takes at least a decade to have the number of students needed to break even, according to industry players.
“A lot goes into building and running a school beyond putting up classrooms. Education investing is definitely more profitable at the secondary school level than at the university level. I do know that some secondary schools are profitable, but the same is not true for most universities, even those that were set-up to make money,” Chidi Nwagu, manager, University Development at the Pan-Atlantic University, Epe, Lagos, told Businessday on phone in an earlier interview.
