Recently, Olaniwun Ajayi LP, a leading Nigerian law firm announced that it had opened a London office with three new partners: Chuks Ibechukwu, Chair, Corporate Finance Practice; Dr. Gabriel A. Onagoruwa, Chair, Finance and Project Development Practice, and Howard Barrie, Senior Partner. Following this remarkable accomplishment, LEGAL BUSINESS’ Onyinyechi Ukegbu sits with the partners to discuss project finance, the infrastructure deficit, the future of the legal sector, and of course, running a Nigerian-born firm out of London.
Chuks Ibechukwu on private equity and impact investments…
“The development story behind an African law firm developing the capability to support clients on not only the Nigerian law aspects of projects in Nigeria, but any multi-jurisdictional or cross-border support that the clients may have, is incredibly compelling and I want to be a part of it. ”
You have worked for several international law firms including Allen & Overy, Latham & Watkins as well as International Finance Corporation, the private sector finance arm of the World Bank, where you were Africa Regional Lead for private equity and funds and advisory services businesses. What influenced your move to OALP?
CBI: My professional interest and focus has always been directed towards development of Africa and emerging markets in other regions. I’ve been fortunate to have had the opportunity to maintain this focus while working at US and UK international law firms and then to consolidate and apply my experience in furthering the mission of International Finance Corporation and the World Bank Group in Africa, including in the roles that you mention.
My work at IFC gave me an interesting and fuller perspective on the legal services market in Africa. On the one hand, I’ve been encouraged by the number of international law firms as well as African law firms that organisations like the World Bank Group and the broader investor community can collaborate with on structuring and closing investments in the region. I’ve been encouraged to see interest in Africa and just how many law firms have invested time and effort in understanding the countries in this region and have dedicated resources to working with clients to unlock opportunities across industries in this region. On the other hand, however, I found it impossible to ignore the fact that most law firms founded in Africa are not positioned to compete for all types of legal work that are relevant to investments in their own jurisdiction. This is mainly because of the multi-jurisdictional and cross-border nature of many investments in this region, and an historical preference for investment agreements with foreign investors to be governed by English law.
We therefore find ourselves in a situation in Nigeria, which is the case in other African countries, whereby Nigerian businesses seeking to attract foreign investment for a project located in Nigeria will need to shop for legal services in London. This has a real and measurable impact on social and economic development in Nigeria if we consider, for example, the revenue that this region foregoes because of this, or the professional experience and human capital development that we forego to other markets by not being able to fill this gap. There are also inefficiencies for clients having to coordinate with multiple law firms on projects.
The development story behind an African law firm developing the capability to support clients on not only the Nigerian law aspects of projects in Nigeria, but any multi-jurisdictional or cross-border support that the clients may have, is incredibly compelling and I want to be a part of it. As a result of what Olaniwun Ajayi has achieved by now being able to support clients with English law capability, Nigerian businesses looking to attract foreign investment for projects in Nigeria, are now presented with an option to shop for all of their legal services in Lagos. A one-stop-shop.
OALP announced that the firm’s focus areas would be corporate finance, project development, M&A and Private Equity. Why these?
CBI: Our strategy is client-centered. We succeed if our clients succeed. In line with this, our London office strategy responds to what we see as our client’s immediate needs and takes into account what we see as their direction of travel so that we can help them along.
If I take as an example one category of clients that we are looking to support through our London office – development finance institutions. Development finance is expected to play an increasingly important role in corporate, project and infrastructure finance in Africa over the coming years. All of our DFI clients have recently announced their intention to expand their investment programmes significantly in Africa, with an increased focus on infrastructure investing and deploying more equity capital, both directly and through Africa-focused fund managers, to unlock some of our more challenging industries and markets. All of this with their continued emphasis on environmental, social and governance standards in the projects they support.
In opening in London and deciding on what areas to focus, we have considered our clients and which areas of expertise are most likely going to be important to them and their objectives in Nigeria and other parts of Africa, and we’ll build from there.
What would be a short-term milestone achievement for the London office and how does this fit into OALP’s vision?
CBI: We only had one short-term milestone for the London office, which was to open the office and demonstrate our belief that a law firm founded in Nigeria is just as capable as law firms elsewhere in the world of providing best-in-class, cross-border legal services and transaction support on all aspects of investments in Nigeria. That a law firm founded in Nigeria has the capacity to take lead transaction counsel roles on all forms of projects in Africa. Considering the combination of expertise that we have assembled in London, it is clear that we achieved this milestone on 1 December 2021 when we launched the office. Achieving that milestone was far from straightforward and was the culmination of years of focus and effort by many at the firm. It has not been easy or without risk, and it is understandable why there are no African law firms like us in London.
With that milestone behind us, our singular focus today is on achieving our mission and long-term objective of establishing Olaniwun Ajayi in the minds of our clients as an international law firm, trusted adviser and partner of choice for their cross-border investments in Africa.
Where do investors see the highest potential for impact investment in Nigeria?
CBI: When we think of high impact investments in Nigeria, but also through Africa, investments in infrastructure are the first to come to mind given the recognized and widely publicized infrastructure deficit in the region. There was a recent World Bank report in which it was estimated that if sub-Saharan Africa were to be able to close its infrastructure gap to the level of the rest of the developing world this could potentially increase the region’s per capita GDP by up to 1.7 percentage points each year, which is huge. Closing the infrastructure gap in electricity-generating capacity alone would yield the largest benefit. As Nigerians going about our day-to-day lives, this is evident to us even without having to look at World Bank reports.
In my previous job at IFC, I worked across industries and measuring development impact was an important aspect of the projects that we financed. What was clear was that for Nigeria and other parts of Africa, investments in almost all aspects of our economies – whether in manufacturing, healthcare, financial services, hospitality, or entertainment – have the potential for real and measurable impact in creating jobs and opportunity, increasing foreign exchange, financial inclusion, developing human capital, and improving all-round living standards.
The global impact investing market is significant, and given the development challenges in Nigeria, we are an obvious destination for impact investment. But impact investors like any other type of investor also need assurances that their investments are protected, financially sustainable and able to generate the right returns. Having the right partners, including legal advisers, that can help them navigate this market and best advise them on how to structure and protect their investments and give them that comfort is key.
Read also: Attract more investment, borrow less experts tell FG
With over $270 trillion worth of global commercial capital out there, how can Nigeria mitigate risk through regulation and attract more private equity and impact investment?
CBI: All investors appreciate that regulations exist everywhere and in all markets. In Nigeria this could be CBN regulations to monitor and control foreign exchange inflows and outflows, shore up our foreign exchange reserves and protect the Naira. Or it could be the more recent FCCPC merger control regulations to improve competition and protect against anti-competitive practices, which is topical among private equity investors, many of which look to take controlling interests in the companies they invest in.
But regulations are there not only to protect investors but also the market and consumers. What is important, therefore, is for our government to find the right balance to ensure that regulations are sufficiently effective to protect the market and consumers but are then instituted and implemented in ways that can sustain investor interest and confidence.
From an investor perspective, they need to see that the regulatory regime applicable to them is clear and relatively stable. Investors need a reasonably high level of visibility and understanding of what regulations will apply to them, the time it will take for them to comply with these regulations, the cost of compliance, and confidence that these three elements will not overly fluctuate. And they need this information and comfort before they commit to making their investment, as this allows them properly value or price their investments, gauge the impact of the regulations on the growth prospects of their business over the life of their investment, more accurately project their returns, and have the confidence that they will be able to repatriate the proceeds of their investment in the agreed currency when they choose to exit. Clear and stable regulatory regimes. This is what governments needs to provide.
OALP’s decision to open a London office is a visionary move in the Nigerian Legal Sector. What impact do you envision this would have on the sector?
CBI: Intraregional trade among African countries needs to improve. Our volumes are substantially smaller compared to other world regions. Intraregional trade has remained somewhere around 13% of total exports in Africa compared to 60% of total exports among EU countries and 46% among countries in East Asia and the Pacific. When it comes to intraregional trade in services, our percentage is even smaller. We just need to look at any infrastructure project being implemented in countries across Africa and this is immediately obvious. Almost all aspects of these projects – whether power projects, roads, ports, you name it – involve the procurement of bulk of goods and services from outside of Africa. The contractors that develop the projects, the technologies that they bring with them or the debt and equity capital used to finance them. When it comes to the services needed to deliver these projects – from insurance consultants, environmental consultants, financial advisers, market consultants, reserves consultants and legal advisers – as a region we are still heavily reliant on firms from outside of Africa for these services.
There is so much more that we could be doing to boost cross-border trade in services in Africa, whether in health, education, or business services. Our mission at Olaniwun Ajayi, at least with respect to the delivery of legal services in Africa, provides African businesses and investors in African projects – both foreign and domestic – with a credible, African-inspired, and African-born option for best-in-class, international and cross-border legal services. Our mission contributes to boosting intraregional trade in services in Africa and to hopefully inspire others to do the same.
Dr. Gabriel Onagoruwa on energy and infrastructure…
“the challenge of setting up a successful international law firm in the competitive space of the most developed legal market in the world is a daunting one. But
the value proposition of an African firm with international legal capabilities
is very compelling.”
What is it like to be one of the premiere partners in this unprecedented move by OALP?
GO: The first word that comes to mind is “privileged”. I feel privileged to have a front seat in this bold move by Olaniwun Ajayi. As you know, this move is pioneering and well in line with the firm’s characteristic Blue Ocean strategy. So, it is exciting to hold this spot in history as one of the founding partners of Africa’s first major law office in arguably the most developed legal market in the world.
On the flip side, the challenge of setting up a successful international law firm in the competitive space of the most developed legal market in the world is a daunting one. But the void that we seek to fill is gaping and the value proposition of an African firm with international legal capabilities and capacity to provide world class legal support to clients engaging in cross-border economic activities across Africa and beyond is very compelling. That is why this initiative is an exciting one. We are confident that with the support of our clients, we are on our way to building a global institution that Africans can all be proud of and one that will serve as a template and inspiration for other professional African institutions.
There is constant talk of how there is much room for growth and expansion in Africa, why start a firm in a London and not another part of Africa?
GO: Our decision to open a London office is a strategic one that is driven by our commitment to our clients and the need to plug a gap in the market while unlocking new opportunities for our people, our peers, and the entire continent.
We definitely see the firm expanding to more African countries and other key global financial centers with significant African economic activities based on the needs of our clients. However, given the prevalence of and preference for English law in EMEA projects and finance transactions, the choice of London as a first stop was simply natural. London’s uniqueness as the world’s global financial Centre is not in doubt and having our first offshore office in the city positions us strategically to provide efficient international legal support to our clients and their projects on a cross-border basis as they expand their footprints across Africa and beyond.
How does the practice focus areas of the London office play to OALP’s strength?
GO: For close to 60 years, Olaniwun Ajayi has been a trusted adviser of choice for institutional investors, sponsors, governments and private clients on all aspects of complex, multi-disciplinary, financing, corporate, commercial, disputes and policy matters arising from their activities and operations. The fact that the firm is constantly ranked Tier 1 by all leading international legal directories speaks to the technical excellence and bespoke client services offered to clients through the decades.
The London office is well-curated to build on Olaniwun Ajayi’s longstanding reputation for high-end and specialist legal services in these areas across key industries in Africa, including power and renewable energy, infrastructure and utilities, oil & gas, mining and metals, industry and manufacturing, healthcare, agribusiness, and Fintech.
Each of the London partners come with exceptional skill-set and robust experience. As such, one can only foresee immense value creation in the synergy between the London office and OALP’s legacy expertise.
You are well-known for your expertise in energy projects in Nigeria and have advised several national and internal oil companies, among others, in this regard. Currently, IOCs are on the verge of divesting from their onshore and shallow water assets in Nigeria, how should local firms structure financing in today’s market?
GO: As you may already know, the energy transition debate is having a profound impact on oil and gas financings, as investors and lenders respond to public pressure on the matter. Some investors and institutional lenders have opted to exit oil and gas completely, but many others remain committed to the sector with the proviso that oil and gas producers must demonstrate good ESG practices and a commitment to operate as sustainably as possible.
These pressures have meant that innovative structures and products have had to be developed and carefully combined to sustain developments in the industry, as the pool and sources of funding have become more streamlined. In the current environment, it is unlikely that a conventional vanilla product would suffice for the kind of acquisition being contemplated.
Hybrid financing solutions involving a well-thought-through combination of any of equity financing (including public markets, equity lines of credit and standby distribution agreements, convertible loans and SPACs); private capital (including private equity, sovereign wealth funds, strategic corporate investors, venture capital, family offices and earn ins); debt financing (including project finance, development finance institutions, export credit agencies, reserve-based lending and sustainability-linked loans) and production-based financing (including pre-export financing, prepayment financing, streams and royalties) would be needed by the indigenous oil and gas companies for the acquisition of these prime assets from the IoCs.
Clearly, a one-size-fits-all approach is unrealistic and unworkable. The optimal financing solution for each indigenous company looking to acquire oil and gas assets would depend on several variables, including whether the company is a sole or multiple asset company, one line or multiple product company, a long-standing or relatively new company etc. Another major consideration in the assessment of the optimal financing structure for indigenous companies looking to acquire these assets will be dependent on the extent to which the company plans to hedge the sale of production from the assets after the acquisition. Reserve-based and, to a certain extent, high yield lending is typically structured on the basis that a significant portion of the production from the asset will be hedged at a predetermined price and for a given period.
Fortunately, the blend of our expertise and experience at Olaniwun Ajayi places us in a prime position to support the IoCs and the indigenous oil and gas companies in their bid to achieve their commercial objectives in relation to the divestment and acquisition of these prime assets in the coming months
Your expertise extends to infrastructure projects, as well, and you have been recognized as a leading individual for finance in emerging markets by Legal500. Comparatively, how successful do you expect the Nigerian Infrastructure Tax Credit Scheme to be, in solving Nigeria’s infrastructure deficit? What would you say are the chief challenges to its long-term success?
GO: Infrastructure deficit is a well-known constraint to economic development and growth and the Nigerian Infrastructure Tax Credit Scheme is a welcome policy initiative of the administration of President Muhammadu Buhari, given its focus on incentivizing the private sector to play a more significant role in plugging the infrastructure deficit in Nigeria in an accountable manner.
With an infrastructure deficit estimated at c. $3.0tn by the International Monetary Fund (IMF) and African Development Bank (AfDB) and requiring at least $100 billion annual funding, and as competing interests continue to jostle for the country’s currently strained public finances, the scheme seeks to leverage private capital towards key infrastructure needs like road construction, maintenance, and repair. With the early successes recorded by NLNG and Dangote Cement PLC who have received tax credit certificates valued at N46 billion and N32 billion, respectively between 2019 and 2021 to offset their income tax payable under the scheme for the applicable years, it can be expected that more stakeholders in the Nigerian business community will adopt and utilize the scheme for the good of all Nigerians.
Although the 10-year limited term of the scheme raises some questions when considered against the backdrop of the fact that over 75% of state and local roads in the country are in a deplorable state, we have to deploy all the tools at our disposal to mobilize the needed finance for investment in critical infrastructure nationwide. Tax credits and other instruments the market has seen in the last few years are a great start, but there is not only room for more, there is need for more!
The government must continue to build a track record of public-private partnership (PPP) performance to attract large sums of long-term funding from the private sector for infrastructure projects in the country. PPPs will enhance a better allocation of risks between public and private sectors and facilitate efficiency in the provision and management of infrastructure projects which will impact positively on the country’s economic growth trajectory and support job creation and the industrialization of the economy.
Where do you see energy and infrastructure practice in the Nigerian legal sector in the next 5-10 years?
GO: The deficit and challenges in Nigeria’s energy and infrastructure sectors must be viewed through the prism of opportunities. 47% of Nigerians do not have access to grid electricity and the entire country requires significant infrastructure investment over the next couple of decades to address the current deficit.
So, without doubt, there is a lot of work to be done in the energy and infrastructure sector of the Nigerian economy and the legal market will play a pivotal role in this.
Projects and deals activity in these sectors continue to improve and show no signs of slowing down. Consequently, Nigerian E&I legal practice will definitely get bigger, more refined and more complex over the next 5 – 10 years. I see the practice evolving to meet the needs of the market and as always, given our unmatched market expertise at Olaniwun Ajayi, we are able to deploy our proficiency for the needs of our clients and the development of these dynamic sectors, in the overall interest of the everyday Nigerian.
Howard Barrie on project finance and the value of innovation in the legal sector…
…being able to sit together, plan together and work together increases the shared commitment to the success of the London office
You have worked on project finance, structured trade finance and cross-border lending transactions in over 16 African countries; how did Africa become the territorial focus of your legal practice?
HB: Like many aspects of life, it started by accident. I had worked on some financing transactions involving Africa earlier in my career (a bartering transaction involving cloves from Zanzibar being swapped from bicycles from England springs to mind). I had also worked on cross-border financing transactions involving South Asia, the Middle East and Russia and served my time financing Public Private Partnership (PPP) transactions when it was popular in the UK. It was the 2000s and because of my international experience, also with project finance and PPPs, the Managing Partner of my then firm, Dentons, asked me to chair its Africa Committee which was responsible for supporting and developing its network of associations with African law firms. Dentons was an early mover in having a formalised network of associations with African law firms. My greater exposure to many impressive lawyers on the Continent and the Continent itself led to me wanting to and getting appointed to advise on projects and project financings on the Continent. The drive to continuing to focus on working on African projects came from a simple idea that if I could contribute my legal experience and skills in helping to develop new infrastructure projects on the Continent from which useful lessons could be learned for the future, this was going to have a far more significant social impact than working on projects in say the UK. For instance, during its construction phase, the Makeni project in Sierra Leone provided employment for, I understand, 2000 of previously subsistence farmers, with many positive, life-changing, consequences for the population of the locality.
Over the years, legal practitioners have commented, repeatedly, on how much easier it is for foreign firms to tap into the African market than it is for African firms to tap into foreign markets. How has your firm accounted for these concerns?
HB: The expertise and success of international law firms in targeting Africa derives from being based on where the projects are being structured and financed from; that in the case of English and French firms a common legal history and language with large parts of the Continent; in many cases simply following their existing clients; having well-trained legal staff; and a desire and financial strength to seek and carry out work on transactions on the Continent. For English lawyers, in particular, the joint common law history combined with the respect in which the English court system is and has been held has been the mainstay of us working in so-called Anglophone Africa. African firms have tended to focus on winning and working domestic deals; in many instances firms placing equal emphasis on commercial law work as well as litigation was late arriving; the firms have been smaller and so could less easily resource large transactions (the abolition of the 20 partner limit was particularly significant for the UK law firms) – many firms comprised a small number of founders and their legal staff often left to found their own firms when they did not get brought into the partnership. But times are and have been changing.
Leading African commercial firms have been spending heavily on travelling to Asia, the UK and the US to build relationships and have been supportive of seconding staff members to international firms and this has effectively enabled them to build up their networks for receiving work referrals but it is Olaniwun Ajayi’s credit that they have taken the next step of having a base in what is still the leading single centre for the origination of African transactions and staffing it with English law professionals, while continuing to work with its extensive network of the International law firms.
In some ways, the COVID-19 pandemic successfully jolted the Nigerian legal sector into the global virtual workspace. What, then, is the advantage of the brick-and-mortar office in London for the Nigerian-born law firm?
HB: Three principal reasons. First, all of us have felt the difference between a face-to-face meeting after often prolonged periods of having meetings on Teams or Zoom. The ability to mix the formal and informal is so much easier with an in-person meeting and makes a big difference in resolving issues. Transactions are as much about the psychology of getting the parties to agree by accepting what they can and should be flexible about as anything else. It is so much easier when you are in their presence. Secondly, you are physically where the market is and immediately associated with the location. So much easier to be in the know and be seen as relevant. Thirdly, while some clients do not care, many clients want to know where you are located, where you can be found, where they can meet you. Bricks and mortar increases the sense of permanence and reliability.
I have once or twice instructed foreign counsel who only operate digitally. It was only after trying and failing to get advice on the relevant law from lawyers operating out of an office. But it did not feel the same. Certainly, many international law firms have been reducing the space they occupy because of the numbers of their lawyers working from home during the pandemic but I do not see large English headquartered international law firms or the large Nigerian law firms closing their physical offices in the foreseeable future. Not having an office is not the same for the staff either. For the Olaniwun Ajayi London team, being able to sit together, plan together and work together increases the shared commitment to the success of the London office. That certainly would not be the same if we were not located in the same place.
You were shortlisted as Legal Innovator of the Year by the Financial Times in 2012 for your work on the Makeni bioethanol project. You were lauded for providing innovative solutions plaguing Sierra Leone’s land law system which was affecting the execution of the €267m project. What would you say is the biggest impediment to Project Finance in Nigeria?
HB: For successful closing of the financing of an infrastructure or energy project on the basis of limited recourse more highly leveraged finance is not easy anywhere in the world. It is why so few financings are on a project finance basis as compared to conventional balance-sheet lending. There are many factors that are relevant. These include banks that can lend long-term; long-term reliable income for the project; the currency risks are managed (hard currency lending where the project relies on soft currency income is inherently more risky); a reliable legal system where changes of law are limited and enforceability of contracts are assured; and can live with the rigidity in the project that the financing documents insist on. Nigerian projects can tick some of these boxes. A would-be project developer with very limited funds to invest in their own project and simply a belief that their project is a good project is going to struggle to get project finance.
What innovations, besides technology, can magnify the impact of the Nigerian legal sector on its business environment?
HB: All clients everywhere want expert and clear advice, promptly given at low cost. The challenge to deliver this constantly produces conflicting pressures. Firms compete for the most capable staff, and the need to ensure that they are trained and supported well pushes up costs while the market demand for lower costs reduces profitability. Traditionally this has been addressed by working longer hours but the Millennial and Generation-X associates in international law firms have not been prepared to do the longer hours without increased pay and in some cases, they have left the profession. Some clients have said they do not need a premium service for which they must pay a premium price for all their work, but law firms worry about client frustration if they provide lower grade work. Indeed, technology has provided some answers. It has enabled faster working, greater use of precedents, easier access to library resources and know-how.
The next generation of technology is bringing with it intelligent precedents, whereby, giving some deal information, the document is drafted for the lawyer instead of by the lawyer; automated production of transaction document “bibles”; scanning of documentation making evidence and discovery in disputes more efficient, the early days of using AI in dealing with certain types of claims. Alongside this, there is greater concentration on the different tasks to be performed during the course of a transaction and greater focus on segregation of those tasks so that each is actually performed by the lowest cost appropriate resource with more work being carried out by non-legally qualified personnel, and where relevant, having a project manager (not a partner) to co-ordinate the activities of team members on a transaction. Alternatively, bringing in experts as consultants for particular transactions, rather than having them permanently on the payroll. All these are designed to make the costs the client is willing to pay go further.
But in the end, I remained slightly old-fashioned in my attitudes. I have told many generations of associates that what the client is paying for is a lawyer’s judgment as to how issues should be handled and resolved. There is in my view only so much that innovation can achieve. To be properly trained, junior lawyers need to be involved in matters, see, and hear how the more experienced members of the team handle issues and people and decide for themselves what to remember about that experience and what to forget, so in time they will be leading members of the firm.
