Nigeria’s mid-sized companies are critical to economic growth and development, contributing significantly to Gross Domestic Product (GDP), employment and national income. However, access to the right type of financing has been identified as one of the challenges hindering the growth of these companies.
As part of measures to improve access to suitable capital, FCMB Asset Management Limited (FCMBAM) recently launched the FCMB-TLG Private Debt Fund, Nigeria’s first Naira-denominated Private Debt Fund. The Fund, approved by the Securities and Exchange Commission (SEC) in May 2024, is sponsored and managed by FCMB AM as Fund Manager, with technical support from TLG Capital Investments Limited (TLG Capital), United Kingdom.
The FCMB-TLG Private Debt Fund currently seeks to raise Ten Billion Naira (N10 billion) under Series 1 of its One Hundred Billion Naira (N100 billion) programme size from Qualified Institutional Investors (QIIs) such as Pension Fund Administrators (PFAs), Insurance companies, Development Finance Institutions (DFIs), Family Offices, and Corporate Organisations, as well as HNIs. The proceeds of the capital raise will be deployed as corporate debt to companies with commercially viable but impact-oriented activities in sectors of the Nigerian economy aligned with the United Nations (UN) Sustainable Development Goals (SDGs).
Traditional Lenders in Nigeria are constrained
Many mid-sized companies have described obtaining suitable loans from traditional lenders as expensive, tedious and complex. The one-size-fits-all approach to lending adopted by most traditional lenders (which may only be suitable for some companies given the peculiar nature of business operations) and high interest rates are amongst the top challenges to accessing suitable financing by these mid-sized companies.
In Emerging Markets like Nigeria, 55% to 68% of formal mid-sized companies are either unserved or underserved by financial institutions, leading to a total credit gap of US$4.9 trillion, according to CGAP, a global independent think-tank group in a recent report. Specifically in Nigeria, 22% of the country’s 41.6 million mid-sized companies identified obtaining finance as their biggest challenge in PwC’s 2020 survey, with less than 5% being able to borrow from banks.
How FCMB-TLG Private Debt Fund can help
The FCMB-TLG Private Debt Fund provides an alternative financing option and offers corporate debt that is not only competitively priced but also suitable to the operations of organisations in selected sectors of the Nigerian economy.
Details of the Fund seen by BusinessDay showed that it is structured as a Closed-Ended Unit Trust Scheme with a Series 1 tenor of 10 years. The FCMB-TLG Private Debt Fund will invest in the debt components of the capital structure of organisations and Special Purpose Vehicles (SPVs) in sectors crucial to Nigeria’s economic growth and development, including Agriculture, Healthcare, Education, Clean Energy, Transportation/Logistics, and IT/Technology.
According to findings by BusinessDay, this innovative solution is expected to reshape the debt investment landscape by providing some of the much-needed domestic capital to businesses, fostering economic growth and development while providing investors with an opportunity to earn a competitive risk-adjusted return on investment.
“By offering suitable financing options tailored to meet the unique needs of target business enterprises, the Fund seeks to catalyse growth opportunities and enhance operational capabilities, a development that aligns with broader efforts to drive entrepreneurship, innovation, and job creation within the Nigerian economy,” Obed Ume, a financial analyst with a Lagos based consulting firm said.
Speaking at the signing ceremony for the Fund organised by FCMBAM, the company’s Chief Executive Officer, James Ilori, said, “The FCMB-TLG Private Debt Fund opens a new avenue for professional investors to participate in the growth of key sectors of the Nigerian economy while providing essential capital to organisations driving sustainable economic growth and development in Nigeria”.
He added, “The launch of the FCMB-TLG Private Debt Fund means Nigeria now joins the rest of the international investment community in offering Private Credit as an investment option under Alternative Assets”.
Also at the ceremony, Aletor Adoghe, representing TLG Capital in Nigeria, stated: “We are delighted to partner with FCMB Asset Management in pioneering this Fund. The Fund aligns with our commitment to investing in untapped markets and will significantly contribute to Nigeria’s broader economic development.”
Impact on Nigeria’s economy
Experts say that the FCMB-TLG Private Debt Fund offers a new avenue for funding. “This offers companies, particularly those in crucial sectors like Agriculture, Healthcare, and Clean Energy, access to short, medium and long-term, Naira-denominated capital. This can be particularly beneficial in an environment with fluctuating exchange rates and high lending rates from traditional lenders,” David Uka, a financial analyst, said.
