Private equity investments in Nigeria jumped by 321.8 percent in the first quarter (Q1) of 2024 largely on deals from energy and educational technology (edtech) firms, BusinessDay analysis of the latest DealMakers Africa shows.
The report by the South African-based firm, which tracks mergers and acquisitions (M&A) and corporate finance activities across the continent, shows that the value of M&A in Africa’s most populous nation rose to $2.59 billion, 322 percent higher than $614 million in the same period of 2023 and 47.2 percent higher than $1.76 billion reported in Q1 2022.
Nigeria recorded the highest private equity deals on the continent for the first time in two years. But in Q1 of 2023, Zimbabwe had overtaken Nigeria as the southern African country received the highest value of mergers and acquisitions.
However, this changed in Q1 of 2024, as a breakdown of the latest report revealed that Zambia, Morocco, Kenya, and Egypt were behind Nigeria with $168.9 million, $132.9 million, $44.0 million, and $31.9 million respectively.
Others were Botswana ($10 million), Côte d’Ivoire ($3. 52 million), Tunisia ($600, 000), Ghana ($314, 698), and Namibia ($100 000).
“In terms of total deals, West Africa continued to dominate (recording $2.6 billion in value) with Nigeria the centre of activity (20 deals),” the report said.
It said out of the top 10 deals announced in the quarter, the largest was the disposal by Shell of its onshore oil and gas subsidiary to Renaissance Africa Energy for $2.4 billion.
“While Africa faces many challenges – both internal and external – opportunities abound, with the world’s largest mineral reserves and huge potential to produce energy from renewable sources,” the report noted.
Read also: Nigeria beats peers, emerges Africa’s largest private equity destination
Backstory
On January 16, Shell reached an agreement to sell its Nigerian onshore subsidiary – Shell Petroleum Development Company of Nigeria Limited – to Renaissance, a consortium of five companies comprising four exploration and production companies based in Nigeria and an international energy group.
“This agreement marks an important milestone for Shell in Nigeria, aligning with our previously announced intent to exit onshore oil production in the Niger Delta, simplifying our portfolio and focusing future disciplined investment in Nigeria on our Deepwater and Integrated Gas positions,” Zoë Yujnovich, integrated gas and upstream director at Shell, said in a statement.
Jens Kengelbach, managing director and senior partner and global head of M&A at Boston Consulting Group, noted that Africa saw significant transactions by BP and Eni in 2021, pushing the deal value up.
“Another exception was in 2023 when we saw only $7 billion in deal value across 440 deals – a 71 percent drop in deal value compared to 2022. When looking at the geographic locations of these transactions, we observe that most deals target South African companies,” he said.
Nigeria is catching up
Kengelbach noted that other economies like Morocco, Egypt, Nigeria, and Kenya are catching up, and becoming increasingly attractive for acquirers. This trend is expected to continue into 2024.
“Transactions in the energy and power clusters will be fuelled by major international oil companies optimizing their portfolios through divestments of non-core assets, particularly in Africa. These companies, acting as the main sellers, are shifting away from non-strategic assets, driving interest not only in fossil fuels, but also in renewable energy sources and infrastructure development.”
Nigeria’s foreign investments are rising
The spike in private equity in Nigeria also mirrors the foreign investments into the country which rose to the highest in four years in Q1 2024 largely on the Central Bank of Nigeria (CBN) reforms.
The latest capital importation report by the National Bureau of Statistics (NBS) shows that total foreign investments into the country stood at $3.38 billion, an increase of 210.2 percent from $1.09 billion reported in the previous quarter.
On year-on-year count, foreign capital inflows rose by 198.1 percent from $1.13 billion recorded in Q1 of 2023.
Harmonisation of the foreign exchange rate market, clearance of forex backlogs, naira devaluation, and high interest rates (following inflation increases) sent positive signals to investors and influenced investments within the quarter, analysts told BusinessDay.
Apart from the Shell deal, the DealMakers Africa report also revealed that Chapel Hill Denham, on February 12, announced a $7.4 million securitised funding for an off-grid solar program by d.light.
“In January, Access Bank announced the acquisition of a 69.7 percent majority stake in Uganda’s Finance Trust Bank. In March, the acquisition of KCB Group by Access Bank Plc was also announced, with the value of the deal being undisclosed. There was an announcement of a 60 percent stake in Presco Plc by Oak and Saffron, with the value of the deal being undisclosed,” it said.
In January, fintech platform, Cleva, received a $1.5 million pre-seed funding from a group of venture capitalists. Zanza Finance also received a $2.3 million funding from VCs in January.
Access Bank received a $75 million loan from Japan International Cooperation Agency (JICA) for the financing of climate change projects in Nigeria. Sahel Capital awarded a $1.5 million trade finance loan to an agro-allied company, Acier Nigeria Limited in February.
Also, in February, All On invested a $3 million bridge fund in Nigerian solar company, Arnergy and Carbon, acquired Vella Finance, while Universal Music Group also bought the majority stake in Mavins Global for an undisclosed amount.
In March, a consortium of VCs invested $100 million in Moove’s Series B funding round and a $1.16 billion syndicated loan was provided to Africa Finance Corporation by a group of investors, including Société Générale, Bank Muscat, and Intesa Sanpolo Bank Luxembourg S.A.
“Nigeria is still a country to beat. Negatives apart, opportunities abound for growth and profitability for investors,” said Andrew Okosi, a United Kingdom-based private equity investor.
