Berkeley Legal | Private Equity (PE) Investment in Nigeria
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17 Feb Private Equity (PE) Investment in Nigeria

Nigeria is currently the second largest economy in Africa and consequently, it is a haven for private equity and foreign direct investments in recent years. The focus areas for PE funds/investments include but are not limited to food, agriculture, healthcare, pharmaceuticals, housing, financial services and fast moving consumer goods. Although Nigeria is at an embryonic stage compared to more developed and emerging markets, PE deals continue to pervade Nigeria at a considerable rate.

Such developments have stemmed from inter alia industry reforms, regulatory developments, tax incentive schemes and the Federal Government’s concerted effort to ensure Nigeria is a more investment/business friendly environment. We will expatiate on some of the aforementioned catalysts later on in this piece.

Some of the prominent players in the Nigerian PE Market are Actis, Abraaj Group, African Capital Alliance, Vectis, Helios Investment Partners and Emerging Capital Partners.  Recent noteworthy PE deals include Abraaj Group acquisition of majority stake in Mouka Ltd from Actis; Abraaj Group acquisition of minority stake in Indorama Fertilizers; 8 Miles LLP acquisition of equity stake in Beloxxi Industries Limited and Moringa Partnership equity investment in Tolaro Global, a processor and exporter of cashew nuts located in Benin.

Forms of PE deals and Legal considerations

PE deals commonly take the form of leveraged buyouts in more advanced economies, however, what is more prevalent in Nigeria are acquisition of minority stakes, management buyouts and restructuring. There has also been an enlargement in mezzanine financing which is an amalgamation of debt and equity financing that gives the lender the rights to convert to an ownership or equity interest in the company in the event of default.

Investors typically desire management buyouts and restructuring so as to have influence on the way in which the company is being run on a daily basis. PE investors would customarily request a right to appoint directors within the investee company to ensure good governance and management.

Equity investment is also a favourable option as it entitles the investor to vote at general meetings as well as active participation on the board. Such terms and conditions would habitually be conveyed in a Share Purchase Agreement. In addition to this, the PE Fund will ensure that its shareholding is secure by entering into a Shareholders Agreements in a private investment or a Subscription Agreement in the case of private investment in a public institution. Key terms in such agreements from a buyers perspective are voting rights, right to first refusal, pre-emptive rights, share transfer restrictions, rights of first offer, tag-along rights, drag-along rights, exit rights, appointment of key officers/directors amongst others. These terms will need to be negotiated diligently to ensure the PE Fund’s rights as a shareholder are protected.

It is pertinent however that those terms do not infringe the target company’s constitutional documents, the Companies and Allied Matters Act (CAMA) or any apposite statutory provisions.

Regulatory Developments

Securities and Exchange Commission (SEC)

The SEC in 2013 re-issued its Rules and Regulations which now caters for and regulates PE fund operations in Nigeria. Some of the salient provisions of the Rules and Regulations as it applies to PE Funds include:

  • The minimum paid-up capital required of a registered fund manager of a private equity fund is N150 million;
  • Prohibiting private equity funds from soliciting funds from the general public while authorizing them to source funds from qualified institutional investors;
  • Prohibiting private equity funds from investing more than 30% of the Funds’ assets in a single investment.

National Pension Commission (PENCOM)

PENCOM recently revised its regulation on Investment of Pension Fund Assets to include PE Funds as part of the classes for allowable investment outlets. The regulation only permits an investment of 5% of the pension assets in the PE Funds. Additionally, a minimum of 75% of Fund shall be invested in companies or projects within Nigeria.

Challenges facing PE investments in Nigeria

We have enumerated below some of the prominent challenges facing PE investments in Nigeria as well as providing mitigants for same:

  • Pricing (high asking/purchase prices for investments potentially provide a stumbling block for private equity deals);
  • Limited public information;
  • Lack of trust and transparency;
  • Corporate Governance issues;
  • Political risks;
  • Exchange rate fluctuations (unstable/unclear FX rate and regulations. In addition, the current administration has provided no clarity with regards to its fiscal/macro-economic plans going forward);
  • Lack of investment in human capital (untrained/unskilled workforce and vast knowledge gaps exist);
  • Quality of collateral/Non-performing assets (in particular landed assets where perfection of same proves to be cumbersome process in terms of timeline);

Some of the above mentioned challenges can however be mitigated against by comprehensive and extensive legal due diligence on the investment company, clear fiscal policies provided by the Federal Government, Insurance (Transactional Risk Insurance), more effective access to public information and Government/Corporate initiatives for more desirable human capital.


Although macro-economic obstacles continue to subsist in Nigeria and has caused a downturn in foreign direct investment (FDI), it is envisaged that PE deals will continue to trickle in. Nigeria remains a hub for investment due to its unexploited assets/resources, potential for growth and need for solid facilities and capital equipment in which sizeable capital injection is required.

Our Firm is able to provide advisory services for PE transactions as we have the requisite expertise and experience in corporate finance, private equity, corporate restructurings, capital markets and mergers/acquisition transactions.

The content of this document is solely for information purposes only and should not in any way be construed as a legal opinion. If you require specific legal advice on any of the matters covered in this article please contact