Nigeria attractive to foreign investors despite challenges – KPMG
Consumer goods, financial services, telecommunications, media and technology, and the oil and gas sectors have accounted for about 80 per cent of the recent inbound investments into the country since its came out of recession, a KPMG report stated on Monday.
The report entitled: ‘Doing Deals in Nigeria – Key Insights from Deal Makers’, was the result of a survey of 50 senior business executives based abroad, who had attempted at least one inbound acquisition in Nigeria in the last four years.
According to the report, about 62 per cent of the respondents are from five countries, with South Africa accounting for the largest figure of 20 per cent, closely followed by the United Kingdom with 18 per cent, and the United States of America with 12 per cent. Other notable countries with interest are France and the Netherlands, with six per cent each.
It stated that 62 per cent of the respondents surveyed would consider an acquisition in Nigeria over the next two years, while 86 per cent of respondents indicated that they would more likely invest in the country again.
The report noted that the key drivers for Nigerian acquisitions by foreign investors included the target customer base and domestic distribution channels, and the opportunity for the investor to restructure the business to create further value.
The Partner and Africa Head, Deal Advisory and Private Equity, KPMG, Dapo Okubadejo, said that the ability of global corporate institutions and private equity firms to use Nigeria as a base for expansion across West Africa further raised the country’s investment destination profile.
He said, “Our key objective in conducting the survey for this report was to hear first-hand from foreign investors. The survey report shares the contributors’ unique insights and perspectives on their deal-making experiences in Nigeria, providing a direct credible feedback to potential investors on the true potential of Nigeria and what to expect in doing deals.
“The report also identifies the key sectors, deal dynamics, leading practices and recognises challenges in doing deals in Nigeria.”
Okubadejo added that despite the general positive tone to the report, respondents, however, noted some critical challenges to deal-making in Nigeria.
He stated, “Key among the challenges to investing in Nigeria include political trends (76 per cent); lack of information/transparency on the target companies (74 per cent); challenging compliance requirements (66 per cent); and the lack of physical infrastructure in the country (50 per cent.
“The lack of physical infrastructure in the country was the most important of all perceived challenges to investing in Nigeria. This challenge further buttresses the attractiveness of companies with effective distribution channels and route-to-market infrastructure as acquisition targets.
“The report also notes the leading practices for successful deals in Nigeria, top of which is the need to engage the right local advisers with the right relationships and understanding of cultural nuances, considering that about 70 per cent of the deals are with privately-owned businesses with bilateral ‘off-market’ negotiations.”
Speaking on the implications of the survey findings, Okubadejo said, “We sincerely hope that the findings in this report will contribute to Nigeria’s policy direction with regards to foreign investments. Current and potential investors have been looking at Nigeria through the eyes of the Western media, many of which may not be telling the right narrative.”