Towards an Enabling Legal and Regulatory Framework for Private Equity and Venture Capital in Nigeria

LAGOS (Capital Markets in Africa) – Research and data from private equity industry associations such as the Emerging Markets Private Equity Association (EMPEA), the African Venture Capital Association (AVCA) and the Private Equity and Venture Capital Association (PEVCA) highlight the impact of challenges including global commodity price fluctuation, foreign exchange volatility, security and insufficient diversification of the economy, among other factors, on the pace of activity in the Nigerian private equity and venture capital (PE) industry.

Encouragingly, however, Nigeria remains an established anchor market for PE in sub-Saharan Africa (SSA) with attributes that are still largely unique in SSA outside South Africa: a relatively evolved ecosystem comprising over 20 fund managers active in Nigeria and a growing secondaries market. Targeted PE investments in fast-growing sectors such as technology, verticals, oil and gas, consumer goods, fertilizers, health, FinTech, insurance, and industrials, underscore PE’s strategic importance for transforming businesses and as a potential enabler of economic, business and social development.

The development of an enabling PE-specific legal and regulatory framework for Nigeria is crucial to the achievement of such goals. The EMPEA Guidelines developed by EMPEA’s legal and regulatory committee, advocate principles including the ability to contract freely, with minimum prescription by statute and an efficient, transparent and fair regulatory environment as key to attracting private capital to emerging markets like Nigeria.

In this respect, Nigeria is arguably a little further ahead of the curve than its neighbours. While PE investment has been largely regulated within the generic investment framework, including the companies legislation, the Presidential Enabling Business Environment Council (PEBEC) reforms for business and investment, and (if it receives Presidential assent) by the potentially greater flexibilities and minority protections envisaged by the Companies and Allied Matters Act (Repeal and Re-Enactment) Bill, the Securities and Exchange Commission (SEC) on PE and PENCOM regulations governing investment in fund assets are uniquely among the earliest PE industry-specific regulations to have been developed in sub Saharan Africa outside of South Africa.

An extract from the INTO AFRICA May 2019 Edition: Private Equity: Nurturing Africa. The article is written by Folake Elias Adebowale (Partner, Udo Udoma & Belo-Osagie Nigeria) and her team. To read the full article, please download by clicking: INTO AFRICA PUBLICATION: MAY 2019 EDITION.