Nigeria’s rich natural resources, large population and favourable demographics ensured that the country remained one of the busiest and most attractive M&A markets in Africa in 2015 despite currency volatility and a period of uncertainty leading up to the presidential election.
Nigeria, one of the largest and most active M&A markets in Africa in 2015, delivered a year of steady deal flow in 2015 with 25 deals worth US$3.2bn. Deal activity was down 22% from 2014, which saw 32 deals worth US$9.5bn. Investor confidence in the Nigerian M&A market was strengthened by the conclusion of a presidential election in March, which had been postponed in early February. However, this coincided with a weakening oil price – oil accounts for approximately 70% of government revenue – and related currency volatility that resulted in the Naira dropping to more than N200 to the US dollar at official exchange rates.
Afolabi Olorode, Head of Financial Advisory and Equity Capital Markets at FBNQuest, says the country’s size, population and consumer trends make it more resilient to these challenges. “The sheer size of Nigeria’s population and GDP makes it an attractive market compared with every other country in Africa. It is the biggest economy in Africa but most sectors are still underserved, which means there is massive growth potential,” says Olorode. “You would have to invest in a number of different countries to match the scale of opportunity present in Nigeria.” Local content The scope of the opportunity in the country, and the limitations a weakening currency has placed on outbound dealmaking, contributed to an increase in domestic M&A activity in Nigeria, which for over the past two years has accounted for nearly half of M&A volume. “Nigeria has been facing some challenges with exchange rates and clamours for devaluation, so we’re probably not as competitive when it comes to outbound deals. But we feel that there is still a lot of work to do here. The domestic market is underserved as it is, so there is no need to go out and start exploring the region or the continent,” says Olorode.