Foreign Investors Identify Consumer Goods, Financial Services as Attractive Investment Sectors

Obinna Chima
The Nigerian economy is seemingly on the upturn and remains an attractive destination for foreign investors, seeking sustainable growth opportunities within the continent, according to findings by KPMG.

The consumer goods, financial services, telecommunication, media and technology, oil and gas sectors accounts for about 80 per cent of recent inbound investments into the country, the professional services firm stated in its report entitled: “Doing Deals in Nigeria – Key Insights from Deal Makers.”

The report was the result of a survey of 50 senior business executives based outside of Nigeria, who had attempted, at least one, inbound acquisition in Nigeria in the last four years.

About 62 per cent of the respondents were from five countries – South Africa -accounting for the largest percentage (20 per cent); closely followed by United Kingdom (18 per cent) and United States (12 per cent).

Other notable countries with interest were France (six per cent) and Netherlands (six per cent). The survey showed 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 Nigeria again.

The report further noted that the key drivers for Nigerian acquisitions by foreign investors included the target’s customer base and domestic distribution channels and the opportunity for the investor to restructure the businesses to create further value.
The ability of global corporates and private equity firms to use Nigeria as a base for expansion across West Africa further raises the country’s investment destination profile.

The Partner and Africa Head, Deal Advisory and Private Equity, KPMG in Nigeria, Dapo Okubadejo 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.”
Despite the general positive tone to the report, respondents, however, noted some critical challenges to deal making in Nigeria.

According to the report, key amongst 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). It noted that 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,” it added.

The report also noted the leading practices for successful deals in Nigeria, top of which was 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.”