Nigeria at 60: CDC Group is celebrating a strong partnership
As one of the most exciting entrepreneurial and innovative hubs in Africa, Nigeria is a priority country for CDC, the UK’s development finance institution and Africa’s largest impact investor. Having invested in the country since 1949, we have witnessed first-hand the growing importance of the private sector over many decades. Our first investments in Nigeria were in the agricultural sector; in 1949 we invested in West African Fisheries and Cold Store. Since then we have become a prominent investor in Nigeria with a diversified portfolio worth in excess of $420 million dollars. We now have investments in close to 100 businesses in the health, infrastructure, financial services, manufacturing, food & agriculture, consumer goods and telecommunications sectors, collectively directly supporting 38,000 jobs. These range from small SMEs to top-tier financial institutions such as Access Bank and industrial players like Indorama, which is building a US$1.2 billion urea fertiliser plant – the largest in the world – in Port Harcourt.
We are also proud to have played a key role in establishing and growing the local private equity (PE) industry by helping African Capital Alliance (ACA) establish its first SME-focused fund in the mid-1990s. ACA went on to raise three additional funds and is one of the great success stories in Nigeria’s PE ecosystem, having invested in Union Bank and Daraju, among many others.
The private sector’s needs have remained broadly the same over the last 60 years: companies require a mix of debt, equity and other financial products, as well as a range of in-depth expertise from their investors to grow, innovate and capture new markets. Venture capital represents an increasingly exciting new asset class – and one where Nigeria has truly excelled, with Lagos establishing itself as one of the continent’s leading start-up innovation hubs.
While significant progress has been made in recent years in terms of improving the business environment, I see this as one of Nigeria’s top priorities – real progress is needed so that our nation can capitalise on its untapped potential. We have a unique entrepreneurial culture, a large population and a domestic market with strong links to our neighbours and the wider continent, combined with the potential to become a major hub for intra-Africa trade and exports outside the continent. But a challenging business environment is holding us back from attracting the investment we need to realise this vision and turbocharge growth in the private sector.
In 2018, Nigeria attracted less foreign investment than Ghana, a country of 30 million people. But we are on the right track on some dimensions: Nigeria rose 15 places on the World Bank’s Doing Business Index between 2019 and 2020, marking one of the biggest leaps. Since 2006, Nigeria has gained 39 places, although there’s much debate as to the accuracy and meaningfulness of these indices.
The government has repeatedly made commitments to address the complex and multifaceted issues that hinder our private sector. The establishment of the Presidential Enabling Business Environment Council and work by the Nigerian Investment Promotion Commission have helped to tackle some bottlenecks. But major challenges remain in areas such as electricity and foreign exchange availability, raising the cost of investment for local and international investors alike. Likewise, streamlining administrative procedures and ending policy and regulatory uncertainty will be key to encouraging further investment and driving long-term employment. This is central to boosting and diversifying the economy and improving the livelihoods of millions of Nigerians.
Costs related to the ease of doing business are felt most strongly by small and medium-sized enterprises (SMEs). They are the building blocks of Nigeria’s economy, accounting for three-quarters of employment and contributing up to 50% of GDP. At CDC, protecting the SME segment – which also faces major challenges in accessing finance – has always formed a core part of our mandate. That’s why in early 2020 we announced a US$19.2 million investment in Verod Capital Management – a leading West African PE firm – to finance SMEs across the region, with a focus on Nigeria. Supporting female entrepreneurs – who account for an estimated 40% of all entrepreneurs and whose tenacity is exceptional – is also a core priority for us. Addressing climate change – the biggest global challenge of our times – also forms a central part of our mandate. Nigeria is highly vulnerable, with Lagos and other coastal cities affected by rising sea levels, while unpredictable rainfall, recurrent droughts and more frequent extreme weather events all threaten the country’s development trajectory and could lead to conflict. Strengthening investments in adaptation and resilience is key to mitigating these impacts.
Having invested across Nigeria and Africa for close to 25 years, I can say with certainty that there is no shortage of promising investable opportunities in our country, ranging from the young entrepreneur with a thirst for innovation and disruption to well-established family-owned businesses and other large players. We at CDC remain committed to continuing to invest in Nigeria for the long-term across all sectors, with a focus on power, food & agriculture and manufacturing. Combining our technical expertise with our hands-on approach, we aim to drive sustainable business transformation and growth within our investee companies.
Despite the current Covid-19 pandemic and its extremely challenging health, social and economic impact, I am excited and optimistic about Nigeria’s prospects. Never has investment into to Nigeria been this important. With sustained progress in strengthening the enabling environment, we can increase foreign direct and local investment allowing Nigeria to rise to the occasion and take advantage of its unique potential. CDC’s decision to re-establish a permanent presence in Nigeria two years ago with the appointment of Benson Adenuga as CDC’s Head of Nigeria office and our new partnership with the Nigeria Sovereign Investment Authority – announced just this week – is testament to our strong commitment to invest in Nigerian entrepreneurs.
Just over 60 years from now, Nigeria is projected to become the second most populated country in the world, after India. We remain determined, now more than ever, to help Nigeria realise its ambitions and believe its world-class businesses and entrepreneurs will be an increasingly powerful source of inspiration for the world.
Alli is a non-executive director at CDC Group. CDC is the UK’s development finance institution and impact investor with a mandate to support the sustainable, long-term growth of businesses in Africa and South Asia. He is also the CEO of SouthBridge Group and was previously President and CEO of the Africa Finance Corporation.
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