Attracting Investment into the Private Sector in Nigeria

Attracting Investment into the Private Sector in Nigeria


Nigeria is regarded as one of the main economic powerhouses of Africa and there are lot of interests by global investors. However, when it comes to investment, it seems that the focus is always on large scale infrastructure government projects. And when the focus is on the private sector, it is targeted at the large enterprise conglomerates like the Dangotes and Otedolas. Who speaks for the Small and Medium size businesses and how can investors be attracted to this segment of the economy?

Small- and Medium-Sized Enterprise Equity Investment Scheme (SMEEIS) – The SMEEIS requires all banks in Nigeria to set aside 10% of their profits after-tax (PAT) for equity investment and the promotion of SMEs. How many banks are doing this and what information can they provide to support which SMEs they have supported each year? Who is enforcing this policy? Are SMEs aware of such a policy?

As Chairman of Nigeria Investment Gateway (NIG), a company with her head office in London, my responsibility is to drive investment into Nigeria and position NIG as the preferred and trusted partner for global investors seeking opportunities in Africa. One of the key questions we get asked from investors is: “We need good bankable projects.”

This article hopes to address what investors are looking for when it comes to making an investment into the private sector. I will touch a bit of the public sector and the role of the government as policies and an enabling environment are very key to attracting investors into a country.


Recently, we were involved in sourcing funding of almost $500m USD for a major solar energy project in Zimbabwe. Unfortunately, on 12th January this year, the Zimbabwean President Emmerson Mnangagwa announced a sharp increase in fuel prices in a measure to improve supplies as the country struggles with its worst petrol shortage in a decade. However, the reaction led to a shutdown of the country and we lost two potential investors in the process even though normalcy has returned in the country.

In the same vein, sometime in February this year, I got a feedback from an investor regarding a fantastic money generating business in Nigeria and he unfortunately turned down the opportunity citing the fact that they are still not comfortable working in Nigeria. So what can be done?

So in summary the following must be in place to attract investors:

  1. Security – This is a major issue and one that needs to be tackled because no matter how attractive the profits look, if there are security issues in a country or region, then investors generally stay away. In the last few years, there has been violence in the eastern part of the country, which is usually a safe haven for investors. Indigenous People of Biafra (IPOB) has been agitating for her own state leading to unrest in the region as well as to sporadic sabotage of oil production. Likewise, the violence attributed to the Fulani herdsmen over land rights with farmers in Benue, Plateau and Enugu states have not helped the security situation in the country. Likewise there have been kidnapping of expatriates in the delta region where most of the country’s oil is produced. Lastly, but not the least is the deadly Boko Haram, an insurgent group in the north east of the country. Thus, while success may have been achieved, there is an urgent need to tell a global story on the level of peace attained in the country, otherwise investors will be left with the same old perception of insecurity.
  2. Tax incentives – I personally think the 30% income tax on companies that make above N1m (One Million Naira i.e. just over £2,000, Two Thousand UK Pounds) is a bit steep. This is in addition to other taxes like VAT, ITF, NSITF, PENCOM plus state taxes like Lagos State Inland Revenue (LIRS). There is a need to harmonise all these taxes into a single tax collected by the government and then disbursed to each agency. That will make it easy for companies to stay compliant while spending less time and energy keeping up to date with these different taxes.
  3. Easy reparation of funds – An investor needs to know that process for repatriation of profit is not cumbersome. I was recently in London with a director of one of the largest money transfer companies in Europe and he said that unfortunately, they cannot trade in Nigeria due to the difficulties associated with taking foreign currency out of the country.
    According to Nigeria’s foreign exchange regulations, if foreign investors intend to access the official foreign exchange market for the purpose of remitting their dividends, interest or capital, they must obtain a Certificate of Capital Importation (CCI) as evidence that their investment was brought into Nigeria. CCI’s are issued by Authorised Dealers (i.e. commercial banks licensed by the Central Bank of Nigeria (CBN) to deal in foreign exchange) within 24 to 48 hours after the investor has brought its foreign investment into Nigeria. The problem is that the CBN’s efforts to defend the Naira, prompted by the fall in Nigeria’s foreign currency reserves, has restrained the ease with which foreign investment capital and profits can be repatriated from Nigeria. This needs to be tackled as soon as possible to restore the confidence of investors.
  4. Strengthening the Legal System – There has been enormous influence of the legal system by the federal and state governments. Back in June 2018, President Buhari signed the Constitution Fourth Alteration Bill, which provides for among other things the “financial autonomy and independence” of the Houses of Assembly and the judiciary of the respective states”. This means that money will be paid directly to the judiciary of each state and no more through the governors. This is positive step in the right direction to ensure the legal system is not compromised.


Once investors are comfortable with investing in a country, they then need to find or review bankable projects. Making projects bankable simply involves putting in place project planning and strategies that make them worthy/attractive to investors and lenders to finance it. It involves proving the viability of the project. The following is usually considered by investors; sufficient collateral, future cash flow, project team and high probability of success.

The right documentation as simple as it sounds is a major issue when wooing investors. They include financial, technical and legal documents. The financial documents may include statements of accounts, business plan and proposal while the technical documents may include architectural drawings and plans. The legal documents may include licenses, binding contracts, deeds etc. Most local projects lack the required documents to attract these investments.

Having the right team and partners to manage and execute the project. This includes technical, legal, government as well finance partners. The strength and antecedent of the team greatly affects its success and bankability. A common issue with project teams is a perceived lack of transparency or sound governance practices and protracted bureaucratic processes, which effectively reduce investor appetite and risk tolerance.

Thus, the following brief points give an idea of what investors are looking for as part of a project submission for investment:

  1. Concise Executive Summary – Considering that investors are in high demand, they have little patience for very long write-ups and that is why an Executive Summary is essential. I would say about 2 to 4 pages long. If you can summarise or produce a one page presentation deck, even better. This is the first document that is sent to an investor. I like to refer to this as a project teaser. Once an interest is shown then the investor will ask for further information. If investors can’t see the opportunity here nor understand what your business is about immediately, then they will not bother to ask for further information.
  2. Financial performance – You need to prove to potential investors that your company has excellent financial performance. Cash flow (input and output) including a properly articulated debt repayment plan to prove your business is capable of handling its financial obligations. In addition, you must show or have a breakdown of how you plan to utilise the borrowed funds. Usually investors will evaluate your revenue streams and turnover rates. Investors also want to see a tranche plan i.e. how you plan to receive the borrowed money (a one-off lump sum or a staggered receipt of funds). As regards, return on investment (ROI), Angel investors, normally expect around 30% in return every year.
  3. The Management Team – Investors pay particular attention (actually this is hugely important) to the background and experience of the management team as it relates to the industry. Investors look for experienced passionate entrepreneurs and management teams with a track record of high performance and leadership in the applicable industry or in prior ventures. Investors get a lot of similar projects and hence, when the projects or ideas are the same, the question remains which is the best team that is going to professionally execute the project easily and bring financial profitability (good ROI) in a short time.
  4. Product or Service uniqueness – Your product or services need to be unique and scalable. You must show with concrete evidence that your proposition is unique. In marketing you will hear the buzz word ‘what is your Unique Selling Point (USP)’. What makes your product or services different? Remember price is not a major USP as someone can undercut your price to gain market share. Amazon is a perfect example of an organisation that will sell below the recommended price to gain market share and eventually take over the original company. Remember if people only bought your product because of price, then they will stop buying from you once they get a cheaper alternative. Typical USP will be intellectual property protection, exclusive licenses and exclusive marketing and distribution relationships.
  5. The market size – Investors typically invest in solutions that address major problems for significantly large market sizes, significant growth and limited competition. The larger and more stable customer base that your brand has, the stronger competitive advantage you will have when pitching to investors. Our huge population is what makes Nigeria attractive to investors. A larger and more stable customer base (off-takers) will serve as proof that your company has a great impact to its target market. Investors look for companies that can grow quickly and manage this high growth scale. Investors must see that the company can generate significant profits beyond the initial idea with adequate financial projections and a plan to include various channels of revenue.

There are other factors like competition, risks, regulations and exit strategy for the investor and many other considerations to bear in mind when trying to attract investors into your project. In a second part, I will discuss more on the composition and structure of a ‘killer’ business plan that will get the attention of investors. To meet genuine investors, join us in London on 22nd November and 23rd November 2019 at the London Excel Exhibition Centre at the 2nd edition of the Best of Nigeria Investment Exhibition, which will be supported by the Nigeria High Commission, UK and the Nigerian Investment Promotion Commission (NIPC).

Chidi Umeano
Kemp House 160 City Road, London, EC1V 2NX, UK | +44 20 3086 8187 | +44 75 3884 8855 | |

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