Buhari’s new ministers hold the key to unlocking the potential of private equity in Nigeria
President Buhari inaugurated his long-awaited cabinet on the 11th of November and the appointments seem to uphold his promise of change. With credible professionals from the private sector awarded key positions, the news is a statement of intent from a government which has put the economy high on its priority list. To name just a few, Dr. Okechukwu Enelamah takes the reigns as Minister of Trade and Investment, Ibe Kachikwu becomes Minister of State for Petroleum whilst Kemi Adeosun will take charge as the Minister of Finance.
There was room for former Lagos state governor, Babatunde Raji Fashola, to head the Ministry of Power, Works and Housing which won’t surprise many following his successes in his previous role. We believe he is “one to watch” and has the capacity to make significant gains in the power sector and accelerate infrastructure development. If he continues his record of achievement, it will help to create an enabling environment for domestic production, reduced demand pressure on foreign exchange and economic growth.
Overhaul in trade and investment
Over the last two decades, the federal government has launched 21 separate “Intervention funds” with a total of $9bn of assets to carry out their work. But this form of intervention has proven ineffective due both to highly priced securities and because commercial banks have not been appropriately incentivised to disburse funds. With the appointment of African Capital Alliance co-founder and former CEO Okechuku Enelamah as the Minister of Trade and Investment, we anticipate increased advocacy for private equity funds as a means of driving investments into underfunded segments, particularly SMEs.
We also expect a realignment in which equity fund managers will be increasingly used to drive investment rather than alternative debt models.
With the pension industry’s Asset Under Management (AUM) growing at approximately US$125m monthly, we expect to see local pension funds making more calculated and informed investments in the private equity asset class. And while local pension funds currently invest a high percentage of their funds in FGN securities (50 percent as at 31 October 2014), Pension Fund Administrators (PFAs) only recorded their first investment of USD64m in private equity as an asset class in Q3 2012. We predict that Mr. Enelamah will encourage PFA’s allocation to the asset class delivering a significant increase over the medium to long term.
Positive outlook for private sector wealth creation
In unveiling a cabinet packed full of ministers with private sector experience, President Buhari has sent out a strong message that Nigeria is open for business. He has selected a strong team capable of helping the country navigate its way through the challenges that lie ahead and we believe the he has the macro winds in his sails. If his team can work in partnership with the private sector to deliver the improved infrastructure that is sorely needed whilst also mobilising capital, a bright future lies ahead for the next generation of Nigerian entrepreneurs.
This piece was produced by Ventures Africa in partnership with The Africa Expert Network (AXN) to provide unique insider commentary from practitioners and subject matter specialists.
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