Venture Capital in Nigeria The Story So Far An Appetizer

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Venture Capital in Nigeria The Story So FarAn
Appetizer

• Rotimi Oyekanmi
• President, Venture Capital Association of Nigeria
  
• African Venture Capital Association Conference
• Mombasa, Kenya
• November 9, 2005

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Nigeria

• Full of Challenges
• OR
• Full of Opportunities ????

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Challenges

• Inconsistent economic policies
• Corruption
• Walk the Talk???
• Brash

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Opportunities

• Population around 120 (or 150??) million people
• Arguably the biggest market in Africa
• Probably the largest telecoms market in Africa
• Probably 2nd or 3rd largest economy in Africa
• Major oil exporter (OPEC member)
• Huge informal sector
• Major exporter of skilled professional to Western
  world
• Democratic Government in place since 1999
• President Olusegun Obasanjo

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Investment Opportunities

• Significant investment opportunities in
• Telecoms
• Power/Energy
• Banking
• FMCGs
• Shipping
• Due to
• Democratization (political stability)
• Deregulation
• Privatization
• Reforms
• Pension Reforms
• Banking consolidation

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Nigerian Initiatives (2001/2)

• Small and Medium Enterprises Equity Investment
  Scheme (SMEEIS) - Funds for Equity in SMEs
• Bank of Industry (BoI) - Funds for Debt financing
  
• Small and Medium Enterprises Development Agency
  of Nigeria (SMEDAN) Ensure Enabling Environment
  for SMEs

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SMEEIS

• Recognition and acknowledgement of important role
  of SMEs in economic development
• SMEs claimed lack of LT funding is problem
• In 2001, Small and Medium Enterprises Equity
  Investment Scheme launched
• Nigerian Banks contribute 10 of PAT for equity
  investment in SMEs
• Mode implementation via
• Banks directly
• Bank subsidiaries
• Independent fund managers

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SMEEIS objectives

• SMEEIS aims for SUSTAINED ECONOMIC DEVELOPMENT
  through
• Employment generation
• Value added production
• Movement from informal to formal sector
• Develop equity investment culture

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SMEEIS

• As at September 30, 2005
• N31 billion (US 220 million) set aside
• N10 billion (US 71 million) invested
• About 200 investments
• Slow pace due to lack of preparedness for quantum
  of funds available (funds came before PE/VC
  skills)

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Key Players

• Amalgamated Capital
• Manage SMEEIS funds for a few Banks
• Aureos
• SME Investment vehicle (also manages SMEEIS funds
  for a few banks).
• First Funds
• Subsidiary of First Bank
• First SMI
• Manage SMEEIS funds for 3 banks
• SME Manager
• Manages SMEEIS funds for 14 banks
• UBA Private Equity
• Subsidiary of UBA
• Unique Venture Capital
• Manage SMEEIS funds for a few Banks
• Several Banks manage the funds in-house

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SMEEIS

• Co-investment opportunities
• Accion (MicroFinance)
• AfriCap (MicroFinance)
• AfricInvest (PE firm)

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SMEEIS

• Already an EXIT in SMEEIS
• Executive Development Business in Lagos
• Investment N35 mln (US250,000)
• Dividends N9 mln (US 65,000)
• MBO (after 39 months) N90 mln (US 650,000)
• Gross IRR (in Naira) 50.1
• Employment 5 staff to 35 at exit
• Turnover N30 mln (US 214,000) to N150 mln (US
  1,071,000) at exit
• Customer base now includes Blue chip companies

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Key Players

• Non SMEEIS Fund Managers
• Actis
• Formerly CDC Capital Partners
• Avante Capital
• Promoted by Ocean and Oil Holdings
• Capital Alliance Nigeria (ACA)
• CAPE fully invested
• CAPE II - follow-up to CAPE being raised
• Vectis
• Newly promoted Fund
• Increased activity by DFIs in Nigeria
• IFC made Nigeria its regional office for West
  Africa
• FMO also in Nigeria
• European Investment Bank increasing its
  activities
• Beginning of critical mass for the VC industry

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Venture Capital Association of Nigeria (VCAN)

• Industry players collaborated to promote VCAN
• Initial start-up supported by FF and CDVCA
• VCAN aims to promote growth of Venture Capital
  in Nigeria
• VCAN formed in 2003 and elected pioneer
  executives
• Rotimi Oyekanmi President
• Kayode Ayeni Vice President
• Soye Adetunji Treasurer
• Peter Longe Ex Officio
• Kunle Wright Ex Officio

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Next Steps for VCAN

• Work with like-minded organisations for
• Capacity building
• PE/VC practitioners
• Entrepreneurs
• Advocacy for enabling environment for PE/VC to
  succeed in Nigeria (especially with regulators)
• Work with BoI and SMEDAN to ensure they operate
  efficiently
• Institute high ethical standards for the
  profession

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Outline for breakout session

• Nigeria Background Information
• Nigerian Experience
• Pre 1997
• 1997 2002/3
• 2002/3 - Date
• Challenges for VC in Nigeria
• Conclusion

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• Thank You