Survey Shows Rising Investor Optimism

By Sunday Ehigiator  

KPMG, one of the biggest professional services firms has revealed that investors are still willing to invest in Nigeria despite various economic setbacks experienced in the country in the last 365 days.

The firm disclosed this in the second edition of its annual investors experience survey on doing business in Nigeria.

Commenting on the survey findings, the Partner and Africa Head, Deal Advisory and Private Equity at KPMG Nigeria, Dapo Okubadejo, disclosed that the survey was necessary to find out the degree of attractiveness of the Nigerian market to investors annually, and recommend areas to be improved upon to further encourage investors in Nigeria.

The survey sampled 50 top business executives cut across both foreign and local investors in Nigeria.

From the 50, 40 per cent and 26 per cent of them were strategic and financial investors respectively, and the remaining 34 per cent were local investors.

While strategic investors were said to be those players who invest on behalf of companies and also manage the company, the financial investors are the ones who only use their money for investments.

“A crucial factor that is expected to enhance deal flow is the improving macroeconomic situation. Around three-quarters of Nigeria’s exports comprise crude oil, making the country one of the biggest losers following the price crash in 2014.

“Market softness in the final quarter of 2018 notwithstanding, the oil price has staged a marked recovery over the last two years, meaning greater revenue for oil producers like Nigeria and, with it, a return of confidence.

“Indeed, an impressive 80 per cent of our survey sample expects deal activity to increase over the next year and more than three-quarters of respondents said they were more likely to invest in Nigeria as a result of their previous M&A experience in the country; almost half suggest that they are now significantly more likely to invest in Nigeria.

“As income rise and Nigerians significantly access banking services, there are likely to be two notable sectors that benefit –  consumer goods and financial services.

“Supporting this, we see that one out of every three deal (33%) in 2017 and 2018 were in the consumer sector versus 21 per cent in 2015 and 2016 combined. Domestic demand is on the rise and acquirers increasingly recognise the potential of entering and consolidating the Nigerian market via M&A.

“Notwithstanding, the country is not without its challenges. Lower reporting standards can prove to be an obstacle for some acquirers, as many private businesses in Nigeria are not subject to full-scale financial audits,” Okubadejo explained.

Continuing, Okubadejo noted that, “This is our second edition of carrying out this research work. The first span through the year 2016/2017 while this we are launching today covers the year 2017/2018.

“As usual, it is important to learn about the experiences of investors annually so to know how to better encourage some improvements in our market and policies so they can remain confident in our market and improve on their investments.

“Our research, conducted in association with Mergermarket, attempts to take the pulse of buyers in their approach to this sometimes complex but rewarding market.”

 Sharing more insights on the survey findings, the Partner, Deal Advisory KPMG, Ijeoma Emezie-Ezigbo, revealed that Nigeria’s consumer industry was showing signs of a robust recovery.

According to her, “on a short term basis, this is being driven by the country’s continued emergence from a recession that began in 2016, the direct result of the oil price slump.

“And financial services have been named the second most attractive sector for Nigerian M&A over the next five years with 40 per cent of respondents citing this as producing attractive investment opportunities.

“Our survey also reveals that respondents are optimistic that M&A will increase over the next two years,” she added.