Nigeria remains West Africa’s biggest private capital market, with $3bn annual deals — SEC

NIGERIA remains West Africa’s largest private capital market, recording an average of 404 private equity and venture capital deals annually valued at $3 billion between 2020 and 2024, according to the Securities and Exchange Commission (SEC).

The deals accounted for 66 percent of the region’s transaction volume and 52 per cent of total deal value during the five-year period, highlighting Nigeria’s dominance in the regional private investment market despite mounting economic and regulatory challenges.

However, the SEC warned that investment activity had slowed amid macroeconomic pressures, higher taxation, regulatory changes, limited institutional investment and inadequate exit opportunities for investors.

The findings are contained in the Nigeria Capital Market Masterplan 2.0 (2026-2036), a 10-year strategic roadmap designed to deepen the country’s capital market and strengthen its contribution to economic growth, infrastructure development and enterprise financing.

The report identified private equity (PE) and venture capital (VC) as critical sources of long-term risk capital capable of supporting business expansion, innovation and job creation while preparing more companies to access Nigeria’s capital market.

It, however, warned that limited exit routes and recent tax changes, including the increase in capital gains tax from 10 per cent to 30 per cent, had weakened Nigeria’s competitiveness as a destination for private capital, constrained the recycling of investment funds and reduced the attractiveness of the market.

The SEC said although the Investment and Securities Act 2025 and subsequent regulatory reforms have strengthened governance, disclosure and investor protection by bringing PE and VC funds within the Collective Investment Scheme framework, important structural gaps remain.

The commission said Nigeria lacked a dedicated regulatory and exchange framework through which closed-ended private equity and alternative investment funds could raise permanent capital, broaden their investor base and provide liquidity through secondary-market trading.

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To address these challenges, the masterplan proposed a specialised exchange listing segment for alternative investment and PE/VC funds, alongside proportionate regulation, tailored disclosure and valuation standards, incentives for institutional investors and improved secondary-market liquidity.

The proposed measures are expected to expand investment opportunities, strengthen exit channels and position Nigeria as a regional hub for private capital.

The masterplan also recommended reforms to deepen Nigeria’s asset-backed securities market, which allows businesses and financial institutions to raise funds by converting income-generating assets into securities.

Although the existing framework provides for special purpose vehicles, credit ratings and investor protection, the SEC said a more comprehensive regime was needed to improve legal certainty and expand eligible assets.

The proposed reforms include securitisation of infrastructure and utility receivables, electricity and water revenues, toll-road collections and other predictable public-sector cash flows.

The commission also proposed mandatory risk-retention requirements, under which originators or sponsors would retain a meaningful economic interest in securitised transactions to align their incentives with investors. International examples cited in the report include the European Union and South Africa, where minimum retention requirements stand at five per cent.