The Mergers & Acquisitions Review: Nigeria

Overview of M&A activity

The onset of the covid-19 pandemic at the beginning of the year significantly slowed down economic activity globally. Nigeria's M&A space also faced a decline in activity during the year in review.

Despite the economic challenges, the banking and financial services sector showed significant activity. Key transactions in this sector in this sector include the acquisition by Access Bank Group of a 100 per cent stake in Kenya's Transnational Bank. Additionally, Access Bank, Zambia (a subsidiary of Access Bank Plc, Nigeria) announced that it had entered into an agreement to acquire the entire issued ordinary share capital, assets and liabilities of Cavmont Bank Limited, a subsidiary of Cavmont Capital Holdings Zambia Plc. Other deals in this sector include the acquisition by FCMB Pensions of a 96 per cent stake in AIICO Pension Managers Ltd; this transaction is yet to be finalised as it remains subject to the parties obtaining relevant regulatory approvals. FBN Holdings recently announced its divestment from FBN Insurance Ltd. The sale of its shares was triggered by the exercise of Sanlam Emerging Markets (Proprietary) Ltd of its pre-emptive rights under the shareholders' agreement.

In the oil and gas industry, Africa Oil Corporation, a Canadian oil company acquired a 50 per cent stake in Petrobras Oil and Gas BV, holder of interests in oil mining leases in Nigeria. The transaction was valued at US$519.5 million.

In the telecommunications sector, Inq, a subsidiary of Convergence Partners, has acquired a 100 per cent stake in Vodacom's business operations in Nigeria, Côte d'Ivoire and Zambia. The transaction was geared towards expanding Inq's presence across Africa.


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General introduction to the legal framework for M&A

M&A activity in Nigeria is generally governed by the Investments and Securities Act (ISA), the Companies and Allied Matters Act, the Rules and Regulations of the Securities and Exchange Commission (SEC) and the Federal Competition and Consumer Protection (FCCP) Act. The SEC recently stated that it views cryptoassets as securities and intends to introduce regulatory guidelines for investments in cryptocurrency.

Prior to the enactment of the FCCP Act, the role of the SEC was to review proposed M&A transactions to ascertain whether a proposed transaction would result in substantial restraint of trade. The implications of the new Act are discussed in Section 3. The Nigerian Stock Exchange also plays a significant role in M&A involving publicly quoted companies that are required to comply with its listing requirements.

Sector-specific laws also regulate M&A transactions in certain sectors. For example:

  1. the Banks and Other Financial Institutions Act and the Central Bank of Nigeria's Guidelines and Incentives on Consolidation in the Banking Industry are relevant to M&A in the banking sector;
  2. the Nigerian Communications Act regulates the telecommunications sector;
  3. the Electric Power Sector Reform Act regulates the electricity sector; and
  4. the National Insurance Commission Act regulates the insurance industry.

These sector-specific laws operate in addition to the provisions of the ISA, the Companies and Allied Matters Act, the FCCP Act and the SEC Rules and Regulations. In the oil and gas industry, any M&A activity that would effect a change in the ownership of an oil mining lease, an oil prospecting licence or a marginal field requires the consent of the Honourable Minister of Petroleum Resources.

M&A transactions may also be subject to the provisions of various tax legislation including the Companies Income Tax Act and the Capital Gains Tax Act. It Is important to note that, in January 2020, the President of the Federal Republic of Nigeria signed the Finance Act into law. The Finance Act made significant changes to existing tax laws in the country. In addition to legislation, Common law applies to the extent that there is no relevant provision in the statutes.

Strategies to increase transparency and predictability

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Developments in corporate and takeover law and their impact

Since the enactment of the Federal Competition and Consumer Protection Act 2019, powers of oversight and approval of M&A transactions are now vested in the Federal Competition and Consumer Protection Commission (FCCPC). In the exercise of its powers, the FCCPC released the Guidelines on Simplified Process for Foreign–to-Foreign Mergers with Nigerian Component in November 2019. The Guidelines serve to bring mergers and acquisitions of foreign entities that would result in a change of control of a Nigerian business under the regulatory purview of the FCCPC. The FCCPC also issued Notice of Threshold for Merger Notification in September 2019, which prescribes the thresholds of annual turnover that would trigger the requirement to give the Commission notice of a merger before implementation.

The FCCPC has also released Merger Review Regulations to provide a regulatory framework for the review of mergers in accordance with the provisions of the Federal Competition and Consumer Protection Act.

In August 2020, the President of the Federal Republic of Nigeria signed the new Companies and Allied Matters Act into law. The new law has introduced several changes to the practice of corporate law in Nigeria. Some of the changes introduced under the new law include the introduction of single-member companies, which allows for the formation of private companies with only one member. Under the Act, small companies can carry on business with only one director and are exempted from the requirement to appoint a company secretary and to hold annual general meetings. The new Act also permits private companies to hold their general meetings electronically. This is a welcome development, particularly in light of movement restrictions necessitated by the covid-19 pandemic. Under the new Act, the circumstances under which a company is permitted to provide financial assistance for the acquisition of its own shares have been expanded such that financial assistance may be given where there is non-reduction of net assets. In cases where net assets are reduced, such assistance should be financed out of distributable profits. Additionally, such financial assistance must be approved by a special resolution of the company. Directors of the company are also required to make a statutory declaration in a form prescribed by the CAC.

Us antitrust enforcement: the year in review

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Foreign involvement in M&A transactions

M&A activity in the past was fuelled by investors' desire to participate in Nigeria's rapidly developing economy. However, recent uncertainty surrounding the foreign exchange regime, coupled with slower economic growth and the emergence of other frontier markets, led investors to become more cautious with Nigerian investments. Efforts by the PEBEC (Presidential Enabling Business Environment Council) have yielded some results as Nigeria moved from number 146 to 131 on the 2020 Ease of Doing Business Ranking. In practice, however, the recent announcement by Shoprite of its intention to divest from its Nigerian subsidiary, Retail Supermarkets Nigeria, citing the harsh business environment as one of the reasons for the decision may not be encouraging to potential investors.

Significant transactions, key trends and hot industries

Financial technology in Nigeria has developed rapidly over the past few years, and start-ups in the sector have raised significant amounts of funding since they began to gain popularity. At the beginning of the year, Paga, a Nigerian digital payments start-up, acquired Apposit, an Ethiopian software development company for an undisclosed sum. More recently, Stripe, a payment processing platform based in America, acquired Nigerian online payment solutions provider Paystack in a deal said to be worth over US$200 million. Another noteworthy transaction in this sector is the US$1 million investment received by Okra, a Nigerian fintech platform from TLcom Capital, a London-based venture capital firm. Okra provides a secure portal through which its clients can access and exchange financial information in real time. In agribusiness, Farmcrowdy recently acquired Best Foods, a leading meat processor. The acquisition is said to be part of Farmcrowdy's plans to increase its presence in Nigeria's agribusiness space. Tomato Jos, an agricultural production company also secured a Series A round funding of over 1.8 billion naira through a consortium of investment firms led by Goodwell Investments. Harambe Entrepreneur Alliance, a network of African entrepreneurs recently provided a US$100,000 equity investment in, a motorbike hailing and delivery service. Harambe also provided US$100,000 in debt financing to Releaf Group, a Nigerian agritech company focused on providing technological solutions to the supply chain industry in Nigeria.

In the insurance sector, Verod Capital recently signed an agreement to acquire Law Union and Rock Plc; the value of this transaction is not known at this time. Another transaction in this sector is the transfer of ARM Holding Company Ltd stake in ARM Life to Tangerine Life Limited, effectively making Tangerine Life Limited the fourth largest life insurance provider in Nigeria.

Other notable transactions include BUA Group's acquisition of majority shareholding in P W Nigeria Limited, a leading mining, engineering and construction company as well as Dangote Sugar Refinery's acquisition of Savanna Sugar Company Limited which was concluded in July.

Financing of m&a: main sources and developments

The cost of locally sourced debt funding for acquisitions is very high, with interest rates typically above 20 per cent. As a result, the vast majority of acquisitions in Nigeria are funded using cash reserves while the rest are funded with equity or debt, especially foreign-sourced debt.

Employment law

There have been no recent changes to employment law that are relevant to M&A. The statutes governing this are the Labour Act, the Pension Reform Act and the Personal Income Tax Act.

The Labour Act provides that the transfer of any contract from one employer to another shall be subject to the consent of the worker and the endorsement of the transfer of the contract by an authorised labour officer.

Tax law

The year in review saw significant changes to the country's tax regulatory framework – further proof of the government's intention to increase revenue generated from taxes. One such change was the amendment of the Deep Offshore and Inland Basin Production Sharing Contracts Act in October 2019. Prior to this amendment, oil and gas companies operating in deep offshore areas paid royalties ranging from 12 per cent to zero per cent depending on the depth of the offshore areas. The aim was to encourage investors with the financial and technical capacity to carry out drilling operations in high water depths. The amendment now provides for a flat royalty rate of 10 per cent for all deep offshore operations while the applicable royalty rate for inland basin areas has been reduced from 10 per cent to 7.5 per cent. Additionally, the amendment now provides for graduated royalty rates depending on crude oil prices per barrel. Naturally, there has been concern regarding the effect this would have on potential investors in the sector.

The enactment of the Finance Act in January 2020 also brought with it, significant changes to the tax regime in Nigeria. The Finance Act amends several tax laws including the Companies Income Tax Act, the Value Added Tax Act, the Capital Gains Tax Act and the Petroleum Income Tax Act, among others. The Finance Act amends the Companies Income Tax Act by introducing provisions to ensure that non-resident companies with significant economic presence in Nigeria are liable to income tax on profits derived from economic activity in Nigeria. This applies even where such companies do not have a fixed base in Nigeria. The Finance Act also amends the value-added tax regime by increasing the VAT rate to 7.5 per cent and now requires Nigerian consumers of VATable services to account for value added tax where the non-resident supplier does not include VAT in its invoice.

The developments in the tax regime also affect some of the rules applicable to business reorganisations in Nigeria. The amended Capital Gains Tax Act now includes a minimum holding requirement for companies seeking to enjoy the capital gains tax exemption applicable to the sale or transfer of assets or businesses within a group of companies. Consequently, acquiring companies are required to retain the acquired assets or business for a minimum of one year, failing which the exemption would be rescinded.

Competition law

The Federal Competition and Consumer Protection Act received presidential assent in early 2019. The Act aims to promote competition, curb restrictive trade practices and protect the interests of consumers. The Act establishes the FCCPC, which is now responsible for the approval of M&A. The Act divides mergers into small and large mergers and gives the FCCPC the power to determine the threshold of annual turnover to determine what constitutes a small and large merger. In the exercise of this power, the FCCPC issued the Notice of Threshold for Merger Notification which prescribes that the FCCPC shall be notified of a merger, if, in the preceding financial year, the entities involved had a combined annual turnover of 1 billion naira or more. Alternatively, the FCCPC must be notified if the annual turnover of the target entity in the preceding financial year was 500 million naira or more.


As the economy recovers from the effects of the covid-19 pandemic, we expect to see more activity in the M&A space. We also expect to see increased activity in the e-commerce and financial technology sectors, especially cryptocurrency particularly in the wake of the SEC's recent recognition of cryptoassets as securities. As financial technology continues to penetrate the Nigerian market, we anticipate that the SEC will follow through on its promise to introduce regulation for cryptoassets.

The introduction of changes to major laws governing corporate law practice in the country point to a commitment to updating the country's legal and regulatory framework to accommodate advances in technology. There have been some concerns that some of the amendments to tax legislations may have a negative impact on foreign investments, however, there is no clear indication that this has been the case.

As the country's economy recovers from the effects of the pandemic, we expect to see increased activity in sectors with a high potential for growth, especially the financial technology and in the technology, media and telecommunications sectors.

In the oil and gas sector, there appears to be renewed optimism for the passing of the anticipated Petroleum Bill. The current Bill under consideration contains provisions for governance in the industry for example, the separation of regulatory bodies for the upstream, midstream and downstream sectors. The Bill also contains comprehensive provisions for the gas sector. This is important because the dearth of gas-specific legislation has hindered the development of the gas sector. Following the passage of this Bill, we expect to see increased investment in the oil and gas sector.


1 Lawrence Fubara Anga is a partner and Maranatha Abraham is an associate at ÁELEX.

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