The Mergers & Acquisitions Review: Nigeria

Overview of M&A activity

Over the last year, there has been increased activity in Nigeria as companies strive to recover from the effects of the covid-19 pandemic on the economy. Nigeria's deal value in the first half of 2021 increased by 267 per cent with a total value of US$1 billion and a volume increase of 17 per cent compared to the first half of 2020.2 Most M&A deals in Nigeria are acquisitions. In 2021, the tech startup space saw a lot of activity with successful funding rounds for various startup companies.

In October 2021, the retail sector was active with African Capital Alliance acquiring a 31 per cent equity stake in Food Concepts Plc from Development Partners International. Shoprite International also sold its equity stake in its Nigerian subsidiary valued at US$20 million. Africa Capital Works also acquired a major equity stake in Dorman Long Engineering Limited, an engineering and fabrication company.

The banking and financial services sector showed significant activity. Key transactions in this sector include the acquisition by Access Bank Group of a 78.15 per cent stake in the African Banking Corporation of Botswana Ltd. Other deals in this sector include the acquisition by FCMB Pensions of a 60 per cent stake in AIICO Pension Managers Ltd.

In the agriculture sector, Releaf Ltd, an agriculture technology startup, raised US$2.7 million in its seed fund round, led by Samurai Incubate Africa, Future Africa and Consonance Investment Managers. Agricorp International – a Nigerian based spices producing, processing and exporting company – also raised US$17.5 million in a Series A funding round from investors including AFEX Nigeria and One Capital LLC.

The telecommunications and entertainment sector saw one of the largest deals with Mwendo Holdings BV (South Africa)'s US$182 million acquisition of Blue Lake Ventures Ltd, a Nigerian media and entertainment company.3 Other deals include the acquisition by I-web Inc of a 100 per cent stake in Nigeria's Tingo Mobile Plc in August 2021.

General introduction to the legal framework for M&A

The laws that govern M&A activity in Nigeria are:

  1. the Federal Competition and Consumer Protection (FCCP) Act 2019;
    • the Federal Competition and Consumer Protection Commission Merger Review Regulations;
    • the Federal Competition and Consumer Protection Commission Merger Review Guidelines;
  2. the Companies and Allied Matters Act 2020 (CAMA);
    • the Companies Regulations 2021;
  3. Investments and Securities Act (ISA) 2007;
    • the Rules and Regulations of the Securities and Exchange Commission (SEC); and
    • the Nigerian Stock Exchange Rulebook

The FCCP Act is the primary legislation that regulates mergers and acquisitions in Nigeria. The Act establishes the Federal Competition and Consumer Protection Commission, and the Competition and Consumer Protection Tribunal. The FCCP Act will be discussed further in Section III.

The CAMA is also an important piece of legislation that impacts on M&A deals. In addition to the regulation of companies, CAMA also includes provisions on share acquisitions, schemes of arrangements, and other forms of business disposals. The provisions in CAMA cover schemes of merger, share buybacks by companies, pre-emptive rights of shareholders, financial assistance by companies to shareholders, etc.

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.

Some sector-specific laws also regulate M&A transactions. 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;
  4. the Petroleum Industry Act 2021 in the oil and gas industry; and
  5. the National Insurance Commission Act regulates the insurance industry.

These sector-specific laws operate in addition to the provisions of the FCCP Act, the CAMA, the ISA, and the SEC Rules and Regulations. In the oil and gas industry, for example, 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. The Finance Act 2019 and the Finance Act 2020 that were passed into law in January 2020 and December 2020, respectively, 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.

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 vested in the Federal Competition and Consumer Protection Commission (FCCPC). In the exercise of its powers, the FCCPC has released the following:

  1. the Merger Review (Amended) Regulations 2021, which amend the 2020 Merger Review Regulations and provide a regulatory framework for the notification and review of mergers in accordance with the provisions of the Federal Competition and Consumer Protection Act. They also modify the applicable fees for notifications under the Regulations;
  2. the Guidelines on Simplified Process for Foreign-to-Foreign Mergers with Nigerian Component in November 2019, which 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; and
  3. the Notice of Threshold for Merger Notification in September 2019, which prescribes the thresholds of annual turnover that would trigger the requirement to give the FCCPC notice of a merger before implementation.

In August 2020, the President of the Federal Republic of Nigeria signed the Companies and Allied Matters Act 2020 into law. CAMA introduced several changes to the practice of corporate law in Nigeria. Some of the changes introduced 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. CAMA also permits private companies to hold their general meetings electronically.

Under CAMA, the circumstances under which a company is permitted to provide financial assistance for the acquisition of its own shares have been expanded so 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 Corporate Affairs Commission.

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 has led investors to become more selective with Nigerian investments. A key consideration that influences foreign investments in Nigeria is the foreign exchange regime. Uncertainty as to the value of the naira coupled with recent difficulties with obtaining foreign exchange in Nigeria has made foreign investors focus on Nigerian investments that generate revenue in foreign currency. Because of the depreciation of the naira, Nigerian investments are cheaper for foreign investors; however, there are concerns about viable and profitable exit strategies because of the difficulty in obtaining foreign currency to repatriate capital and profits. Policy uncertainty around foreign exchange management is currently fuelling exits while at the same time limiting the number of fresh foreign investments into Nigeria.

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 moves by prominent companies to divest their assets in Nigeria may not be encouraging to potential investors. For example, Shoprite announced its intention to divest from its Nigerian subsidiary, Retail Supermarkets Nigeria, citing the harsh business environment as one of the reasons for the decision, and there have been reports that Royal Dutch Shell is planning a major divestment of its Nigerian assets, including its Nigerian subsidiary, the Shell Petroleum Development Company.

Despite the effects of the covid-19 pandemic and foreign exchange concerns, the market did see some acquisitions by foreign investors; for example, Heineken NV, the Dutch brewing company launched a mandatory takeover bid of Nigerian Champions Breweries Plc, through Heineken's Nigeria subsidiary, Raysun Nigeria Ltd.

Significant transactions, key trends and hot industries

Financial technology in Nigeria has developed rapidly over the past few years, and startups in the sector have raised significant amounts of funding since they began to gain popularity. As stated earlier, equity investments in Nigerian startups are typically through funding rounds.

In August 2021, Alerzo Ltd – a Nigerian B2B retail tech startup – raised US$10.5 million in a Series A round led by Nosara Capital. At the beginning of 2021, fintech startup Kuda raised US$25 million in a funding round led by Valar Ventures. This followed a US$10 million raise in November 2020, led by Target Global. In April 2021, Okra – a fintech platform – raised US$3.5 million in a seed round further to its goal to expand its data infrastructure in Nigeria and expand to Kenya and South Africa. This is soon after another noteworthy transaction where the company received a US$1 million investment 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 May 2021, Mono also closed its seed round with a US$2 million investment, with investors such as Entrée Capital and Lateral Capital.

In July 2021, Lidya, a Nigerian fintech startup, also announced that it had completed a US$8.3 million pre-Series B funding round. The investments were led by Alitheia Capital with the participation of Bamboo Capital Partners, Accion Venture Lab and Flourish Ventures.

In the financial services sector, AfricInvest acquired a minority stake in the Royal Exchange General Insurance Company through its evergreen private equity fund, FIVE. In April 2021, the International Finance Corporation also announced a partnership with Nigeria's Lift Above Poverty Organization (LAPO), further to LAPO's mandate to expand its microfinance business in Africa.

In terms of key trends, cryptocurrency and crypto assets have been gaining a lot of attention in Nigeria. In September 2020, the SEC stated that it views crypto assets as securities and intends to introduce regulatory guidelines for investments in cryptocurrency. However, in February 2021 the Central Bank of Nigeria (CBN) issued a letter to all banks and other financial institutions iterating that such regulated institutions are prohibited from dealing in cryptocurrencies and facilitating payments for cryptocurrency exchanges. Both regulators have stated that they are working together to analyse and understand the identified risks to better protect the public, should the regulated institutions be permitted to deal and facilitate crypto transactions.

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 from foreign sources.

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. However, it should be noted that as a result of disruptions caused by the covid-19 pandemic, there have been significant lay-offs and redundancies across several sectors. This has led to increased judicial activism, especially at the National Industrial Court.

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. A major change is the passage of the Petroleum Industry Act 2021 (PIA) in August 2021. The PIA repeals the Petroleum Act 2004 and provides a fiscal framework for the Nigerian petroleum industry. Chapter 4 of the PIA provides for the Petroleum Fiscal Industry Framework, with changes to royalty rates and pricing. The PIA also introduced the Hydrocarbon Tax at the rate of 15–30 per cent, to be charged on the crude oil revenue of companies with onshore, shallow water and deep shore upstream petroleum operations. In addition, companies income tax and education tax is now applicable to companies in the petroleum industry and will no longer be deductible.

The enactment of the Finance Act 2019 and Finance Act 2020 also brought with it significant changes to the tax regime in Nigeria. Both Finance Acts amend 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 2019 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. Notably, the Finance Act 2019 also includes provisions relevant to business reorganisation in Nigeria. The provision exempts assets transferred or sold between related companies as part of a business reorganisation from capital gains tax, value added tax and companies income tax, provided the companies have been related for at least 365 days prior to the reorganisation and the company that acquired the asset does not dispose of the asset within 365 days of the date of the transaction.

It also amended the value-added tax regime by increasing the VAT rate to 7.5 per cent and now requires Nigerian consumers of VAT-able services to account for value added tax where the non-resident supplier does not include VAT in its invoice.

The Finance Act 2020, which took effect on 1 January 2021, introduced amendments to the Public Procurement Act and the Companies and Allied Matters Act, among others. Amendments include personal income tax being made applicable to non-resident individuals providing technical, management, consultancy and professional services with significant economic presence in Nigeria while small companies (as defined under the Companies Income Tax Act) are not exempt from Education Tax.

Another key change is 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.

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 continued activity and development in the e-commerce and financial technology sectors, following the funding rounds by different companies. We also note uncertainty in the cryptocurrency space as financial institutions, for fear of sanctions by the CBN, close accounts of cryptocurrency traders and exchanges as instructed by the CBN. FinTech companies have also deactivated digital accounts of customers that dealt with cryptocurrency. The market anticipates the result of the SEC's engagement with the CBN as they resolve how the operation of cryptoassets in Nigeria will be regulated.

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 technology, media and telecommunications sectors.

In the oil and gas sector, there is renewed optimism for the Nigerian petroleum industry as the new fiscal and tax framework for the sector aims to encourage investment in the sector.


1 Lawrence Fubara Anga is a partner and Oyeyosola Diya is an associate at ÁELEX.

2 Sandy Bhadare, 'SA and Nigeria M&A Deal Value Rises in 2021' (2021) African Law & Business – News and Analysis, accessed 14 October 2021.

3 ibid.

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