Emergence of Venture Capital in Nigeria
Venture Capital in Nigeria started informally by industry leaders like Professor Adebayo Adedeji. He wrote the Lagos Action plan of 1980 which served as the stimulant for the establishment of the African Industrial Development Fund, a pioneer Fund that looked into Africa industrialisation and development of local technology. Another notable mention is Henry Fajemirokun who is the founder of Henry Stephens and the formation of Nigerian American Merchant Bank now (FCMB).
Henry's involvement with several companies and sectors shows he was a pioneer in the Nigerian maritime industry and owned the first Nigerian company in a shipping line. He established Henry Stephens Shipping Company and the Nigeria Shipping Company, his involvement in commodity brokerage started in 1969 when he held a seat on the London Stock Exchange aside as an active investor. Henry was a shareholder in leading companies in Nigeria e.g Johnson Wax, FanMilk, First Bank Nigeria Limited, Nigeria Sewing Machine Manufacturing company limited, Nigerian Diversified Investments.
Similarly, Nigeria’s first VC firm, the National Risk Fund Plc (NRF), was established in 1987 out of the Venture Capital (Incentives) Decree No. 89 1993 Act. This was backed by the Federal Government of Nigeria, through the Raw Materials Research Development Council (RMRDC), as well as by banks and manufacturing companies.
Similar to Professor Adebayo Adedeji and Henry Fajemrokun in the early Nineties, the first prominent venture capital deal led and executed by Nigerians was the $285M acquisition of GSM operating license for EcoNet by a syndicate of traditional banks, High Networth Individuals (HNIs) and State Governments like (Lagos & Delta) in 2001. After the Econet deal, seven banks syndicated to raise 30M naira for Interswitch in 2002 for the switching and payment processing company.
Another success story was uncovered when MTN listed its Nigeria entity on the Nigerian Stock exchange. The 6 largest individual shareholders are Pascal Dozie, Gbenga Oyebode, Babatunde Folawiyo, Victor Odili, Sani Mohammed Bello, Ahmed Dasuki. These angels served as the first set of investors in Nigerian companies before venture capital became more democratised and open to foreign investors.
The growth of VC is concomitant with the privatization of State-Owned Enterprises (SOEs) and liberalization of the telecommunications sector in the country. Since 2003, the VC sector became a recognizable part of the Nigerian financial sector as the nation enjoyed continual democratic governance. Between 2014 and 2019, 613 VC deals were reported in Africa with a total value of $3.9 billion.
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