Connect with us
SSN
Advertisement
IZIKJON
Advertisement
forex
Advertisement
Stanbic IBTC
Advertisement
Binance
Advertisement
Esetech
Advertisement
Patricia
Advertisement
Fidelity ads
Advertisement
app

Exclusives

Nigeria records $4.3 billion in Corporate Deals in 2020

Paystack, Flutterwave, 54 gene, Trade Depot headline as Nigeria generates $4.3 billion from corporate deals.

Published

on

Nigerian owned businesses and businesses operating in Nigeria recorded over 106 corporate deals valued at over $4.3 billion (N1.63 trillion) in 2020. 

This is according to data compiled by Nairalytics the research arm of Nairametrics between January and December 2020 all at different stages of completion.  

Nigeria’s investment climate was precarious in 2020 as the global economy spluttered due to the Covid-19 pandemic. Nigeria’s GDP contracted by 3.62% (year-on-year) in real terms in the third quarter of 2020 after enduring a 6.1% contraction in the previous quarter, a development that was also attributed to the sustained shocks emanated from the continued spread of the virus as well as weak global oil prices.  

Thus, foreign investor sentiments towards investing in Nigeria remained dampened due to the economic downturn stifling foreign portfolio inflows into the country. Data from the National Bureau of Statistics (NBS) shows that capital inflow into Nigeria was estimated at $8.61 billion between January and September 2020, compared to $20.19 billion recorded in the corresponding period, falling by 57% year on year.  

In addition, data obtained from the Nigerian Stock Exchange (NSE) reveals that about N226.13 billion was recorded from Foreign Portfolio Investors between January and November 2020 as domestic investors drove market turnover for the most part of the year.

Despite the economic downturn, the economy witnessed several corporate deals consummated or under different stages of completion for the period ended December 2020.

Corporate Deals Soar 

Corporates ranging from Startups to more matured businesses announced the closure or intent to secure funding through debt or equity-related deals amidst covid-19 and the lockdown. From Silicon Valley to South Africa the deals flowed in from all over the world boosting the capital structure of most Nigerian firms.

  • A total of 106 deals were captured in 2020 valued at $4.3 billion or N1.6 trillion occurred during the year with transactions ranging from raising equity, debt issuances, outright acquisitions, and divestments.
  • While the tech community dominated most of the equity-related deals, more established companies focussed on public offerings and debt securities such as commercial papers to raise money.
  • It is no surprise that the largest deal captured in 2020 was the International Breweries rights issue valued at about N165 billion or $457 million.
  • Dangote Cement was next to a bond issuance of about N150 billion, one of the largest private-sector debt-related deals for the year. BUA Cement followed suit with its own debt issuance of about N100 billion.
  • In terms of commercial papers, MTN raised N100 billion, the largest commercial paper issuance raised during the year.
  • In the tech community, the $200 million acquisition of Paystack by Stripe was by far the largest deal directly affecting a Nigerian based tech-related company.
  • Bolt, the cab-hailing tech firm operating across Nigeria and some African countries also got a significant funding boost raising about $100 million.

 

Why this matters

While the Nigerian economy suffered one of the biggest drops in portfolio investments in 2020 there was a flurry of mega deals that boosted the capital structure of most firms operating in the country.

  • Nairametrics research believes a large chunk of this funding will be spent in Nigeria as the country picks up from the economic ruin that was 2020.
  • The funds will flow into marketing budgets, capital expenditures, hiring of talents and executives, software acquisitions, etc.
  • Nairametrics also expect a significant rise in corporate deals on the Nigerian Stock Exchange as more companies take advantage of low-interest rates to either raise cheaper debts or replace expensive debts with equity.
  • Nigeria has a thriving Deals market that provides a significant source of revenue to law firms, financial advisory firms, auditors, fund sourcing firms, and investors.
  • Nigerian regulators also earn significantly from fees and taxes collected as the deals are consummated.

 A comprehensive report on all 106 deals will be published by Nairametircs next Monday. Kindly send in your email address here to get a copy.

Subscribe

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

1 Comment

1 Comment

  1. Anonymous

    January 24, 2021 at 11:34 am

    BUA was 115bn. Dangote’s bond was 100bn

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Exclusives

The Nigerian economy is increasingly dollarized but there is a way-out

Nigeria’s overdependence on Oil has brought about high dollarization in Africa’s biggest economy.

Published

on

For managers of the Nigerian economy, it was a huge sigh of relief when the National Bureau of Statistics reported that the country had surprisingly exited a recession in the 4th quarter of 2020. Contrary to most analyst expectation, the Nigerian economy grew by 0.11% in the 4th quarter of 2020.

Despite the return to growth, albeit tepid, a dark cloud of uncertainty continues to hover over the minds of millions of Nigerians as the broader economy remains in a fragile state. A key factor that remains a bellwether for the economy is the exchange rate, which is always perfectly correlated with the price of oil and the resultant dollar related export earnings.

Data has repeatedly shown that the country of over 200 million people is affected by the volatility of crude oil prices in the international market, particularly in the exchange rate value of the naira. Without oil, the Nigerian economy in its current state will collapse.

Data from Nairalytics, a data-sharing portal, reveals that the oil sector provides for 85% of Nigeria’s export earnings and 55% of its government revenues, making the nation highly dependent on the dollar for its survival. It appears a lot of financially savvy Nigerians now this already and are increasing their dollar positions.

According to Silas Ozoya, Founder/CEO of SUBA Capital LLC, in an exclusive interview with Nairametrics, a growing number of Nigerians are getting more attached to the US dollar due to high inflation and low purchasing power of the naira.

“Many Nigerians are beginning to dollarize their spending, investment and asset holdings to hedge against the ever-increasing inflation rate and our strong economic romance with recession,” Ozoya said.

Nigeria, Africa’s biggest crude oil producer, has been heavily impacted by the plunge in crude oil prices following the outbreak of the COVID-19 pandemic, with the nation’s authorities adjusting the naira twice in the year 2020 to deal with the pressure.

Besides the drop in foreign exchange revenues from crude oil export, diaspora remittances, which made up about 5% of Nigeria’s GDP in the year 2019, also experienced a significant decline in 2020, again due to the impact of the pandemic and the economic challenges faced by many nations across the globe.

Uwa Osadiaye, a financial analyst in a leading merchant bank, in a note to Nairametrics, revealed that the Nigerian apex bank had made great efforts to reduce the country’s high dependence on the dollar. He advised the nation to increase its Agricultural production.

“The central bank has tried to do this with little success but I believe that beyond administrative measures, the key could lie in increased domestic production of things we consume that aren’t commoditized internationally for a start, such as food crops,” Osadiaye said.

Temitope Busari, CFA, in a telephone interview with Nairametrics, said that it was time for Nigeria as a country to diversify.

“One outcome of the diversification of the Nigerian economy, and perhaps the most critical one at this time, is the potential to diversify our foreign exchange earnings as a sovereign state. It will reduce overdependence on crude oil, maximize opportunities in erstwhile neglected sectors and project the country as the destination for top-class value creation in other areas outside being an oil-producing state,” Busari stated.

The financial analyst also spoke on the need for Africa’s leading oil producer to invest more in intellectual property and encourage Nigeria’s talent in the diaspora, saying:

“We have produced some of the most brilliant minds in the world evidenced by the ground-breaking successes recorded by Nigerians in diaspora (Medical professionals, Software engineers, resilient small business owners to mention a few), and we must begin to drive policies to retain that talent in-country and make the world pay premium dollar for it.”

Binance

Adetayo Teluwo, a scholar at Warwick Business School, said that the narrative seems to be changing as Nigerians are now beginning to embrace homemade goods.

“The Fashion & Style scene continues to boom. From side hustles to globally-competitive websites with options to accept payments from customers all over the globe,” Teluwo said.

Jaiz bank ads

Bottom line

Economic experts believe that the way to solve this growing menace is for Nigeria to promote free markets and support large scale exports from the Agricultural, Mining, and Technology sectors. The country should tap into its raw diamond which is “intellectual services” to develop a knowledge economy.

Nigeria can draw lessons from India, which has performed remarkably well in creating an outsourcing and knowledge-based economy valued at over 150 billion dollars per annum. This has put India on the technology map, as a destination of low-cost but high-quality technical services, helping the densely populated nation to generate sufficient economic ripple effect to drive job and wealth creation.

Coronation ads
Continue Reading

Exclusives

Three things Nigerians can learn from Warren Buffet’s latest letter

Three things we learned from Berkshire Hathaway’s (Warren Buffet’s) 2020 letter to shareholders.

Published

on

warren-buffett, Young Investors, Here’s why Warren Buffet's $4.6m lunch with Bitcoin entrepreneur is experiencing delay , What Warren Buffet will do if he traded Nigerian stocks

Three things we learned from Berkshire Hathaway’s (Warren Buffet’s) 2020 letter to shareholders.

Warren Buffet (Sage of Omaha) recently released his annual letter to Berkshire Hathaway’s shareholders providing a recap of 2020 performance, as well as, giving his general perspective of his company’s journey.

Investors all around the globe fall over themselves to pay attention to what Mr. Buffet says, as well as how his portfolio of companies are performing. Just to learn as much as possible from one of the world’s most successful investors to date.

We at Nairametrics are no different and in this article, we will share some key business takeaways from the 2020 letter.

READ: Young Investors can learn these tips from Warren Buffet

1. Compounding still makes you rich

Just in case some investors momentarily forget about the power of compounding and consistency in investments, the very first page of Mr. Buffet’s letter serves up a timely reminder.

Specifically, since 1965 to 2020, the market value of Berkshire Hathaway’s stock has grown at a compounded rate of 20%. This is remarkable given that very few companies last that long (55 years) let alone provide such returns in US dollars over such a period of time. Even the S&P 500 with dividends included compounded at 10% (which is no small feat in of itself).

This lesson here is that for Retail investors, SMEs, startups, the power of compounding doesn’t need to be continually reminded, it needs to be a primary focus as you seek to deploy capital.

READ: Analysts pick Nigerian stocks Warren Buffett may likely buy

For context, in 1965 our dear country Nigeria had approximately $240million in external reserves.

  • If only 1% (i.e. $2.4million) had been invested in the S&P500 index and kept in a fund, the value of that fund today will be $56.3billion.
  • Alternatively, if only 0.05% ($1.2million) had been invested in Berkshire Hathaway stock and kept in a fund, the value of that fund today will be worth $67.45billion.

You can learn more about the power of compounding and here also.

2. Always focus on your CORE objectives and Key results

In 2020, Berkshire Hathaway earned USD$45billion of which $21.9b was operating income, $4.9b was unrealized gain, $26.7b was unrealized gain partially offset by $11b loss write-down.

Despite the huge unrealized gain of $26.7b, Mr. Buffet in his typical style was dismissive of unrealized gains but rather was quick to point out that his core objectives of growing operating income and acquiring good companies were not met in 2020!!!.

Binance
  • “Operating earnings are what count most, even during periods when they are not the largest item in our GAAP total. Our focus at Berkshire is both to increase this segment of our income and to acquire large and favorably-situated businesses. Last year, however, we met neither goal: Berkshire made no sizable acquisitions and operating earnings fell 9%. We did, though, increase Berkshire’s per-share intrinsic value by both retaining earnings and repurchasing about 5% of our shares.”

READ: Why Warren Buffett’s company is buying shares of a gold mining company

Furthermore, Mr. Buffet points out that Berkshire Hathaway’s earnings do NOT factor any portion of the operating earnings of companies which they have stakes in, such that only the dividends due to Berkshire are included in the results.

Jaiz bank ads

In other words, he is keen to avoid clouding actual performance of his CORE investment vehicle by avoiding accounting gimmicks which gross-up earnings.

For Nigerian startups, SMEs, retail investors, the lesson here is that a laser-focused approach to tracking CORE business earnings helps provide business owners with clarity about actual business performance. This persistent clarity keeps owners grounded on what are the key areas of focus for improved business performance whilst avoiding reporting superficial income.

READ: What Warren Buffet will do if he traded Nigerian stocks

Coronation ads

3. Avoid business complexities AND always choose the most profitable business path which offers the least resistance.

We previously mentioned, Mr. Buffet’s preference to tracking income from CORE businesses. In his letter to shareholders, he goes further to discuss his apathy to the traditional Conglomerate.

Specifically, most businesses that are acquired are seldom leaders in their sector and often are underperforming hence the need to be acquired. Consequently “Conglomerates” who focus on fully acquiring other businesses will likely end up with a portfolio of “Sub-optimal” businesses.

Turning around the fortunes of these “acquired’ businesses will require management time and effort whilst distracting from CORE operations and creating business complexities.

Mr. Buffet notes that going forward Berkshire Hathaway’s approach will seek to avoid this option of undue business complexity and focus on path of least resistance to profitability. This will be achieved by continuing to find very good businesses and taking a stake in these well run businesses.

app
  • “It took me a while to wise up. But Charlie – and also my 20-year struggle with the textile operation I inherited at Berkshire – finally convinced me that owning a non-controlling portion of a wonderful business is more profitable, more enjoyable and far less work than struggling with 100% of a marginal enterprise.
  • “For those reasons, our conglomerate will remain a collection of controlled and non-controlled businesses. Charlie and I will simply deploy your capital into whatever we believe makes the most sense, based on a company’s durable competitive strengths, the capabilities and character of its management, and price.
  • “If that strategy requires little or no effort on our part, so much the better. In contrast to the scoring system utilized in diving competitions, you are awarded no points in business endeavors for “degree of difficulty.” Furthermore, as Ronald Reagan cautioned: “It’s said that hard work never killed anyone, but I say why take the chance?”

The lesson here for Nigerian startups, SMEs, retail investors is that rather than always wanting to go alone into new ventures, sometimes you need to seek competent partners to collaborate and execute ventures with. (i.e., successful business isn’t always about who struggled the most).

Finally, (Yeah, I know I said three things, but this is also an important takeaway), one additional point is that consistency pays. We previously stated that Berkshire Hathaway stock has returned 2,810,526% between 1965 to 2020. One way that Mr. Buffet has accomplished this is by being very consistent in his portfolio. Consistency can be seen in the duration of holdings, as well as the general mix of the sectors of interest.

With regards to duration, the three most valuable assets in his portfolio have been held for at least 15years plus.

Holding Duration Sector 
GEICO 1951 to date Financial Services – Insurance 
BHE (Berkshire Hathaway Energy) 1999 to date Utilities – Energy 
BNSF (Burlington Northern Santa Fe, LLC) 2006 to date Utilities – Freight/Transport 

Even if you then look at the top 15 investments in Berkshire’s portfolio, you notice it is comprised largely of Financial Services, Utilities stocks and Large Tech firms.

The lesson here for Nigerian startups, SMEs, retail investors is that if you find something that you are good at, keep doing it and producing consistent results, stay within your area of competence and aim to maximize value.

Continue Reading



Advertisement





Nairametrics | Company Earnings

Access our Live Feed portal for the latest company earnings as they drop.