The Best Way To Invest In Africa: A Focus On Nigeria
Many international organisations are unaware of the vast business opportunities in Africa, even as the continent, being the most untapped part of the world, is currently billed to become the fastest growing economy on the planet. This information may not be widespread, but for those who are aware, many of them either choose to stay away or feign ignorance because of the reputation of some countries of interest or some fears that prospective investors may have about doing business in Africa as a whole.
While there will always be good and bad times, one of such countries with the most abundant resources and opportunities on the African continent is Nigeria with over 50 different types of solid minerals available, immense agricultural products, one of the largest oil & gas reserves worldwide, and a fast-growing population to favour the Fast Moving Consumer Goods (FCMG) industry.
But despite its wealth-creation potential for any international investor that decides to make the leap, very few act on it. A bulk of the reasons most investors are scared of investing in Nigeria are:
- Unstable political climate
- Poor economic growth
- Poor international reputation
- Risk of losing investments
- Poor infrastructure
These problems are always present in developing nations, and in the process, gives rise to great profitability in specific industries like commodity trading, parts of manufacturing, and more.
Several multi-national conglomerates have long identified the opportunities present in doing business in Nigeria, and so, have taken advantage of its benefits to growing their global value exponentially. For those who can, but haven’t, they’re missing out on a great opportunity they may come to regret many years down the line.
Since there are great advantages of investing in Nigeria, I’ve detailed 4 ways prospective international investors can take advantage of the opportunity:
1). Become A Commodity Financier:
Commodity trading firms in countries like Nigeria always need finance to grow their export capacity. While banks may be willing to fund transactions, there’s a limit to what they can do, and this is where international financiers come in.
Financiers could choose to fund transactions on a per shipment basis so they can earn a percentage of the revenue generated from the export. Some financiers, on the other hand, may instead choose to give the amount as a loan repayable over a period of 3 to 5 years.
When you choose to finance the exports of local commodity trading firms in Nigeria, you can remotely participate in the country’s commodity trading industry and consistently earn revenues from monthly shipments financed.
2). Invest Or Acquire A Local Company:
Investing in a local Nigerian company with high prospects for growth is another option.
In this scenario, the company would need to first need to get a Certificate of Registration of Company with Foreign Participation from the Nigerian Investments Promotion Council (NIPC). The company will need to obtain a business permit from the Federal Ministry of the Interior (FMI) after showing proof that the foreign entity has actually invested in the business. And the company will also need to get a Certificate of Capital Importation (CCI) to serve as an evidence that the investor’s funds have been brought into Nigeria.
When you invest in or acquire a local company but retain its executives, you can easily leverage their experience and success they’ve achieved to quickly grow the organisation.
Irrespective of acquisitions or investments, foreign investors can also start up local companies and own 100% of the shares in them.
3). Invest In A Foreign Branch Of A Local Company:
Very successful organisations tend to expand their operations to multiple countries in a bid to spread their reach, grow their market base, and build a global brand.
As an international investor, you can choose instead to invest in the international subsidiary of the parent organisation in Nigeria. This way, you know you’re affiliated with the parent company in some ways and stand to profit from the income the foreign subsidiary generates in its jurisdiction.
For instance, you could invest in the Vietnamese branch of a Nigerian company that exports cashew nuts, so that from every sale the branch company in Vietnam makes, you can profit from it according to your shareholding in the company.
4). Invest In The Stock Market:
The fourth way to invest in Nigeria is to invest in the Nigerian Stock Market. Here, many local and multinational firms have their stocks listed on the exchange which are traded every day. A foreign investor could also invest in a local company with a view of listing on the stock market soon.
To Sum It Up
While doing business in Africa may be touted as difficult, it’s a lot easier if you’re working with the right partners. Countries like Nigeria for instance, are highly welcoming to foreign investments, and so, the Nigerian Investments Promotion Council (NIPC) is always willing to provide all the help they can offer to a foreign investor.
Another thing to note is it’s usually best to finance, invest, or acquire local companies instead of starting up one from scratch. This way you’ll have experienced local partners running the business profitably, and in the process, reduce your chances of failure.
What are your thoughts on how to invest in Nigeria? Let me know by leaving a comment below.