Nigeria falls big on private capital. South Africa, Kenya, Egypt soar

Private capital investment in Nigeria fell significantly in 2022, the same year competing African nations of Kenya, South Africa and Egypt saw huge growth, a new report shows.

While private investment in South Africa grew 18% and by as much as 387% in Kenya, it fell 40% in Nigeria, reversing gains the country made a year earlier when it topped the continental chart.

Private capital are investments made into companies that are not publicly traded. They are typically made by private equity and venture capital funds, who first raise the funds from investors.

Citing data from Global Private Capital Association, which tracks private capital fundraising and investment across the globe, the European Investment Bank said in a report this week that global risk aversion severely affected private capital fundraising and investment in Africa in 2022.

The Financing in Africa Survey report said fundraising in Africa fell by 35% to $2.1 billion, the lowest for the continent since 2013.

Despite the challenging fundraising environment, private investment in Africa remained robust. That is because in addition to newly raised funds, investment funds also have some existing capital which they can invest.

Private investment in 2022 only decreased by 3%, to $6.3 billion, remaining close to the all-time high set in 2021.

“This resilience was attributed to the deployment of pre-existing capital, indicating the continued strong appetite for deals in the region,” the report said.

Only four countries

Almost two-thirds of all private capital investment on the continent went to the four major national markets: South Africa, Kenya, Egypt and Nigeria. The financial services sector attracted the most, taking nearly half.

But while South Africa topped the chart with $1.3 billion, an 18% growth, Kenya rose 387% to $1.1 billion, and Egypt grew 87% to $897 million.

Nigeria plunged from $1.1 billion to $722 million.

The previous year, Nigeria led the chart largely on account of fintech-related venture capital activity in the country.

Reliance on existing capital for investment may prove more problematic for Africa if its fundraising continues to fall, EIB senior economist, Colin Bermingham told Pluboard.

“However, this situation can’t last forever. Investment is reliant on fundraising capital so if fundraising remains lower, investment volumes will also fall,” he said in a note.