How global headwinds impact West Africa's private equity space

The private equity space in West Africa continues to show resilience amid unprecedented challenges facing the global and Nigerian economy. Femi Ogunjimi, a Partner at CardinalStone Capital Advisers, remains optimistic about the compelling investment opportunities in the region despite the ongoing uncertainties. Ogunjimi highlighted that while global headwinds may have an impact, each region's circumstances are unique, and private equity investments in West Africa are still addressing real-life problems with significant growth potential. One of the key factors affecting private equity investments in the region is foreign exchange volatility. With the local currency weakening against the US dollar, raising funds in dollars for startups becomes challenging. However, Ogunjimi emphasized that the fundamentals of businesses in West Africa remain strong, with businesses growing faster than the devaluation of the local currency. He emphasized that most investments in private equity are long-term, and he expects the FX challenges to resolve themselves over time, ensuring that investments achieve their objectives. Despite the global challenges brought on by the COVID-19 pandemic, the private equity space in West Africa saw a significant influx of capital last year, with about 10.4 billion raised. Ogunjimi expressed confidence in sustaining this momentum, citing the strength of business cases in the region. Health care, in particular, has been a hot sector for investments, with notable deals like Afia Care showing promising growth potential in the industry. When evaluating potential investments, CardinalStone Capital Advisers looks for promoters with strong character alignment, differentiated business models, growth opportunities, and the potential to become sector leaders. Ogunjimi emphasized the importance of providing the necessary support for businesses to catalyze their growth and achieve industry leadership status. The challenge of exiting investments in the West African market was also discussed, with Ogunjimi highlighting the strategic approach to exits. While full exits are still in the early stages, partial exits have been successful, with a focus on long-term growth projections and attracting potential buyers for invested businesses. In the evolving landscape of asset classes, private debt has emerged as a significant player, driven by the appetite of local funders like pension funds. Ogunjimi noted that private debt funding is on the rise, supported by pension funds' growing interest in this asset class. This development complements equity investments and contributes to infrastructure development and company growth in the region. Overall, despite the challenges posed by global headwinds, the private equity space in West Africa remains robust and poised for continued growth. With a focus on sustainable investments, strong business fundamentals, and strategic planning for exits, the region's private equity market is navigating uncertainties with confidence and resilience.