Nigeria takes key investment role in first US-Africa Summit

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In the latest push by Nigeria’s larger corporates to expand their continental footprint, Dangote Industries has announced plans for significant new capital commitments throughout sub-Saharan Africa alongside two of the world’s largest institutional investors at the first ever US-Africa Summit in Washington DC in August.

Dangote Industries, one of West Africa’s largest industrial conglomerates, unveiled a proposal to invest up to $5bn alongside Black Rhino, a portfolio company of US-based investment firm Blackstone. The commitments would be split in a 50/50 partnership and would be invested over the next five years with a particular focus on power, transmission and pipeline projects across sub-Saharan Africa.

Blackstone’s CEO, Steve Schwarzman, said the firm was expecting a return similar to that of its US private equity operations, which implies a rate of about 16% as of end-June, according to Bloomberg, with Blackstone committing money from its main energy-focused private equity business Blackstone Energy Partners.

A strategic partnership between Dangote and US private equity firm Carlyle Group was also announced on the sidelines of the summit. The partnership will seek to channel capital into oil and gas, consumer and agribusiness industries across the continent, although no amount was specified. Dangote Industries is currently an anchor investor in Carlyle’s sub-Saharan fund.  

Successful summit

The US-Africa Summit, held during the first week of August, was in part a platform to increase US trade and investment in Africa. China surpassed the US as Africa’s largest trading partner in 2009. US trade on the continent has declined since, due largely to a drop in oil imports. At the same time, volumes fell from $125bn in 2011 to $85bn in 2013 even as trade with China rose from $166bn in 2011 to $210bn in 2013.

The event, which saw more than 50 heads of state and government attend, was the first such conference hosted by the US, although recent years have seen China, Japan and the EU host similar forums. The US government claimed that $33bn in new investment deals was signed during the conference.  

Nigerian expansion

Dangote’s new partnerships represent a significant push by Nigeria’s private sector to expand investment in high-growth African markets, but they are far from the group’s first foray into other sub-Saharan economies. Dangote Cement, for example, one of the subsidiaries of the group and Nigeria’s largest cement supplier, has announced plans to invest $1bn in plants across Africa, including a $400m factory in Kenya.

Nor is the industrial conglomerate the only Nigerian firm expanding into new African markets. Recent years have seen a number of indigenous Nigerian companies – bolstered by growing balance sheets in their home market – move into other frontier economies elsewhere in Africa.

Nigeria’s banks have been particularly active. UBA, for example, has units in 19 African markets, which together have contributed more than a fifth of total revenues over the first half of 2014. Another of Nigeria’s lenders, First Bank, last November acquired the West Africa holdings of Switzerland’s International Commercial Bank Financial Group, expanding its presence in Ghana, Gambia, Guinea and Sierra Leone. In February this year Guaranty Trust Bank completed a $100m majority acquisition of Kenya’s FinaBank, which also operates in Rwanda and Uganda.

Other Nigerian companies moving abroad include firms such as mobile telecom operator Glo, which also has licenses in Benin and Cote d’Ivoire and last year launched operations in Ghana. Technology manufacturers such as Zinox Technologies and Omatek Computers have also opened operations elsewhere in West Africa.

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