Articles by Chima Nwokoji

Business

FX reforms, exit challenges slow venture capital investments in Nigeria — Report

Foreign exchange (FX) reforms and persistent exit challenges have dampened venture capital (VC) and private equity (PE) investments in Nigeria over the last four years, according to a new report by the Impact Investors Foundation (IIF). The report, titled: “Nigerian Impact Investment Landscape 2025,” was unveiled on recently at the 8th Annual Convening on Impact Investing (ACII) in Lagos. It revealed that total VC and PE inflows fell sharply from $1.14 billion in 2022 to $939.5 million in 2023, and further to $211.4 million and $207.5 million in 2024 and 2025 respectively. The number of deals also declined drastically — from 292 in 2022 to just 78 by 2025, underscoring the mounting investment headwinds facing Nigeria’s startup and impact ecosystem. “Private Equity (PE) and Venture Capital (VC) activity in Nigeria has slowed sharply since 2022, mirroring global market corrections and compounded by domestic macroeconomic headwinds,” the report said. It identified several key factors behind the downturn, including the global VC funding slump, FX volatility, and weak exit opportunities. Following record highs in 2021 and 2022, global tech funding contracted by 54 percent year-on-year in 2023, while Africa recorded a 32 per cent drop in deal count. In Nigeria, the Central Bank’s foreign exchange reforms, which began in June 2023 with the unification of exchange rate windows, have introduced new valuation risks. The report noted that multiple naira devaluations caused pricing uncertainty, translation losses, and raised the cost of dollar-denominated capital — discouraging foreign investors. It added that exit constraints such as limited initial public offering (IPO) and merger & acquisition (M&A) activity have weakened investor confidence and delayed capital recycling. Meanwhile, domestic macroeconomic pressures — including high inflation, tight liquidity, and policy reforms such as fuel subsidy removal — further eroded local co-investment appetite. Etemore Glover, CEO of IIF, said the report provides critical evidence-based data to guide policymakers, Development Finance Institutions (DFIs), and investors. “This data will help guide capital to where it is needed most, translating availability into impact-aligned growth and a more resilient investment ecosystem,” Glover said. The ACII conference, themed “Strengthening and Scaling the Nigerian Impact Economy,” brought together policymakers, investors, and entrepreneurs to chart a path for inclusive growth and sustainable finance in Africa’s largest economy.

Business

Mandatory deposits with CBN hit N24.81trn, squeezing loan growth

Banks’ mandatory deposits with the Central Bank of Nigeria (CBN) have surged to record levels, tightening liquidity in the banking sector and stifling credit expansion to businesses and consumers. Available data from the CBN show that nine leading Nigerian banks held a combined ₦24.81 trillion as mandatory deposits with the apex bank as of September 30, 2025. This represents an 8.31 percent increase from ₦22.91 trillion reported in the 2024 financial year. The affected banks include Zenith Bank Plc, Access Holdings Plc, Guaranty Trust Holdings Plc, United Bank for Africa (UBA) Plc, FirstHoldCo Plc, FCMB Plc (Half Year), Stanbic IBTC Holdings Plc, WEMA Bank Plc, and Sterling Bank Plc. The deposits, also known as the Cash Reserve Ratio (CRR), refer to the proportion of banks’ total customer deposits that must be kept with the central bank. The policy, designed to control money supply and inflation, has increasingly become a drag on banks’ ability to extend loans to the real sector. Nigeria’s CRR currently stands at 45 percent—one of the highest in the world. While the CBN’s intent is to manage inflationary pressures and stabilise the naira, analysts argue that the high reserve ratio constrains banks from putting their capital to productive use, such as business and consumer lending. “When the central bank raises the CRR, banks hold a larger portion of their deposits as reserves, reducing the funds available for lending and investment,” said a Lagos-based financial analyst. “This helps curb inflation but also limits economic growth.” Despite a modest increase in lending, credit growth has slowed significantly compared to previous years. The nine banks’ combined loan book stood at ₦65.37 trillion in September 2025, up 7.42 percent from ₦60.86 trillion in 2024. This is in sharp contrast to a 52.63 percent loan growth in 2024 and a 32.64 percent increase in 2023. CBN’s latest money and credit statistics further confirm this slowdown. Bank credit to the private sector dropped to N75.83 trillion in August 2025—the lowest level recorded this year—representing a 0.4 percent decline from N76.14 trillion in June. “Nigerian banks have so much cash sitting with the CBN, but I do not expect this to change overnight,” said Abiola Rasaq, an economist and former Head of Investor Relations and Portfolio Investments at UBA Plc. “It will take time, and the pace of change depends on how fast stakeholders improve the risk environment to enhance banks’ appetite for lending to the real sector.” Manufacturers have also raised concerns over limited access to credit at affordable rates. They lamented that high borrowing costs, coupled with foreign exchange volatility, are inflating production expenses and forcing firms to pass these costs on to consumers through higher prices. Shareholders have equally voiced frustration, noting that high CRR levels reduce banks’ capacity to generate profits and pay dividends. “This structural limitation makes it challenging for banks to meet domestic lending targets, even with higher capital buffers,” analysts at Renaissance Capital said. “While recapitalisation aims to expand lending capacity, the CRR hike stifles liquidity, compelling banks to prioritise balance sheet preservation over credit expansion.” As the CBN maintains its tight monetary stance to battle inflation and exchange rate instability, analysts warn that the trade-off could undermine private-sector productivity and slow economic recovery unless a balanced policy adjustment is introduced.