Investment banking is expected to generate $142.16 billion in total revenue in 2024, driven by a significant rise in private equity activity, increasing capital needs, and the use of sustainable finance techniques. As AI-powered solutions, digital assets, and ESG initiatives continue to advance, the market is anticipated to reach $194.05 billion by 2028. Sustainability and technological advancements will shape investment banking in the future.
One of the biggest economies in Africa, Nigeria, has seen a turning point in the investment banking industry over the past 12 months. Capital-raising efforts, mergers and acquisitions, and sustainable finance are being fuelled by growing demand for capital in key sectors such as consumer goods, energy, telecoms, real estate, and financial services.
Coronation Merchant Bank (Coronation MB) is positioned to take advantage of these opportunities as a consultant to governments and corporations. The future of investment banking in Nigeria will be influenced by four trends: Islamic finance, infrastructure investment, mergers and acquisitions (M&A), and commercial paper (CP).
Commercial paper
In an era of rising interest rates and the need for less costly alternatives to bank loans, commercial papers have become an essential source of working capital financing for investment-grade corporations. CP issuances generated ₦1.5 trillion ($910 million) for Nigerian companies in 2022 (₦252 billion – $153 million in 2022). At a time when bank loans are prohibitively expensive, this increase in issuances highlights the significance of CPs to corporations.
The wide acceptance of this working capital financing method is reflected in the fact that corporate issues are found across a variety of Nigerian economic sectors, including manufacturing, financial services, health, agriculture, and retail. In 2023, MTN Communications raised ₦374 billion ($227 million) through multiple issuances, representing one of the major transactions. Dangote Cement, Flour Mills of Nigeria, and Nigerian Breweries were among other companies that issued CPs. Their respective issuances were ₦150.97 billion ($92 million), ₦221.28 billion ($134 million), and ₦116.49 billion ($71 million).
To expand operations in the industry moving forward, Coronation Merchant Bank raised a total of ₦343.43 billion ($209 million) for Dangote Sugar, Dangote Cement, and 27 other issues from the various commercial papers raised during the year.
From inflationary pressures to the different monetary policy measures implemented to curb them, the CP market is not without challenges. However, given that corporations are still seeking working capital funding and the flexibility of CP programmes, our long-term outlook for CPs remains positive.
Infrastructure investment
The infrastructure deficit in Nigeria requires investments of approximately ₦30 trillion ($18.2 billion) over the next 30 years. As a result, fund managers have registered infrastructure funds totalling ₦1.5 trillion ($910 million), with ₦230 billion ($140 million) raised over a six-year period. The energy, telecom, transportation, and health sectors have all benefited from these investments.
Leading issuing house Coronation MB raised ₦8.79 billion ($5.3 million) on the Coronation Infrastructure Fund’s series one offer. This issuance, which outperformed earlier rates of 33.375% and 24.70% by comparable infrastructure funds, represents the market’s highest subscription percentage and largest amount raised for a first infrastructure fund.
As evidence of growing acceptance of infrastructure funds as an investment class by institutional investors, such as pension funds with the largest domestic fund pools, five fund managers plan to launch new funds within the next year.
Mergers and acquisitions
The CBN’s directive to increase minimum capital requirements for deposit money banks from April 2026 has prompted several banks to seek ways to recapitalise. The recent announcement of the Unity Bank and Providus Bank merger serves as an example, and other deposit money banks are expected to announce additional M&As to remain open and competitive.
CardinalStone’s acquisition of Radix Pension, GTCO’s acquisition of Investment One Pension Management, and Access Holdings’ acquisition of ARM, Sigma, and First Guarantee Pensions yielded the second-largest pension manager by assets under management (Coronation MB served as a financial adviser on all Access Bank M&A transactions).
In the stockbroking industry, Zedcrest acquired RMB’s stockbroking division. An agreement was reached for EverQuest Acquisition to sell its shares and acquire a 100% equity stake in FBNQuest Merchant Bank.
Additionally, M&A activities were observed in the energy, entertainment, and fintech sectors. These included Carbon’s purchase of Vella Finance, Universal Music Group’s purchase of the majority of Mavins Global, and certain Nigerian companies’ purchase of Shell’s onshore oil and gas assets. Coronation MB is prepared to offer advice on these deals, and more corporates are expected to continue using M&A to achieve strategic growth.
Islamic finance
The non-interest finance market increased by $0.76 billion between 2021 and 2023, from $2.30 billion to $3.8 billion. During that period, its share of the global finance market went from 0.075% to 0.9%. Because of Nigeria’s sizable Muslim population and the currently unbanked populations in the North-West and North-East, this presents a promising growth opportunity.
Since the FGN issued ₦100 billion ($61 million) sovereign sukuk in 2017 and six more issuances totalling ₦1.092 trillion ($664 million) to finance infrastructure developments, including 4,000 km of roads and bridges, as well as the most recent sukuk issuance in October 2023 for ₦652 billion ($397 million), non-interest financing has gained popularity. The CBN, SEC, and FMDQ are among the regulators who can help Islamic finance in Nigeria expand.
Recently, Trustbanc launched its first NICP programme under FMDQ’s updated framework, enabling businesses to issue short-term instruments that comply with shariah under the wakalah structure. As the original organiser of this NICP programme under the revised framework, Coronation MB played an instrumental role.
The investment banking industry in Nigeria is evolving to accommodate the distinct funding requirements of governments and corporations. Key trends highlight the sector’s contribution to long-term corporate and economic growth. Both short- and long-term financing require the use of commercial papers and Islamic financial instruments like sukuk. Corporates can drive expansion through M&As or organic growth.
Nigeria’s investment banking scene is evolving faster than ever, fuelled by private equity, sustainable finance, and new technologies. From commercial papers to infrastructure projects, mergers and acquisitions, and Islamic finance, the sector is finding innovative ways to meet the country’s growing capital needs. With the Federal Government increasingly using sukuk to finance infrastructure alongside private sector participation, corporates and the government are tapping these tools to drive growth. Coronation Merchant Bank is ready to guide them, ensuring investment banking remains central to Nigeria’s long-term economic progress.