1. Consumer sector on the rise

Nigeria’s consumer industry is showing signs of a robust recovery. On a short-term basis, this is being driven by the country’s continued emergence from a recession that began in 2016, the direct result of the oil price slump. The International Monetary Fund (IMF) predicts that the country will post growth of 1.9% in 2018, compared with just 0.8% in 2017 and -1.5% in 2016.

The Naira has also stabilised following the introduction of various policies by the Central Bank of Nigeria (CBN), notably ‘the Investors and Exporters’ (I&E) window, which has led to more balanced retail prices. According to Nielsen Africa, 83% of Nigerians in the second quarter described the state of their personal finances over the next year as excellent or good.

On a long-term basis, meanwhile, Nigeria has favourable demographics: the UN estimates that by 2050, the country will become the third most populous nation in the world, surpassing the US. Lagos alone is home to 21 million inhabitants, with 2,000 new arrivals each day. As Nigerians’ purchasing power increases, so too will the consumer opportunity.

In 2018, the sector saw a boost in M&A activity over the previous two years, with consumer deals accounting for 33% of Nigeria’s total M&A value in 2017 and 2018 combined, compared with 21% in 2015 and 2016 combined. And this situation looks set to continue as three-quarters of respondents agree that the consumer sector will be the country’s most attractive sector for M&A over the next two years. Legislative changes should have a positive impact, with the Federal Competition and Consumer Protection Bill awaiting enactment. This modernisation of the country’s anti-monopoly laws and market regulation is expected to drive interest in consumer-facing businesses and attract more foreign investment to the market.

2. Potential for an increase in financial services M&A

Financial services was named as the second most attractive sector for Nigerian M&A over the next five years, with 40% of respondents citing this as producing attractive investment opportunities. It is estimated that only 40% of Nigerian adults have an account with a financial institution or a mobile money provider, leaving significant headroom for growth.

Deal opportunities within the financial services sector are not limited to banks, of course. As more Nigerians open bank accounts and the country moves from a cash to a digital economy, companies and investors will seek to acquire payment processing businesses, fintechs and ancillary service providers.

Click to download and read more on this year's KPMG's key insight from various dealmakers in doing deals in Nigeria.