Economy
Africa, Middle East to Record 70% Drop in Financial Deals 2018
By Dipo Olowookere
A new report has warned that the financial sector M&A in Africa and the Middle East will experience a drop of about 69.5 percent in 2018 to $9 billion from $29.5 billion recorded in 2017.
The report, conducted by Baker McKenzie’s Global Transactions Forecast in conjunction with Oxford Economics, explained that the higher amount in 2017 was the result of one megadeal that inflated 2017’s deal total: the $14 billion merger of the National Bank of Abu Dhabi and First Gulf Bank.
In 2019, the Forecast predicts deal activity in the region’s financial sector to increase slightly to $10.3 billion before dropping to $6.6 billion in 2020.
According to the Head of the Financial Industry Group at Baker McKenzie in Johannesburg, Mr Wildu du Plessis, “The decrease in M&A in the financial services sector in Africa is due mainly to economic and political instability, a lack of diversification, the risk of corruption and generally poor business climates across the region.”
He explained further that, “The willingness and ability of governments to reform their legislation so that it is more investor friendly, and to deal with bloated fiscal balances, is key to future growth in sector.
“In addition, growth in financial services in Africa is dependent on investment in technology and innovation as financial services organisations such as banks and insurance companies look to upgrade their IT systems and find news way to grow their customer bases.”
Globally, the Forecast anticipates that M&A values in the financial sector will rise to $616 billion in 2018, up 25 percent from $462 billion in 2017.
The Forecast shows that ultra-low interest rates, tech enabled disruption and regulatory pressure, all of which have squeezed profitability and increased costs, have created an environment which will drive M&A activity across the global financial sector throughout 2018 and beyond, Baker McKenzie said in an emailed statement to Business Post on Wednesday.
One recurring theme across banks, insurers and asset managers is the challenge of upgrading legacy systems designed for the age before artificial intelligence and machine learning, and before the tech titans based in Silicon Valley and increasingly China were targeting profitable financial services products using state-of-the-art digital technology.
Part of the solution to this challenge will come from fintechs, which bring their expertise in digital customer experience and new tech solutions that enable the incumbents to tackle old problems such as payment methods and swift product recognition matched to client needs.
Most established financial institutions are fully aware of the enormity of the task of developing these upgrades internally, preferring to acquire or partner with fintechs as a means of survival.
“Legacy IT systems constrain the ability of incumbent banks to innovate as these system are incompatible with the demands of artificial intelligence and big data,” says Jeremy Pitts, global chair of Baker McKenzie’s Financial Institutions Group. “New entrants have a serious advantage, so alliances between incumbent banks and fintech start-ups are often the best solution.”
“The same demand for technology innovation and the upgrading of legacy IT systems is driving deal activity in the financial sector in Africa. However, the opportunities presented by the rapidly developing financial services sector are driving outbound, and not inbound, investment. Our recent Technology Sector Forecast showed that the growing need for technology innovation in the financial sector in Africa has seen domestic banks make significant investments in offshore technology companies,” notes du Plessis.
“The expanding middle class in Africa also presents many opportunities for growth in the financial sector. Increased access to mobile and online banking, as well as the development of fintech, has meant that previously unbanked and uninsured populations on the continent are now able to access financial products and services.
“The vast potential for future growth is spurring the financial sector’s investment in technology companies. This increasing demand will most likely lead to solid growth in the sector beyond the next few years,” du Plessis adds.
By Adedapo Adesanya
The Nigeria Customs Service (NCS) is seeking a reduction in import duty exemptions, which rose to N34 trillion, limiting its ability to increase its revenue generation threshold.
The Comptroller-General of the Customs Service, Mr Adewale Adeniyi, disclosed that the value of import duty exemption certificate approvals increased to that level in 2025, describing the policy as one of the major factors restricting its revenue generation.
At an investigative session of the Senate Committee on Finance with revenue-generating agencies in Abuja on Monday, Mr Adeniyi explained that government fiscal policies have continued to impact the revenue-generating capacity of the Customs Service, both positively and negatively.
“The NCS would have generated significantly higher revenue over the years if not for government-approved import duty waivers and other external factors affecting collections,” he said.
He added that the Import Duty Exemption Certificate scheme, introduced in March 2020, accounted for about N34 trillion in approvals in 2025, with nearly 60 per cent covering duty-free importation of military hardware due to Nigeria’s prevailing security challenges.
Other government-backed duty waivers, he noted, covered the importation of Compressed Natural Gas (CNG), electric and hybrid vehicles, healthcare equipment and medical supplies, industrial machinery and manufacturing inputs, as well as food import intervention programmes.
While acknowledging the impact of the waivers on Customs revenue, Mr Adeniyi argued that fiscal policy should not be assessed solely on the basis of revenue generation but also on its broader economic and social objectives.
He, however, urged the federal government to establish stronger monitoring mechanisms to ensure beneficiaries of duty waivers deliver the intended economic outcomes, including lower consumer prices, increased local production and improved healthcare access.
The committee also expressed displeasure over the absence of several heads of government agencies invited to the hearing, including the Nigerian Civil Aviation Authority (NCAA), Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Industrial Training Fund (ITF), and the Federal Medical Centre (FMC), Jabi.
The Chairman of the Senate Committee on Finance, Mr Sani Musa, warned that the affected chief executives must appear at the committee’s next sitting or face severe sanctions under the Senate’s rules.
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By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange rose by 0.40 per cent on Monday, July 13, buoyed by buying interest in 11 Plc, Central Securities Clearing System (CSCS) Plc and UBN Property Plc, which offset the profit-taking in Food Concepts Plc, the parent company of Chicken Republic.
11 Plc gained N20.69 to end at N227.64 per share compared with last Friday’s price of N206.95 per share, CSCS Plc grew by N1.83 to N91.48 per unit from N89.65 per unit, and UBN Property Plc added 1 Kobo to sell at N1.81 per share versus N1.80 per share.
On the flip side, Food Concepts Plc depreciated by 24 Kobo to close at N2.45 per unit, in contrast to the preceding session’s N2.69 per unit.
As a result, the market capitalisation increased by N9.2 billion to N2.587 trillion from N2.578 trillion, and the NASD Security Index (NSI) improved by 15.33 points to 4,311.67 points from 4,296.34 points.
Yesterday, the volume of securities traded by investors surged by 615.9 per cent to 9.1 million units from the previous 1.3 million units, and the value of securities rose by 997.1 per cent to N320.4 million from the preceding session’s N29.2 million, while the number of deals decreased by 12.5 per cent to 28 deals from last Friday’s 32 deals.
At the close of trades, Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units worth N6.5 billion, and CSCS Plc with 73.9 million units exchanged for N5.2 billion.
GNI Plc also closed the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units sold for N8.4 billion, followed by Infracredit Plc with 2.3 billion units traded for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
