Nigerian billionaires and high-net-worth individuals have a variety of strategies for investing in the capital market, reflecting both the diversity of Nigeria’s economy and the individual’s business acumen.
UBS data showed three billionaires in Nigeria, Aliko Dangote, Mike Adenuga, and Abdulsamad Rabiu increased Nigeria’s wealth by 19.7 per cent in one year
Here’s how they typically engage with the capital market:
According to a Henley & Partners analysis, a number of highly ultra-rich men are drawn to industries such as agriculture, logistics, commodities, communications, financial services, infrastructure, retail, manufacturing, and residential/commercial real estate.
Stock Market Investment: Many Nigerian billionaires invest directly in the Nigerian Stock Exchange (NGX). They hold significant shares in companies, which can range from financial firms, agro agro-supply companies, to energy firms.
- For instance, Aliko Dangote has substantial stakes in many blue-chip firms including businesses founded by him
- Similarly, other tycoons like Jim Ovia, Fola Adeola, and Atedo Peterside have notable investments in financial institutions like Zenith, and GTBank through direct ownership and via family offices or holding companies.
Corporate Expansion and New Ventures: Instead of just investing in stocks, they often use the capital market to fund new projects or expand existing businesses.
- This could be through rights issues, where they offer existing shareholders the opportunity to buy additional stock in the company at a discount, or through IPOs (Initial Public Offerings) for new ventures.
- This not only provides capital growth but also increases their market visibility and potentially their net worth.
- Tony Elumelu, the founder and chairman of Heirs Holdings operates businesses in Africa’s financial services, oil and gas, power, real estate, hospitality, healthcare, and agribusiness sectors.
Diversification Across Sectors: While many are known for their primary industries (like Dangote in cement and sugar), they diversify into other sectors like real estate, banking, insurance, and manufacturing. This diversification strategy helps mitigate risks associated with sector-specific downturns.
Private Equity and Venture Capital: Some invest in or set up private equity funds or venture capital firms.
These investments might not always be public, but they involve funding startups or small to medium enterprises with high growth potential, which could later be taken public or sold for profit.
Foreign Investments: Wealthy Nigerians often look beyond Nigerian borders for investment opportunities, especially in African countries or globally in sectors they understand well.
This could be through direct investments or partnerships with international companies, as seen with deals in oil trading or manufacturing partnerships.
Real Estate: Although not directly part of the ‘capital market,’ real estate investments are often leveraged through capital market mechanisms like REITs (Real Estate Investment Trusts) or through loans backed by property assets, which indirectly ties back to how they finance or leverage their investments.
Philanthropy as an investment: While philanthropy might not be an ‘investment’ in traditional terms, for many Nigerian tycoons like Tony Elumelu, it amplifies their social currency.
Investments in education, health, or community development can foster a better business climate, indirectly benefiting their companies and reducing tax exposures.
Hedge against currency fluctuations: Given Nigeria’s history with currency devaluation, some might invest in or hold assets abroad, like properties or stocks in foreign markets, or commodities like gold, to hedge against naira depreciation.
- The richest man in Africa, Aliko Dangote, is getting ready to create a family office in Dubai, joining an increasing number of wealthy people who are taking advantage of the city’s standing as a major international financial hub.
- Investment strategies by wealthy Nigerians in the capital market aren’t just about financial gain; it’s often intertwined with national economic development, personal legacy, and sometimes political influence.
- Their investments can shape market trends, influence sectors, and sometimes, even government policy, reflecting a deep understanding of both market dynamics and socio-political environments.