NIGERIA: OPIC SUPPORTED INVESTMENT FUNDS IN THE

UNCLAS LAGOS 000147 SIPDIS SIPDIS DEPT PASS TO OPIC FOR APATEL, BPEARCE E.O. 12958: N/A TAGS: EINV ECON NI SUBJECT: NIGERIA: OPIC SUPPORTED INVESTMENT FUNDS IN THE REGION: GEF AFRICAN CONSUMER FUND REF: A. STATE 27714 ¶B. LAGOS 549 ¶C. LAGOS 99 ¶1. Summary: The objectives of OPIC,s supported GEF African Consumer Fund are compatible with the Government of Nigeria's desire for more and longer-term equity investment in private companies operating in sectors that do not traditionally receive funds. More private equity funds are needed for investment in companies operating outside the financial, infrastructure, energy, housing, and telecom sectors because these other sectors have limited and short-term local funding sources. Mission Nigeria encourages OPIC to support GE African Consumer Fund. End Summary. ¶2. The Central Bank of Nigeria (CBN) had mandated that ten percent of all private equity funds must be invested in small and medium size enterprises (SMEs); however the CBN recently discontinued this requirement. As a result, some banks have pooled funds that had been set aside to fulfill this mandate into a common fund called the Small and Medium Enterprise Equity Investment Scheme (SMEEIS). Early in March 2008, the Bankers' Committee, made up of the 24 consolidated banks, replaced SMEEIS with the new Micro Credit Fund (MCF) and put the unused funds from the SMEEIS into the MCF. ¶3. To ensure a flow of credit to SMEs, banks also have the option to contribute five percent of their before-tax profit to a pooled fund created to support microfinance banks. In addition to the SME equity schemes organized by banks, four well-known major private equity funds currently operate in Nigeria. One of the firms, Capital Alliance (CA),has established a management team to vet SMEs' readiness for equity investment and when necessary to assist SMEs fine-tune their operations to qualify for CA's funds. ¶4. Comment: As it stands, Nigeria's private equity market is fledging, and more private equity funds are needed for investment in companies operating outside the financial, infrastructure, energy, housing, and telecom sectors (reftels B and C) because these other sectors have limited and short-term local funding sources. Mission Nigeria encourages OPIC to support GE African Consumer Fund. End Comment. ¶5. This cable was cleared with Embassy Abuja. BLAIR