Banji Adenusi With private equity (PE) transactions in Africa now grossing an excess of $1 billion each year and growing, it is no surprise that the regulators are turning their spotlight on the sector to prevent abuse. Most recently, Nigeria's Securities and Exchange Commission brought out specific rules to govern the operations of private equity funds in Nigeria. This demonstrates the Commission's recognition of the growing importance of PE funds in driving investments in the country, especially considering the buoyancy of sectors such as telecoms, healthcare and real estate. It is furthermore a recognition of the management of the operational and investment risks associated with these funds – underscoring the need for a robust risk assessment and management framework for investment advisers. The rules apply to PE funds established in Nigeria with a minimum commitment of N1 billion ($6.3 million) of investors' funds; the funds are restricted to sourcing investments from qualified investors alone (Rule 249(d)(4)). The revised rules impose a minimum capital requirement of N20 million on PE fund managers, which is justified on the basis of the risk exposure of the fund. This capital requirement is a fair cap, especially when juxtaposed with the EU directive on the regulation of private equity (the Alternative Investment Fund Managers or AIFM Directive), which imposes a capital requirement of €125,000 ($164,000) for external managers of funds and €300,000 for a fund manager that is an internally managed fund. The AIFM Directive also requires, however, that the manager provide additional funds equal to 0.02% of the amount by which the value of the portfolios exceed €250 million.
April 23 2013
