If you have ever clamoured against the
increasing socio-economic and environmental problems in Nigeria or wondered how
you can generate profitable returns from your investments while simultaneously
contributing to the development of the society, you should consider impact

With a population of over 190 million people,[2] the second largest and fastest
growing economic market in Africa, Nigeria is an ideal place for impact
investment. The socio-economic and environmental challenges in Nigeria create
an opportunity for impact investors.

What is Impact Investing All About?

Impact investing refers to an investment that
aims to generate measurable beneficial social or environmental returns in
addition to financial gain.[3] It is centred on making a positive
impact through investments in projects that better the community.[4] Impact
investing is usually categorised under sustainable investing, which also
encompasses socially responsible investing (SRI).[5]

The role of the impact investor is
different from a classic investor. Firstly, the impact investor expects real
and tangible social impact from its investments, without which the goal of
financing won’t be achieved.[6] Secondly,
unlike the classic investor who is motivated by maximization of profit and
therefore anticipates returns above market average on capital invested, an
impact investor is driven by the need for a significant social impact. An
impact investor may accept below market returns – provided the projects
invested in follow through on their promises of social and environmental

The development of impact investment was
necessitated by the Sustainable Development Goals,[8] adopted by the United Nations in
2015 which called for a collaboration of the private, public, and philanthropic
sectors to end poverty and ensure environmental sustainability by 2030.

Legal Regime for Investing in Nigeria

There are a plethora of laws and regulations
governing investments in Nigeria. They include: The Companies and Allied
Matters Act,[9] the Nigerian Investment Promotion
Act,[10] the Investments and Securities Act,[11] Consolidated Rules and Regulations
of the Securities and Exchange Commission, the Foreign Exchange (Monitoring and
Miscellaneous Provisions) Act,[12] the Industrial Inspectorate Act,[13] National Office for Technology
Acquisition and Promotion Act,[14] the Rulebook of The Nigerian Stock
Exchange 2015 etc.

The Corporate Affairs Commission (“CAC”) oversees
the formation and administration of all business entities in Nigeria. Every
investor who seeks to set up a business in Nigeria which does not fall under
any of the categories of business exempted from registration must register
his/her business in Nigeria with CAC. The Nigerian Investment Promotion
Commission (“NIPC”) is the principal body that regulates all foreign
investments in the country and a foreigner seeking to invest in Nigeria is also
required to register with the NIPC.

Due to the number of regulatory compliances
expected to be met by a foreigner who seeks to do business in Nigeria, there is
a One Stop Investment Centre (OSIC),[15] which houses all the relevant
regulatory bodies.[16] Prospective investors who wish to
do business in Nigeria can visit the OSIC to obtain all regulatory permits and
registrations required to invest in Nigeria.

Operating Principles for Impact Investing

The International Finance Corporation, World
Bank Group, recently launched some operating principles for Impact Management.
The nine (9) principles identify the key characteristics of investment fund
management, with the aim to positively contribute to measurable socio-economic
or environmental impact.[17] The goal behind the principles is
to ensure that investing decisions are made with consideration to
socio-economic impact.[18] The principles include: definition
of strategic impact objective(s) consistent with the investment strategy;
management of strategic impact on a portfolio basis; establishment of the Manager’s
contribution to the achievement of impact; assessment of the expected impact of
each investment, based on a systematic approach; assess, address, monitor, and
manage potential negative impacts of each investment. Others are: monitoring of
the progress of each investment in achieving impact against expectations and
respond appropriately; conducting exits considering the effect on sustained
impact; reviewing, documenting, and improving decisions and processes based on
the achievement of impact and lessons learned; and publicly disclosing
alignment with the Principles and provision of regular independent verification
of the alignment.[19]

Why Impact Investment Matters in Nigeria

Nigeria is a country faced with an avalanche
of socio-economic challenges like hunger, poverty, unemployment, poor
healthcare, poor/inadequate infrastructural facilities, illiteracy, among
others, which largely affects its growth and development.  However, these
challenges create an opportunity for impact funds and impact investment.

Some distinctive attempts at impact investing
in Nigeria can be seen in the growing focus of the Federal and State government
on bond issuance projects centred on solving socio-economic and environmental
challenges and the increasing emergence of small and medium scale enterprises
(SMEs) which are significant contributors to social and economic growth and
development. Entrepreneurs are more aware of social and environmental challenges
and are innovating ways to tackle them. Examples include LifeBank, an SME that
saw an important opportunity in making sure patients who need blood can get it
in due time. LifeBank developed proprietary software to tackle blood shortages
and quick access to medical products in hospitals in Lagos.[20] Wecyclers, a company that powers
social change in the environment, provides household recycling services with
the use of low-cost cargo bikes, which allowes people in low-income communities
to capture value from their waste.[21] Andela, a technology company,
recruits and trains local software developers at little or no cost, who in turn
work remotely for them for various international companies, thereby generating
employment opportunities for thousands of the unemployed populace in Nigeria.[22]

Furthermore, a good number of impact
investing funds have been made available by some foreign development
institutions and bodies. For instance, the African Development Bank invested in
the Africa Food Security Fund (AFSF) to boost agri-business SMEs and enhance
food security in some African countries like Nigeria.[23] Also, the International Finance
Corporation made an investment in Hygeia Nigeria Limited to improve the
healthcare infrastructure in Nigeria and to facilitate access to quality
healthcare services.[24] Locally, the Nigerian Capital
Development Fund (NCDF) launched an Impact Investment Note and Fairshares
investment platform to enable impact investors make investments and become
stakeholders in NCDF, to drive sustainable impact projects in the country.

A couple of Federal and State government
bonds which can be characterised as social impact bonds are additions to impact
investment funds in Nigeria. For example:

1.      Issuance of Sukuk
(Islamic Bonds)

Sukuk or Islamic bonds are structured in such
a way as to generate returns to investors without infringing the tenets of
Islamic law that prohibits “riba” (interest). As an investor your money is put
into the assets of a project or investment in order to generate profits and not
interests. However, the Federal Government of Nigeria and a State government
have been involved in the successful issuance of Sukuk Bonds as impact
investment. Osun State government through a wholly owned Special Purpose
Company, (Osun Sukuk Company Plc) was the first in sub-Saharan Africa to issue
Sukuk bonds worth N11.4 billion as an education project to finance construction
of some High Schools in the state.[25] More recently, the Federal
government issued a N100 billion Sukuk bond for the construction of federal
roads across the six geopolitical zones in Nigeria.[26]

2.      Issuance of Sovereign
Green Bonds

A sovereign green bond is a debt security
issued by a national government for climate and environmental projects. They
can be denominated in a foreign currency or the government’s own domestic
currency. In 2017, the Federal Government of Nigerian issued a climate bond
certified sovereign green bond worth N10.69bn, making it the first issuer of
sovereign green bonds in Africa and the 4th in the world.[27] The bond was issued to finance
three (3) major projects: the energy education programme, renewable energy
micro utilities, and afforestation.[28] In 2019, a second tranche of the
bond was issued.[29]

3.      Euro Bonds

Eurobonds are bonds that are issued in a
currency not native to the country where it is issued, e.g., where the Federal
Government of Nigeria issues a bond denominated in US Dollars in Nigeria and
invites investors from all over the world to subscribe to it. Nigeria issued
its 6th Eurobond in 2018 worth $2.86 billion, following
issuances in 2011, 2013, and 2017 in different tranches.[30] The Eurobond was issued to help
fund Nigeria’s budget deficit, reduce the risk of inflation and to improve the
financial health of the country. Its sale was said to have been three times

4.      Corporate Green Bonds

A corporate green bond is a bond issued by a
corporation other than a government or municipality, in order to raise
financing for climate and environmentally friendly projects. In March 2019,
Access Bank Plc., issued a 5-year fixed rate senior unsecured green bond,
making it the first ever Climate Bonds Standard Certified Corporate Green Bond
to be issued in Africa.[31] The bond issued was worth N15bn and
was for the financing of new loans and refinancing of existing loans in
accordance with the Bank’s Green Bond Framework and the Climate Bonds
Initiative standards, and to support projects directed at flood defence, solar
generation facilities and agriculture.[32]

5.      Housing Funds

These are funds established by private or
government agencies to support the preservation and production of affordable
housing, particularly for low income earners to access decent and affordable
homes. A good example is the National Housing Fund and Family Homes Fund. The
Family Homes Fund is a social intervention program that provides access to
affordable housing, home loan assistance funds, rental housing funds and
infrastructure development funds for millions of Nigerians within the low to
medium income bracket, through strategic partnerships with various categories
of investors.

From the foregoing, it can be deduced that
the future of impact investing in Nigeria is very bright. More recently, the
Bank of Industry, African Capital Alliance, Business Day Media Limited, Ford
Foundation and Dalberg Advisors formed the Impact Investors Foundation (IIF).
The foundation was registered as a non-profit entity to foster the development
of impact investing in Nigeria and promote cooperation amongst relevant
stakeholders active in the sector.[33] It is anticipated that this
strategic collaboration would boost the growth of impact investing in Nigeria.

Challenges Faced by Impact Investors

Regardless of the potential to boost the
development of critical infrastructure and supplement government spending,
several fundamental challenges exist that have slowed investment activity. To
grow the sector in Nigeria, these obstacles would need to be addressed. Some of
these challenges include: difficulty sourcing viable investments that meet both
financial and social or environmental objectives; negative perception about
sustainable investing that value must be sacrificed for profit and that these
funds underperform compared to traditional funds; shortage of high-quality
investment opportunities with strong track records; limited innovative funds
and deal structures; lack of appropriate capital across the risk/return
spectrum; difficulty exiting investments due to foreign exchange control, are
some of the major challenges.


While impact investments have continued to
grow in Nigeria, its impact might not be significant amidst the plethora of
challenges faced across the country. This myriad of challenges impedes the
expansion and maximum realisation of its potential to deliver social, economic
and environmental returns at scale.

Nevertheless, these perceived challenges
shouldn’t serve as an excuse to bury the idea of impact investment. On the
contrary, it is a time for us to revaluate our guiding principles and
collaborate to build a strong socio-economic society. We need to consider
impact investment and ask ourselves these questions: What if we redefine wealth
and prosperity not in terms of how much money we are able to amass but how much
positive impact we are able to make in our community and in the lives of
others? What if we changed our perception of investment from a principal goal
of yielding profit to one of contributing to reduce deficits in social
infrastructure? The new world we have dreamt about is possible; one where
impact investing provides some of the answers to changes we have long desired.

For further information on this article and
area of law, please contact Sandra Eke at:         S. P.A. Ajibade &
Co., Lagos by telephone (+234 1 472 9890), fax (+234 1 4605092)
  mobile (+234 8112491286) or email (seke@spaajibade.com).

[1]     Sandra
Eke, Associate Intellectual Property & Technology Law, SPA Ajibade &
Co., Lagos, Nigeria.

World Bank, “World Development Indicators: Google Public Data Explorer”
available at: https://www.google.com/search?q=population+of+nigeria&rlz=1C1CHBD_enNG735NG736&oq=population+of+&aqs=chrome.1.69i57j0l5.6662j0j7&sourceid=chrome&ie=UTF-8 accessed
6th November 2019.

[3] Global Impact
Investing Network, “Impact Investment in Africa” available at: https://www.impactatafrica.org/sites/default/files/publications/impact_investment_in_africa_action_plan_2016_english.pdf accessed
on 20th April 2019.

Investopedia, “What is impact investing” available at:
accessed on 18th April 2019.

Bloomberg, “Quick take: Sustainable Investing” available at: https://www.bloomberg.com/quicktake/sustainable-investing accessed
10th September 2019.

Optimy Wiki, “Impact investment” available at:https://wiki.optimy.com/impact-investing/ accessed
18th April 2019.


Common Fund for Commodities, “The Sustainable Development Goals and Impact
Measurement – A CFC Journey” available at: http://www.common-fund.org/wp-content/uploads/2019/01/AR-2017-Sustainable-Development-Goals-and-Impact-Measurement.pdf accessed
12th October 2019.

CAP C20 Laws of the Federation of Nigeria 2004.

CAP N117 LFN 2004.

CAP T22, LFN. 2004.

CAP F34 LFN 2004.

CAP I8 LFN 2004.

CAP N68, LFN 2004.

NIPC, “Guide to investing in Nigeria: Getting started” available at: https://nipc.gov.ng/iguide/getting-started/#osic accessed
12th December 2019




Desola Ososami, “How Impact Investments can develop Nigeria?” available



African Development Bank, “African Development Bank, partners support
smallholder farmers with 17 new project grants” available at https://www.afdb.org/en/news-and-events/african-development-bank-partners-support-smallholder-farmers-with-17-new-project-grants-19222 accessed
8th November 2019.

IFC, “IFC, IFHA II, Swiss Re and CIEL Healthcare Invest in Hygeia Nigeria to
Expand Access to Quality Healthcare” available at: https://ifcextapps.ifc.org/ifcext/Pressroom/IFCPressRoom.nsf/0/C1481BDFE4A7586185257F33003E3183 accessed
5th November 2019.

The Nigerian Observer “Osun Sukuk: Driving National Fund for Development
Projects” available at: https://nigerianobservernews.com/2019/02/osun-sukuk-driving-national-fund-for-development-pojects/ accessed
5th April 2019.

Debt Management Office, “Press Release on The Second N100 Billion Sovereign
Sukuk Issuance.pdf” available at: https://www.dmo.gov.ng/news-and-events/circulars-releases/2672-press-release-on-the-second-n100-billion-sovereign-sukuk-issuance accessed
8th November 2019.

[27]   Debt
Management Office, “FGN Green Bond Offer for Subscription” available at: https://www.dmo.gov.ng/fgn-bonds/green-bond/2289-fgn-green-bond-offer-for-subscription/file accessed
8th November 2019.


The Federal Government of Nigeria embarked on an issuance of N15bn Series II
Green Bond. The law firm of SPA Ajibade & Co and Austen Peters & Co
acted as joint solicitors to the bond issuance project. A subscription level of
over 220% was recorded. See: Debt Management Office, “FGN N15bn Green Bond
Series II Prospectus” available at: https://www.dmo.gov.ng/fgn-bonds/green-bond/2810-fgn-n15bn-green-bond-series-ii-prospectus/file 
accessed 8th November 2019.

[30]    Nairametrics,
“Over $17bn raised from bonds by Nigeria and other African countries – World
bank” available at: https://nairametrics.com/2019/05/02/over-17bn-raised-from-bonds-by-nigeria-and-other-african-countries-world-bank/ accessed
5th June 2019.

[31] Access Bank Plc
,”Proposed Bond  Issuance” available at:     https://www.accessbankplc.com/AccessBankGroup/media/Documents/Proposed-Issuance-Of-Green-Bond.pdf accessed
8th November 2019.

[32] ibid

[33] Impact
Investors Foundation, “About Us” available at: https://impactinvestorsfoundation.org/iifconvening2019/

accessed 8th November 2019.

Source: SPA Ajibade & CO