High borrowing costs and limited access to flexible financing are slowing mergers and acquisitions (M&A) across Africa, including Nigeria, despite strong corporate interest in business expansion, Standard Chartered has warned.
The bank disclosed this in a statement quoting its Africa Chief Executive Officer and Head of Coverage, Dalu Ajene. He called for a rethink of acquisition financing to unlock the continent’s next phase of corporate growth.
Ajene spoke during a strategic roundtable titled “Scaling Acquisition Finance to Steady the M&A Downturn” at a pan-African forum in Kigali, Rwanda. He warned that Africa could miss a critical phase of industrial expansion unless financial institutions develop more flexible and scalable funding solutions.
According to the statement, the slowdown in mergers and acquisitions reflects a financing gap rather than a lack of business ambition.
Ajene cited findings from a discussion paper presented at the forum. He noted that Africa’s M&A activity weakened even as global dealmaking recovered.
According to BCG’s 2025 M&A Report, Africa’s total deal value declined by about 24 per cent in the first nine months of 2025 compared with the same period in 2024. Transactions involving African companies also dropped by nearly 46 per cent.
In contrast, global deal value increased by around 10 per cent during the same period, highlighting Africa’s underperformance.
The statement also referenced data from DealMakers Africa, showing that M&A deal value across Africa, excluding South Africa, fell by 16 per cent year-on-year to $4.66bn in the first half of 2025. Deal volumes also declined by 21 per cent.
Ajene said African businesses remain eager to grow but lack access to financing structures that support acquisitions.
“The appetite for growth remains strong among African businesses,” he said. “What is missing are financing instruments that reflect the realities of how African companies expand.”
He explained that many firms are ready to scale operations, acquire competitors, and strengthen regional integration. However, the financial framework needed to support those ambitions remains underdeveloped.
Ajene noted that many African banks still depend on traditional lending structures with rigid repayment schedules. These structures often fail to match the uneven growth patterns of mid-sized businesses.
He added that financing tools such as mezzanine finance, hybrid debt-equity structures, and earn-out mechanisms remain scarce across many African markets.
According to the statement, these financing options are increasingly important because offshore private capital has become more selective, local institutional capital remains limited, and high interest rates have raised the cost of acquisition financing.
Ajene said the financing challenge persists despite Africa becoming more attractive to investors.
He cited data from the United Nations Trade and Development, which showed that foreign direct investment into Africa rose by 75 per cent to a record $97bn in 2024.
However, he noted that the increase was concentrated in large project-finance transactions. Greenfield investment announcements fell by 37 per cent to $113bn, highlighting the need for financing structures that can convert investor interest into completed corporate transactions.
“Africa’s M&A slowdown is fundamentally a financing problem, not a demand problem,” Ajene said. “There are viable businesses, willing buyers, and strategic opportunities across sectors.”
He called for stronger collaboration between commercial banks and Development Finance Institutions (DFIs) to improve risk-sharing arrangements for acquisition financing.
According to him, commercial banks could provide senior debt while DFIs support subordinated financing and guarantee mechanisms that would encourage more lenders to participate.
Ajene said the approach would reduce concentration risks for lenders while providing African businesses with longer-term capital suited for expansion and consolidation.
He also stressed the need for clearer qualification frameworks to help businesses understand what lenders expect before approving acquisition financing.
According to Ajene, many African companies have strong growth potential but need greater clarity on governance standards, cash-flow predictability, and operational resilience required by lenders.
He added that reversing Africa’s M&A downturn would require not only more capital but also smarter financing structures designed around the continent’s business realities.
The warning comes as Nigeria continues to maintain high interest rates.
The Central Bank of Nigeria recently retained the Monetary Policy Rate at 26.5 per cent, citing rising external risks, renewed inflationary pressures, and the need to sustain exchange rate stability.
The decision has generated mixed reactions from members of the Organised Private Sector. While some acknowledged the reasons behind the move, others argued that high borrowing costs continue to discourage investment by small businesses and manufacturers, limiting production and job creation.
