ARM Investment Managers has launched a N200 billion private debt fund programme aimed at addressing Nigeria’s chronic small and medium-sized enterprise (SME) financing gap, reducing import dependence, and expanding access to long-term, non-bank credit for viable businesses.
The fund, unveiled at a media briefing in Lagos on Monday, will be rolled out in phases, beginning with a N25 billion Series I raise. It is structured as a closed-ended private credit vehicle with a 10-year programme tenor and a three-year shelf registration, targeting institutional investors and high-net-worth individuals.
Speaking at the launch, Deji Opeola, chief executive officer of the ARM Private Debt Fund, said Africa’s marginal presence in global finance continues to limit its economic influence, despite accounting for 20 percent of the world’s population.
“Africa represents about 20 percent of the global population but less than three percent of global GDP. In private credit, which is now a $3.5 trillion global asset class, Africa and the rest of the world account for just about three percent,” Opeola said. “That translates to roughly $105 billion, while Africa alone has an SME funding gap of over $400 billion.”
Nigeria’s share of that gap, he noted, is estimated at over $32 billion, at a time when SMEs contribute close to half of GDP and more than 80 percent of employment. Yet, about 90 percent of lending to businesses still comes from banks that remain largely risk-averse to the SME segment.
Opeola explained that private credit, non-bank lending provided by investment funds, has grown rapidly since the global financial crisis, offering flexible, covenant-driven financing with lower default rates and more predictable returns than traditional bank loans or public debt.
“Private credit offers high returns with relatively low volatility. More importantly, it delivers impact immediately, because it is tied to cash flows and real economic activity,” he said.
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Focus on Nigerian SMEs
The ARM Private Debt Fund will focus on established small and mid-sized businesses with at least three years of operations, proven cash flows, and EBITDA typically ranging between N500 million and N2 billion. The fund will be sector-agnostic, excluding primary agriculture, and will deploy capital through senior secured term loans, revolving credit facilities, and selective mezzanine structures.
Opeola said a key objective of the fund is to support businesses that can substitute imports and expand exports, thereby easing pressure on foreign exchange.
The fund also places emphasis on gender inclusion, reflecting data showing that between one-third and 40 percent of Nigerian SMEs are led or owned by women.
Risk management and governance
To strengthen risk management, ARM has partnered with S&P Global, adopting its analytical framework for credit appraisal alongside on-the-ground due diligence.
“We visit companies, kick the tyres, and understand governance and management. Then S&P’s global metrics help us with the analytical backbone,” Opeola said.
The fund will operate under a multi-layer governance structure comprising a fund management team, an independent investment committee, and an advisory board to be constituted by investors after the fundraise, ARM said.
While the fund has a long-term horizon, ARM introduced a liquidity mechanism to address investor concerns about locking up capital for a decade. Up to 20 percent of assets under management can be partially redeemed through securitisation of diversified loan portfolios, subject to approvals by the investment committee and the fund’s board.
“These assets will be rated, securitised and listed, creating a new class of instruments in Nigeria’s capital market, while allowing investors to access liquidity without dismantling the portfolio,” Opeola said.
Real-economy impact
To illustrate the fund’s intended impact, Opeola cited a Lagos-based recycling company valued at about $15 million that converts waste plastic into materials sold to global retailers such as Walmart in the United States and Tesco in the United Kingdom.
“That is foreign exchange for Nigeria,” he said. “What such companies need is liquidity to manage receivables and expand capacity. This is exactly where private credit fits.”
ARM said several similar transactions are currently undergoing investment committee review, with deployments expected once Series I is fully raised.
The private debt fund adds to ARM’s growing alternative investment platform, which includes infrastructure, real estate, trade finance, and agribusiness funds. The firm, which has operated for over 31 years, also manages Nigeria’s largest mortgage-related real estate investment fund.
Opeola said that the firm’s long-term ambition is to help narrow Africa’s estimated $400 billion SME financing gap by providing disciplined debt capital that supports growth, job creation, and economic diversification.