ACA Foundation Completes Ethical Living Project 3.0, Reaching Over 4,100 Students Across Lagos

Steve Iwenjora Joins Industry Leaders at AVCA 2026 to Discuss Liquidity in African Private Capital

The Quiet Rise of Private Credit and its Role in Bridging the Financing Gap in Frontier Markets

Africa’s economic narrative is currently undergoing a profound structural shift. For decades, the continent’s growth has been framed by trends highlighting persistent “gaps,” most notably in infrastructure and small-to-medium enterprise (SME) financing. While international headlines often focus on capital scarcity, recent data suggests the real challenge is a mismatch between traditional financial structures and the continent’s unique operational realities. Over 2024 and 2025, private credit transitioned from a peripheral alternative to a central pillar of financial stability, emerging as the “new financer of the economy” as traditional banking institutions continue to contend with increasingly stringent regulatory constraints.

The Credit Void

The scale of the financing challenge is most evident in the US$331 billion SME financing gap across sub-Saharan Africa[1]. SMEs constitute the backbone of the African economy, representing approximately 90% of all companies, yet they remain persistently underfunded¹. This is not merely a lack of liquidity; it is a byproduct of how frontier banking systems are built. Most commercial banks are deposit-funded and governed by very stringent prudential regulations, such as Basel III and IV, which prioritize liquidity and capital preservation over long-tenor flexibility.

In Nigeria, the continent’s largest economy, these structural limitations are particularly acute. While the banking sector has deepened[UO1] , banks’ balance sheets remain tied to short-term deposits, making lending beyond three years prohibitively expensive. This constraint is compounded by structural shifts in the sector, including consolidation, rising capital requirements, and higher regulatory equity thresholds, which are pushing banks toward larger balance sheets and more conservative risk frameworks, often prioritising top-tier corporates over mid-market lending. When macroeconomic shocks occur, such as the reforms that drove Nigeria’s inflation to 34.6% in 2024, banks naturally retreat to protect their capital[2]. This leaves mid-market manufacturing and infrastructure firms in a “refinancing trap.” This structural limitation is reflected in World Bank data showing that domestic credit to the private sector in Nigeria stood at a mere 13% of GDP in 2024, with Kenya at 32% and Egypt at 28%, a stark contrast to 76% in South Africa and 194% in China[3].

Private credit serves as the essential “capital bridge” to fill this void, offering “patient capital” that is not subject to the same daily withdrawal risks and capital reserve requirements as bank deposits.

The Performance Paradox

A central hurdle to attracting institutional capital into Africa has been the distorted perception of risk. Global credit ratings often weigh GDP per capita more heavily than actual project fundamentals or repayment behavior, creating a systemic bias that inflates borrowing costs. However, empirical evidence reveals a compelling “Performance Paradox”: Africa possesses the lowest default rates globally for infrastructure and project finance at just 1.9%[4]. This default rate is significantly lower than that of Western Europe (4.6%), Asia (4.6%), and Latin America (10.1%)⁴. Despite this superior performance, African issuers face disproportionately high-risk premiums.

By “flipping the coin,” sophisticated investors are beginning to identify undervalued, high-quality assets that offer exceptional risk-adjusted returns. Private credit funds are uniquely positioned to capture this mispriced risk, providing a more accurate reflection of the continent’s underlying economic cashflows than traditional rating methodologies suggest.

A Shift in Asset Allocation

The rise of private debt is part of a broader trend known as the “Confluence Revolution,” the strategic convergence of private equity and debt. Across the African continent, and particularly in South Africa, local private equity firms are increasingly viewing private credit as an attractive diversification strategy. In 2025, a survey found that 86% of local private equity firms are now actively pursuing or considering private credit strategies, a sharp increase from 50% just a year prior[5].

The rationale for this popularity lies in the structural protections credit offers. Because debt ranks ahead of equity, credit funds are paid first if a portfolio investment underperforms, ensuring a level of predictability and steady proceeds that favourably compares with pure equity. For borrowers, the attraction is equally clear: private credit offers faster execution times (cited by 48% of surveyed corporates), bespoke financing (43%), and stronger relationships (38%)[6] when compared to traditional banks. In an environment where 71% of corporates value speed of decision-making above all else, private credit is outcompeting the rigid processes of traditional banks⁶.

Global Stress, Structural Contrast

The global expansion of private credit is beginning to reveal points of strain. In developed markets, particularly in the United States, early signs of stress have emerged following a prolonged period of low interest rates and abundant liquidity that encouraged increasingly aggressive lending structures. Recent bankruptcies among highly leveraged borrowers have drawn attention to weakening underwriting standards, including weaker lender protections, optimistic performance assumptions and the growing use of complex financing arrangements. In addition, rising exposure to sectors such as technology, where earnings assumptions are being reassessed, alongside pockets of unsecured or loosely structured lending, has added to investor caution. Broader macro and political uncertainty in the US have further reinforced a more risk-sensitive environment.

While these developments have prompted warnings that losses in the next credit cycle could exceed expectations, they do not yet amount to a systemic crisis. More importantly, they highlight a structural contrast. In frontier markets, private credit is not the product of excess liquidity or financial engineering, but of a fundamental need to bridge persistent financing gaps in the real economy. This distinction, combined with generally lower leverage levels and a stronger linkage to cashflow-generating sectors, is positioning frontier markets as an increasingly compelling alternative for long-term investors reassessing global credit allocations.

Mobilizing Homegrown Capital

The maturation of the industry is also evidenced by the rise of “homegrown capital.” African investors, specifically pension funds, insurance companies, and corporate investors, increased their share of fundraising value from 14% in 2022 to 19% in 2024². This shift is increasingly driven by a strategic need for diversification. Historically, African institutional investors have been over-exposed to their single home markets and local currencies, with domestic portfolios heavily dominated by sovereign bonds and treasury bills.

With Africa’s pension fund assets now reaching an estimated US$1.5 trillion, there is a growing imperative to move beyond these concentrated, low-yield local instruments. Pan-African credit funds offer a compelling solution to this exposure. By investing across multiple borders, these funds provide critical geographic diversification while generating dollar-denominated yields or hard-currency returns that protect against the inflation and local currency devaluations that have historically eroded local savings. Furthermore, private credit provides these institutions with regular liquidity through periodic contractual cashflows

To address local currency capital needs, local currency funds are being established in key markets. These vehicles allow local institutions to commit capital in their domestic currency while co-investing alongside larger Pan-African funds. This “parallel” or “feeder” structure provides a dual benefit: it addresses domestic financing requirements while offering local investors an opportunity to earn hard-currency returns through participation in multi-jurisdictional portfolios. This trend is evident in South Africa, where managers often operate Rand-denominated private credit funds alongside their USD vehicles to accommodate different investor mandates. Similarly, in Nigeria, managers are increasingly using Naira-denominated parallel vehicles to attract local pension funds that are sensitive to the “FX trap” and the volatility of dollar-denominated capital calls.

The Strategic Frontier

Sector-specific trends are further driving the growth of private capital, including private credit. Finance remained the most active sector in 2024, accounting for 33% of deal values, driven largely by the dominance of FinTech[7]. In West Africa, 75% of deals in the financial sector between 2016 and 2022 were in financial technology[8]. These technology-enabled companies are leveraging digital innovation to deepen financial inclusion, a mission that increasingly attracts ESG-aligned capital.

Environmental, Social, and Governance (ESG) metrics are no longer a “luxury” but a standard operational requirement for African finance. Private credit providers are now moving toward structuring sustainability-linked loans, which reward enterprises for hitting verifiable social or environmental milestones, thereby creating a more resilient corporate class.

Conclusion

The rise of private credit in Africa is not a temporary response to a liquidity crunch; it is a structural evolution of the continent’s financial architecture. In 2024, while venture capital faced global headwinds, private debt maintained significant momentum, with deal values climbing by 36% as fund managers gravitated toward the SME space⁷.

By mobilizing local currency, leveraging the global-low 1.9% infrastructure default rate, and fostering a “confluence” between debt and equity, private credit has become the essential capital lifeline for the African real economy⁴. As the continent accelerates toward 2030, this asset class will be the primary engine bridging the gap between Africa’s vast growth potential and its current structural constraints.

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Yemisi Akinbo and Yaw Keteku

African Capital Alliance Group

[1] MSME Finance. International Finance Corporation (IFC). Retrieved from https://www.ifc.org/en/what-we-do/sector-expertise/financial-institutions/msme-finance

[2] Inflation Rates. (2024). Central Bank of Nigeria. Retrieved from https://www.cbn.gov.ng/rates/inflrates.html

[3] Domestic Credit to Private Sector (% of GDP). World Bank DataBank. Retrieved from http://databank.worldbank.org/data/reports.aspx?source=2&series=FS.AST.PRVT.GD.ZS

[4] Speaking Notes. African Development Bank (AfDB). Retrieved from https://vcda.afdb.org/system/files/Speaking%20Notes.pdf

[5] SAVCA Private Equity Survey 2025. (2025). South African Venture Capital and Private Equity Association. Retrieved from https://savca.co.za/savca-pe-survey-2025/

[6] Private Credit in Trade Finance. (2021). TXF Research. Retrieved from https://assets.contentstack.io/v3/assets/blt3de4d56151f717f2/blt7059cc4285452ac9/6183b8d819df7c77cdb1fd14/TXF_Research_Private_credit_in_trade_finance_report_2021_V10.pdf

[7] 2024 African Private Capital Activity Report. (2024). African Venture Capital Association (AVCA). Retrieved from https://www.avca.africa/media/fcpjt4s3/2024_avca_african_private_capital_activity_report_apca_public.pdf

[8] AVCA-KIFC Africa Funds Report. African Venture Capital Association (AVCA). Retrieved from https://www.avca.africa/media/ktoflen5/02115-avca-kifc-funds-report_9-part1.pdf

Dr. Okey Enelamah Receives the 2026 Dr. James I. Cash Advancing Pathways Award at Harvard Business School

Dr. Okey Enelamah, Chairman ACA was awarded the 2026 Dr. James I. Cash Advancing Pathways Award at the 53rd Annual H. Naylor Fitzhugh Conference at Harvard Business School (HBS).

The award, jointly conferred by the Harvard Business School African-American Alumni Association (HBSAAA) and the African American Student Union (AASU), honors an HBS alumnus or faculty member who has demonstrated a sustained commitment to educating, mentoring, and advancing pathways for the next generation of leaders.

This year’s recognition celebrates Okeys professional excellence and exemplary contributions, reflecting a career defined by institution building, mentorship, and expanding economic opportunity.

A Career Built on Creating Pathways

As highlighted in the Harvard Business School publication, Dr. Enelamah’s journey began in medicine before pivoting to finance, a decision that ultimately led to the founding of African Capital Alliance (ACA) in 1997 alongside Richard “Dick” Kramer.

Under his leadership as Co-Founder and CEO (1997–2015), ACA became Nigeria’s first private equity firm, raising over $1.2 billion across four funds and investing in middle-market businesses across technology, financial services, energy, and consumer sectors. One of ACA’s earliest landmark transactions delivered a 44x return on exit from MTN Nigeria, establishing the firm’s reputation for disciplined investment and value creation.

In 2015, Dr. Enelamah was appointed Nigeria’s Minister of Industry, Trade and Investment, where he focused on improving the ease of doing business, attracting investment, and strengthening the enabling environment for private sector growth.

Beyond investing and public service, he has continued to invest in education and leadership development, including founding the Nigerian University of Technology and Management (NUTM), a STEM-focused institution dedicated to preparing the next generation of African leaders and entrepreneurs.

A Recognition That Reflects Our Values

The Dr. James I. Cash Advancing Pathways Award was established to honor individuals who advance opportunity and contribute meaningfully to business and society.

For ACA, this award reflects the enduring values that guide our work:

• Humility in leadership and service
• Excellence in execution and standards
• Integrity in decision-making
• Discipline in capital stewardship
• Contribution to society beyond commercial outcomes

ACA Foundation Launches Ethical Living Project 3.0 for Secondary School Students in Lagos

The ACA Foundation is pleased to announce the launch of the Ethical Living Project 3.0 for 2026, the third edition of its flagship initiative dedicated to promoting integrity, ethical leadership, and social responsibility among Nigerian youth.

Building on the success of previous editions, this year’s programme will engage over 4,000 secondary school students across Lagos State, equipping them with the values, mindset, and practical skills needed to navigate today’s complex world with integrity and purpose.

Through the Ethical Living Project, the Foundation continues its commitment to nurturing a new generation of ethical leaders who will contribute positively to their communities, the nation, and the global society.