Due Diligence Checklist for Investing in Nigerian SMEs

Most investments that fail in Nigeria don''t fail because the market was wrong. They fail because somebody skipped due diligence. Whether you''re writing a ₦5m angel cheque or a ₦500m growth round, the same discipline applies. This checklist is the working playbook professional investors use before sending money into a Nigerian SME.

1. Legal and corporate

• Certificate of Incorporation (CAC)
• Memorandum and Articles of Association
• Updated CAC status report (no outstanding annual returns)
• Shareholding register and capitalisation table
• Board resolutions authorising the raise
• Tax Identification Number (TIN) and tax clearance certificates (last 3 years)
• All sector-specific licences (CBN, NAFDAC, SEC, NCC, DPR, etc.)
• Any pending or threatened litigation

2. Financial

• Audited financial statements (last 3 years) by a recognised firm
• Management accounts for the most recent 12 months
• Bank statements (last 12 months) — match revenue claimed to actual inflows
• Accounts receivable and payable ageing
• Customer concentration (no single customer should be more than 25% of revenue)
• Unit economics: gross margin per product/SKU, CAC, payback period
• Debt schedule including hidden related-party loans

3. Operational

• Org chart and key-person dependencies
• Employment contracts for senior team (with non-compete and IP clauses)
• Standard operating procedures and any ISO/quality certifications
• Supplier contracts and concentration risk
• Lease agreements for premises (verify with landlord)
• Insurance: assets, liability, key-person

4. Commercial

• Customer interviews (5–10 calls minimum) — verify retention claims
• Competitor map and pricing comparison
• Pipeline analysis: weighted vs unweighted
• Marketing channel breakdown and CAC by channel
• Cohort retention curves (especially for subscription businesses)

5. Founder and management

• Founder background checks (employment history, prior companies, public records)
• Reference calls with prior employers, co-founders, ex-employees
• Credit bureau check on the founder personally
• Cap-table cleanliness — no ghost shareholders, no informal verbal equity promises
• Alignment: founder vesting schedule, lock-up, anti-dilution terms

6. Technology (if relevant)

• Code repository review with technical advisor
• Infrastructure cost as % of revenue
• Security posture: penetration test, NDPR compliance, encryption practices
• IP ownership: confirm code, trademarks and domains are owned by the company (not the founder personally)

7. Red flags that should pause the deal

• Refusal to share bank statements
• Inconsistent revenue numbers between the pitch deck, financials and bank inflows
• Tax arrears or expired CAC filings
• Family members on payroll without operational roles
• Founder unable to explain unit economics in plain language
• Customer references the founder won''t allow you to contact directly

8. Closing structure (Nigeria-specific)

• Term sheet with binding exclusivity and non-binding economics
• SPA (Share Purchase Agreement) and Shareholders Agreement under Nigerian law
• Stamp duty on the SPA (FIRS)
• Post-completion CAC filings to register the new shareholding
• Tag-along, drag-along, pre-emption, and information rights baked in
• Tranched disbursement linked to milestones — never wire the full amount at signing

9. How Fundwey reduces your DD workload

Every business listed on Fundwey goes through a 10-document verification process — CAC, tax clearance, ownership proof, financials, sector licences, references and more — before being awarded a Fundwey Rating from Bronze to Platinum. That doesn''t replace your DD, but it eliminates the obvious frauds and saves you weeks on the basics.

Browse verified businesses or upgrade to an Investor plan to access full financial details and request introductions through our blind matchmaking system.

This article is informational and not legal or investment advice. Always consult qualified Nigerian counsel before executing any investment.