Nigeria, the most populous nation in Africa, has emerged as the top on the continent in terms of tech startups, with an estimated 3,360 of the 5,200 total, according to reports.
Nigeria’s digital ecosystem is thriving, inventive, and dynamic; it draws big talent, capital, and international attention. But the nation also faces some obstacles that could prevent it from reaching its full potential, such as access to cash, internet infrastructure, tech talent, and regulations.
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Nigeria’s technological prowess and achievements
Four unicorns—companies valued at least $1 billion—that originated in Nigeria include Interswitch, Flutterwave, OPay, and Andela. Interswitch is a digital payment provider that offers banks and enterprises switching and processing services. Flutterwave is a finance platform that facilitates e-commerce and international payments. OPay is a ride-hailing and mobile money service that is available in Nigeria and other African nations. Andela is a talent marketplace that links multinational corporations with African software engineers.
Partech Africa reports that in 2021, Nigerian tech startups raised $1.7 billion, which accounted for 40% of the overall funding for tech startups in Africa. Nevertheless, the most recent funding raised by Nigerian entrepreneurs in 2023 was $410 million, a three-year drop in contrast to previous years.
The worldwide economic slump was blamed for the funding slowdown because it made investors more wary of their investments. However, certain Nigerian businesses still managed to get some major agreements in 2023, such as Termii ($3.65 million), OnePipe ($4.8 million), and Releaf ($3.3 million)23.
Among the noteworthy transactions are the $170 million Series B from Flutterwave, the $400 million Series C from OPay, and the $110 million Series A from Kuda Bank. Global tech behemoths like Google, Facebook, Microsoft, and Twitter have also taken notice of and backed Nigerian tech companies, launching a number of projects and programs to strengthen the country’s tech sector.
The digital ecosystem in Nigeria is broad and encompasses a number of industries, including e-commerce, fintech, healthtech, edtech, agritech, and logistics. Here are a few instances of creative and significant startups in various fields:
2020 saw Stripe purchase Paystack, a fintech startup that lets companies take and handle online payments, for $200 million.
In 2019, Jumia, an e-commerce platform with operations in 14 African nations, became the first internet firm from Africa to list on the New York Stock Exchange.
A healthtech business called 54gene secured $25 million in Series B funding in 2021. The company offers genomic data and insights to African communities.
A $7.5 million Series A fundraising round was secured in 2021 by uLesson, an edtech business that provides students in Africa with individualized and reasonably priced instruction.
An agritech business called Farmcrowdy, which links farmers with markets and investors, won $3 million in Series A funding in 2019.
In 2019, Kobo360, a logistics business that links cargo owners and truck drivers, secured $30 million in Series A funding.
Nigeria’s limitations and tech challenges
Nigeria’s tech ecosystem has many strengths and remarkable accomplishments, but it also has certain flaws that could prevent it from reaching its full potential. Among them are:
Digital infrastructure: According to Internet World Stats, Nigeria has a 65% internet penetration rate, which is less than the 70% average for Africa. Nigeria has slow internet as well; according to Speedtest Global Index, it is ranked 143rd out of 176 countries. Due to Nigeria’s unstable power supply, a lot of tech businesses have to rely on solar power and generators.
Tech talent: The lack of access to and poor quality of education, particularly in STEM subjects, limits Nigeria’s supply of tech talent. Nigeria’s adult literacy rate is 62%, which is less than the 65% average for Africa, according to the World Bank. Nigeria has a lower tertiary enrollment rate—11%—than the average for Africa, which is 13%. The brain drain has an impact on Nigeria’s IT talent as well because many bright and skilled developers leave the country in search of better prospects and working environments.
Regulation: The frequent and capricious government interventions, coupled with the absence of clear and supportive regulations, frequently provide hindrances to Nigeria’s innovation sector. For example, the Central Bank of Nigeria outlawed cryptocurrency transactions in 2020, which had an impact on numerous fintech businesses that used cryptocurrencies as a payment method. The suspension of Twitter’s service in Nigeria by the government in 2021 had an impact on numerous internet businesses that relied on the network for marketing and communication.
Capital Access: Most of the investment for tech startups in Nigeria comes from foreign investors, who continue to be a prominent part of the country’s innovation ecosystem. Partech Africa reports that in 2021, foreign investors provided 81% of the capital for tech startups in Nigeria, with local investors accounting for just 19%. This makes political unpredictability, cultural diversity, and currency swings risky for Nigerian digital businesses. In addition, there aren’t enough exit prospects or early-stage and seed capital options for software firms in Nigeria.
Nigeria’s prospects and opportunities in technology
Nigeria’s digital ecosystem, in spite of its shortcomings and difficulties, offers a lot of potential and chances that it may take use of to foster and accelerate innovation across the globe. Among them are:
Population: The World Bank projects that Nigeria will have 214 million people living there in 2021, making it the most populous nation in Africa and the ninth most populous country worldwide. According to the CIA World Factbook, Nigeria has a young population (median age of 18), which makes it a big and expanding market for ICT goods and services as well as a pool of prospective tech talent and entrepreneurs.
Diaspora: The World Bank projects that there will be 17 million Nigerians living abroad by 2020, making it the largest diaspora in Africa and the sixth largest globally. The World Bank estimates that the Nigerian diaspora would send $26 billion in remittances in 2020, making it the country’s second-largest source of foreign money after oil. Through money, networks, mentorship, and lobbying, the Nigerian diaspora can play a significant role in bolstering and advancing Nigeria’s tech industry.
Innovation: The influence and success of Nigeria’s tech startups attest to the ecosystem’s reputation for creativity, adaptability, and resilience. The entrepreneurial spirit and ambition of Nigeria’s digital entrepreneurs, who don’t mind taking chances and finding solutions to issues, also propel the country’s innovation ecosystem. The IT sector in Nigeria has the potential to use innovation to produce solutions that benefit not only Nigeria and Africa but the entire world.
Nigeria has one of the most advanced and promising IT ecosystems in Africa, with the potential to become a major worldwide innovator and influencer. Nonetheless, there are a few obstacles and flaws in Nigeria’s tech ecosystem that must be fixed if it is to reach its full potential. The IT sector in Nigeria must also take advantage of certain chances and opportunities that may further its development and potential. The decisions and actions of its players, including tech startups, investors, the government, academic institutions, and civil society, will determine whether Nigeria’s tech ecosystem continues to grow or stagnates at this crucial moment. Nigeria’s digital sector has the chance and duty to set the standard for ICT innovation and influence in both Africa and the globe.
What effect does Nigeria’s tech ecosystem have on the country’s economy?
Because it fosters innovation in goods and services, job creation, GDP development, and investor attractiveness, Nigeria’s digital ecosystem benefits the country’s economy. The following data and statistics show this impact:
PwC estimates that in 2020, Nigeria’s IT industry contributed 15.3% of the country’s GDP, ranking it second only to agriculture.
The World Bank estimates that by 2025, Nigeria’s digital economy may generate 3 million new employment and increase the country’s GDP by $88 billion.
Nigerian tech startups raised $1.7 billion in 2021, Partech Africa reports, which accounted for 40% of all funding for tech startups in Africa.
Nigeria boasts the most active tech hubs in Africa, with over 85 hubs that help and mentor tech entrepreneurs, according to GSMA.
Nigeria has one of the most active and dynamic tech scenes in Africa, and it has the potential to grow into a major innovation and impact hub on a global scale. Regulating, tech talent, digital infrastructure, and finance access are some of the issues Nigeria’s IT industry must deal with in order to realize its full potential. Nigeria’s digital ecosystem must overcome these obstacles and take advantage of its opportunities to spur global innovation acceleration and incubation.
