Nigeria is Africa’s largest economy. It is also Africa’s most populous nation and has the continent’s youngest population with one-third of its population between the ages of 15-35 - this, it is conventionally thought, demonstrates an expanding population of tech-savvy individuals willing to utilize new technology and innovative products as they become available. Additionally, 18 million of Nigeria's more than 100 million internet users also use smartphones. In the sixty-two-year history of the nation, this presents the ideal opportunity to change its course for the better through technology-enabled entrepreneurship.
Nigeria, despite its financial, regulatory, and infrastructure constraints, has a vibrant technology innovation space supported by a strong upper and lower middle class with an endless need for a wide range of goods and services. This has led to the emergence of a distinct technology startup ecosystem with its own set of players, emphasis areas, and requirements.
Just the Lagos ecosystem alone is valued at $9 billion which is far ahead of African contemporaries like Cape Town, Johannesburg, Nairobi and Accra. With five of the seven unicorns—Flutterwave, Jumia, Opay, Andela, and Interswitch—found in Africa, the ecosystem's dominance in terms of scale, ability to attract investment, and influence in its early phases is a hint of its enormous potential.
At least 750 startups, many of which are in the technology and technology-enabled sectors, make up Nigeria's startup ecosystem, which has the largest number of startups in Africa in terms of volume. According to Intelligence from Techpoint Africa, Nigeria's startup ecosystem raised $1.06 billion in 2021, which is at least 62% of the amount raised in three preceding years combined; between 2018 and 2020. With at least $1.03 billion of the $1.06 billion raised, Nigeria's technology startup ecosystem dominated the country's emerging startup scene in 2021. Of that amount, $811.23 million was attracted by Nigerian technology firms with a sole focus on deploying financial technology.
Another indicator for assessing the volume and size of Nigeria's technology startup ecosystem is startup density. Nigeria's ecosystem for technology startups has the second-highest density of tech startups on the African continent, slightly behind Egypt. As widely noted, Israel has the highest tech startup density and the highest total startup density in the world.
Also, according to StartupLagos, between 2016 and 2020, the Nigerian technology startup ecosystem recorded over 200 fundraising rounds and successfully closed 493 agreements.
The Nigeria Startup Bill project (NSB), a combined effort by the nation's technology startup ecosystem and the presidency to co-create growth conducive policies and construct deliberative channels between the two entities, is Nigeria's largest technology startup intermediary with the government.
The most prominent use case for technology as deployed by a majority of the technology startups currently innovating in the technology startup ecosystem in Nigeria is in finance - through financial technology. There is a lot of opportunity for growth despite the booming activity in Nigeria's financial technology sub-sector and the positive multiplier effect on the economy.
The financial technology sub-sector in Nigeria, for instance, represented 1.25 percent of retail banking revenue in the country in 2019, according to Mckinsey’s Global Banking Pool. Additionally, in 2021, the Nigeria Inter-Bank Settlement System (NIBSS) reported that financial technology-enabled electronic channels in Nigeria were used to record transactions worth $651.8 billion. This represents just 5% of our transaction volumes, with 95.3% of our transactions still being cash-based, according to the Enterprise Development Center's (EDC) study statistics on transactions in Nigeria in 2018.
The financial technology component of Nigeria’s wider technology startup ecosystem is therefore the area with the greatest potential for exponential growth in Africa and the global south as a whole. Take into account the ecosystem impact if Nigeria starts recording 20–50% of our national transactions online. Although the Nigerian ecosystem drew $811 million in fintech investments in 2021, this is still a small percentage of the $210 billion in global fintech investments as of that year.
The financial technology segment of the technology startup ecosystem in Nigeria is also actively contributing to the development of the human capital of Nigerians. This is through the promotion of financial inclusion and literacy. Also, through the provision of cutting-edge, accessible, and affordable financial products that meet the needs of unbanked and underserved segments of the population across culture, gender, and geography. Offering tools that enable access to alternative assets and digital investment products in order to attain better financial outcomes is a use-case that is now getting popular among the technology startups innovating in Nigeria’s digital investments space. The use of financial technology to address societal issues like student loans, online education, and affordable health insurance is also very promising in the fields of education and health. Technology-enabled and technology-centered startups in Nigeria are offering innovative and life changing solutions in personal finance management, wealth management, lending, consumer payments, health-care, logistics, agriculture, e-commerce, housing and to name a few.
1 Nigeria’s age distribution by population (2021) via Statista - https://www.statista.com/statistics/1121317/age-distribution-of-population-in-nigeria-by-gender/