The African startup ecosystem is booming, and Nigeria is at the forefront of it all as Africa’s unofficial tech capital.
For example, Lagos is home to one of the three most important tech clusters in the region, with the other two being in Nairobi, Kenya, and Cape Town, South Africa.
Nigeria is one of the top three countries driving the growth of technology in West Africa and Africa as a whole. With a teeming population of 206 million people. Nigeria also ranks as the most populous nation in Africa. These many people connote a large market size for trade
There are challenges that remain to be surmounted if the country’s start-up scene is to become globally competitive: Although Lagos is renowned for its start-up ecosystem, there is a significant disconnect between the city’s tech ecosystem, its surroundings and the wider country, which suffers from chronically poor infrastructure and education, and recurring political instability and security issues.
There are also certain regulatory hurdles to overcome.
For example, many of the country’s most prominent start-ups operate within the financial technology (fintech) space, partly in consequence of the limited formal banking facilities available; Nigeria was the leading country for Bitcoin and cryptocurrency adoption last year, according to statistics firm Statista.
However, in recent months the Central Bank of Nigeria has been cracking down on cryptocurrency, despite stating that it is not moving towards an outright ban.
This was intended to bring the booming market under control and prevent the technology’s misuse. But critics have said that it will stifle innovation and limit the potential of tech start-ups.
Most SMEs rely on personal savings and money from friends and relatives to kick-start their businesses, but lately, there’s been a shift. Some SMEs have been able to continuously raise foreign capital to drive their businesses — these are startups. And it’s not so surprising that startups are able to woo investors more than traditional SMEs — they provide tech-driven solutions, which makes their potential to scale faster and globally more feasible than their counterparts.
Meanwhile, a 5G network is set to be rolled out across the country, following successful trials in the cities of Lagos, Abuja and Calabar.
A further incentive to growth of the digital sector is that – in common with many oil-producing countries – Nigeria is seeking to limit the prominence of hydrocarbons in its GDP mix, following a very troubled year for oil prices. An increase in the GDP contribution of digital companies could stand to pick up some of the slack when it comes to diversification.
While much work remains to be done, there are already countless success stories of innovative start-ups that are changing the face both of Lagos’ tech ecosystem and Nigerian society as a whole.
For example, in one of the biggest pieces of Nigerian tech news in 2020, local fintech start-up Paystack was acquired by US-based giant Stripe in October, in a deal that was reportedly worth more than $200m.
Founded in 2016, Paystack processes more than 50% of payments made in Nigeria, and will now spearhead Stripe’s African expansion.
Elsewhere, Arone – based at the Roar Nigeria Hub of the University of Nigeria – builds drones that deliver medical supplies to more remote regions. This is particularly useful in the case of certain Covid-19 vaccines, which must be kept at low temperatures.
But the potential applications of drone technology go beyond health care. Drones can broadly improve logistics in places with high traffic congestion, such as Lagos and other big cities in Nigeria, as they can bypass traffic jams and deliver goods, household items and food supplies within 15 minutes. This will have a great impact on e-commerce.
This is a prime example of how the increased digitalisation effected by coronavirus is being leveraged post-pandemic to drive innovative approaches to business in general.
Meanwhile, Nigerian start-ups are also driving renewable energy, a key component of the world’s “green recovery” from Covid-19.
Given the way foreign investments rain on Nigerian startups, it’s normal to anticipate some tremendous impact, a spontaneous positive turnaround in Nigeria’s ailing economy, and possibly the appreciation of its currency. But, none of such has been visible; a big reason to worry.