Venture

Nigeria is becoming Africa’s unofficial tech capital

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Jack Dorsey CcHub Nigeria

Africa has one of the world’s fastest growing tech markets and Nigeria is becoming its unofficial capital.

The West African nation is commonly associated with negative cliches around corruption and terrorism (which persist as serious problems), and it’s those issues that likely influenced the Trump administration’s recent restrictions on Nigerian immigration to the U.S.

Even so, there’s more to the country than Boko Haram or fictitious princes with inheritances.

Nigeria has become a magnet for venture capital, a hotbed for startup formation and a strategic entry point for Silicon Valley. As a frontier market, there is certainly a volatility to the country’s political and economic trajectory. The nation teeters between its stereotypical basket-case status and getting its act together to become Africa’s unrivaled superpower.

The upside of that pendulum is why — despite its problems — so much American, Chinese and African tech capital is gravitating to Nigeria.

Demographics

“Whatever you think of Africa, you can’t ignore the numbers,” Africa’s richest man Aliko Dangote told me in 2015, noting that demographics are creating an imperative for global businesses to enter the continent.

That strategic necessity extends to Dangote’s home of Nigeria, which houses Africa’s largest population of 200 million, and it is expected to exceed 700 million in 30 years, which would make Nigeria the third-largest country in the world after India and China, according to the UN’s World Population Prospects data.

The last decade has seen a large increase in global businesses expanding into Africa. For companies and startups with consumer-driven businesses, Nigeria’s demographics make it a compelling market for revenue growth and a base for a broader African strategy.

Economy

In 2014, Nigeria surpassed South Africa as Africa’s largest economy, creating a dual distinction that has attracted startups. “Nigeria is the largest economy and most populous country in Africa. Its fintech industry is one of the most advanced in Africa, up there with Kenya and South Africa,” Chipper Cash CEO Ham Serunjogi told TechCrunch in 2019 on his payment venture’s expansion there. “I think for any company doing fintech across borders that is looking to be successful in Africa, it’s imperative that you have a presence in Nigeria.”

The country is known for its oil production, but its economy is diverse. Oil exports generate two-thirds of the Nigerian government’s revenue but only 8% of the country’s GDP. Tech tangential sectors such as financial services, telecoms and media and entertainment are driving growing portions of Nigeria’s nearly half-trillion-dollar economy, according to the National Bureau of Statistics.

Venture Capital

Perhaps the strongest indicator of Nigeria’s ascendance as Africa’s unofficial tech capital is venture capital. Though the stats vary, the country started to pull ahead of key startup markets Kenya and South Africa as early as 2019.

Just-released data for 2019 by Partech indicates that Nigeria now leads the continent in VC, raising $747 million of an estimated $2 billion in capital that went to tech companies in Africa last year.

TechCrunch covered a number of the large rounds that factored into that. Mastercard invested $50 million in Jumia, an e-commerce company headquartered in Nigeria with a broader Africa presence, before it became the first tech startup on the continent to IPO on a major exchange, the NYSE, in June.

One of Jumia’s backers, Goldman Sachs, led a $20 million round into Kobo360, a Nigerian trucking-logistics startup.

Software engineer company Andela, with offices in the U.S. and Lagos, raised $100 million and Nigerian fintech company Interswitch achieved a $1 billion valuation and unicorn status after a $200 million investment from Visa.

Nigeria’s Interswitch confirms $1B valuation after Visa investment

Though not classified as venture funding, more of Nigeria’s FDI is coming in the form of expansion of big tech in the country. Facebook opened an innovation lab in Nigeria in 2018 called NG_Hub and Google launched its own developer space in Lagos last week. Twitter and Square CEO Jack Dorsey hasn’t established any significant presence for his companies in the country yet, but he did visit Nigeria for the first time in November.

Nigeria also became central in 2019 to a pivot from China to African tech. In the last two quarters of 2019, more than 15 Chinese actors invested over $240 million of venture capital in Africa. More than $210 million of that was for fintech startups PalmPay and OPay in Nigeria.

Fintech

Supporting Nigeria’s bid as unofficial capital for African tech were events in 2019 that (arguably) made it the continent’s top hub for fintech investment and digital payments startups.

Kenya held this status previously with the local success and global acclaim of its M-Pesa mobile-money product, which has some 20 million users. But more founders and VCs are opting for Nigeria as the epicenter for digital finance development on the continent.

A tally of 2019 TechCrunch coverage pegs fintech-related investment in the West African country at around $400 million last year, which is equivalent to roughly one-third of all startup VC raised for the entire continent in 2018, according to Partech stats.

Some fintech startups are also making Nigeria their primary market to test and scale applications before expanding in Africa and abroad. Chipper Cash is following this strategy, and so is San Francisco-based Migo, which started in Nigeria with its banking products and recently launched in Brazil.

Nigeria’s Paga acquires Apposit, confirms Mexico and Ethiopia expansion

Paga, one of Nigeria’s leading payment startups, announced it would expand to Ethiopia and Mexico last month. And both Visa and Worldpay entered into partnerships with Nigerian-founded B2B fintech startup Flutterwave to process payments in that country and broader Africa.

Founders

Rock-star founders are requisite for any viable tech scene. CEOs in Nigeria’s fairly nascent startup market are still largely in the trenches of building their companies, but they are starting to amass Pan-African and global recognition.

That includes Paga founder Tayo Oviosu, who studied at Stanford and worked at Cisco before founding his company in Lagos and becoming one of the first African founders to speak at TechCrunch Disrupt SF in 2018.

Paga CEO Tayo Oviosu

Serial entrepreneur Sim Shagaya has name recognition from Lagos to Cape Town, and he recently launched his third company, edtech startup ULesson, in 2019.

Jason Njoku, CEO of Africa’s leading VOD startup iROKOtv — which offers the largest uncatalogued collection of Nollywood content in the world — has a 60,000 Twitter following, his own blog, and attracts crowds wherever he speaks.

Before they IPO’d or exited their existing companies, Njoku, Oviosu and Shagaya have already started angel funding to support younger Nigerian founders. With greater success, they’ll likely step up that support and become more recognized role models and significant investors in Nigeria’s younger startup entrepreneurs.

Cultural influence

A final marker for Nigeria becoming Africa’s top tech hub is the country’s growing status as Africa’s creative capital. Nigeria’s Nollywood film industry is the second largest in the world by volume, and the country’s movies and pop music are streamed and downloaded from Nairobi to New York.

Pop culture plays a role in the flow of talent and VC to tech markets — such as the U.S. and China — and the consumption of culturally infused apps globally. The growth of Nigeria’s creative industries could also play a role in elevating the country’s startups, apps and founders.

Canal+ acquires Nollywood studio ROK from IROKOtv to grow African film

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