Major Problems Of Nigeria's Tech Ecosystem

Nigeria is home to one of the fastest-growing tech ecosystems in Africa, as it was ranked number 3 among top tech ecosystems on the continent in the Global Startup Ecosystem Index 2021 by StartupBlink. 

Due to a large consumer market, tech is showing great prospects in Nigeria today and is still one of the most underexploited. While having an employment share of only 0.5 percent, technology has managed to become the second-largest contributor to the Nigerian Gross Domestic Product (GDP) as it contributed 15.3 percent in 2020, behind only the agricultural sector which contributed 26.2 percent while having an employment share as large as 48 percent.

Despite its promising outlook, however, Nigeria’s tech sector is still grappling with deep-cutting challenges, some of which we will be exploring in this article.

Unstable Electricity

Nigeria’s tech ecosystem, just like every other sector in the country, has been embattled with poor infrastructure. Amid a host of other inadequacies, electricity has been a standout deficiency as it has the most direct impact on technology advancement in the country.

At the end of 2019, a survey of 93 Nigerian tech startups was carried out by the Center for Global Development and its results stated that 57 percent of these startups found electricity to be a “major” or “very severe” obstacle to their business. Most tech startups have to bear the cost of providing their electricity through generators to stay functional, which in many cases is a backbreaking cost. To promote the growth of tech in Nigeria, it is pertinent for the government to prioritize the provision of stable electricity.

Poor Internet Facility

Africa’s largest economy is still struggling with poor broadband penetration. According to Statista, just over half (51.44%) of the Nigerian populace have access to the internet as there is still poor infrastructural development in the telecom space. In a recent Jumia Mobile report, it was discovered that Nigeria was way behind other African countries as only 44 percent of mobile subscribers use 3G,  while 4 percent use 4G. 

Although internet penetration is improving in the country, there is still a lot to be done. Rural areas are still experiencing low coverage by telecom operators as more attention is showered on the big cities. However, many young innovators have also emerged from relatively remote areas. This shows that even the remote areas need internet coverage just as much as they need education and infrastructure.

Poor Access to Financing

Although Nigerian startups are getting more access to fundings than ever before, especially from venture capitals and angel investors, there is still a credit access problem for many early-stage startups. In the first half of 2021, African startups raised nothing short of $1.19 billion in VC funding, and Nigeria accounted for 28 percent of the startups that raised funds with Kuda and Flutterwave being the biggest beneficiaries. However, these startups are not new to the tech scene.

Early-stage startups - the ones that are yet to achieve a product-market fit - are still being left out when it comes to funding. On the other hand, taking a bank loan is very expensive for them due to high-interest rates, and is also difficult to procure.

Single-digit loans need to be made available for small businesses in Nigeria, as high interest rates are likely to cripple early-stage startups.

Stifling Government Policies

Nigeria scored 131 points in the World Bank’s Ease of Doing Business index report, a very low score when compared to countries with thriving economies such as New Zealand and Singapore. This is reflective of the unfavourable climate created by the government not just for tech companies, but for businesses in general.

Recently, the Central Bank of Nigeria clamped down on four fintech companies (Trove, Rise, Bamboo and Chaka) by freezing their accounts in a bid to “protect the naira”. These companies which have been thriving by making foreign and local stocks available and easy to buy for Nigerians now have to battle their government for their business models to succeed.

This isn’t the first case of an unnecessary clampdown by the government. A few years ago, ride-hailing startups such as Gokada, MAX and OPay were crippled by the government for no tangible reason.

While the tech space has received minimal incentives from the government, Nigeria’s National Information Technology Development Agency (NITDA) recently released a disturbing bill that was imposing more levies and fines for startups.

Technology is arguably the most promising sector in Nigeria today, and the government ought to do more to promote rather than stifle its growth.