– A recent report named Nigeria as the African country with the most tech start-ups
– Launched in 2019, the Digital Economy Policy is committed to boosting the sector
– Various obstacles remain to be overcome, linked to both regulations and infrastructure
– 4IR start-ups are changing the face of Nigerian society and driving its Covid-19 takeover
A recent report highlighted the significant potential of Nigeria’s burgeoning tech start-up scene, but also highlighted a series of limitations that need to be addressed for the segment to become a real engine of the country’s recovery from Covid- 19.
As OBG has explored, Fourth Industrial Revolution technologies have taken root across sub-Saharan Africa, with many states leveraging digital solutions to boost their recovery from coronavirus.
Nigeria is a forerunner in this regard. For example, Lagos is home to one of the region’s three most important technology hubs, the other two being in Nairobi, Kenya, and Cape Town, South Africa.
Indeed, according to a recent report by fDi Intelligence, a division of Financial Time, the Nigerian city has the largest number of start-ups in Africa.
Released in April, the first African Tech Ecosystems of the Future ranking placed South Africa in first place in terms of its overall technology ecosystem, as well as in many individual indicators, including economic potential, start-up status up and business friendliness.
Nigeria was ranked sixth overall, with the report also highlighting various challenges that remain to be overcome if the country’s start-up scene is to become globally competitive: “Although Lagos is renowned for its start-up ecosystem -up, there is a significant mismatch between the technological ecosystem of the city, its surroundings and the country as a whole, which suffers from chronically poor infrastructure and education, as well as political instability and recurring security issues. “
There are also some regulatory hurdles to overcome.
For example, many of the country’s largest start-ups operate in FinTech, in part due to the limited formal banking facilities available; Nigeria was the top country for bitcoin and cryptocurrency adoption last year, according to statistics firm Statista.
However, in recent months, the Central Bank of Nigeria has cracked down on the cryptocurrency, although it has said it is not moving towards an outright ban.
This was aimed at harnessing the burgeoning market and preventing the misuse of technology. But critics said it would stifle innovation and limit the potential of tech start-ups.
Despite these obstacles, there are encouraging signs that the authorities are serious about boosting Nigeria’s digital sector.
At the end of 2019, the Ministry of Communications was renamed the Ministry of Communications and the Digital Economy. It was followed in early 2020 by the launch of the 2020-2030 National Digital Economy Policy and Strategy.
This signal document sets out eight pillars that will be used to transform Nigeria into a leading digital economy. They are: regulation of development; digital literacy and skills; solid infrastructure; service infrastructure; development and promotion of digital services; intangible infrastructures; digital society and emerging technologies; and the development and adoption of indigenous content.
At the same time, a 5G network is expected to be rolled out across the country, after successful trials in the cities of Lagos, Abuja and Calabar.
While the start of the coronavirus pandemic came shortly after the launch of the new policy, it seems that the vision it enshrines is already bearing fruit: in the fourth quarter of 2020, the Nigerian digital sector grew by 40.7% , a trend that continued in the first months of this year.
Another incentive for the growth of the digital sector is that, like many oil-producing countries, Nigeria is seeking to limit the importance of hydrocarbons in its GDP mix, after a very turbulent year for oil prices. An increase in the contribution to GDP of digital companies could fill some of the gap in diversification.
While there is still a lot of work to be done, there are already countless innovative start-up success stories that are changing the face of both Lagos’ tech ecosystem and Nigerian society as a whole.
For example, in one of the biggest Nigerian tech news of 2020, local fintech start-up Paystack was acquired by US giant Stripe in October, in a deal valued at more than $ 200 million.
Founded in 2016, Paystack processes over 50% of payments made in Nigeria and will now spearhead Stripe’s African expansion.
Elsewhere, Arone – based at the University of Nigeria’s Roar Nigeria Hub – builds drones that deliver medical supplies to more remote areas. This is particularly useful in the case of certain Covid-19 vaccines, which must be stored at a low temperature.
But the potential applications of drone technology go beyond healthcare. As Emmanuel Ezenwere, CEO and founder of Arone, recently told OBG, “Drones can greatly improve logistics in places with high traffic congestion, such as Lagos and other major cities in Nigeria, because they can bypass traffic jams and deliver goods, household items and supplies in 15 minutes.This will have a big impact on e-commerce.
This is a prime example of how the increased digitization brought on by the coronavirus is harnessed after the pandemic to drive innovative approaches from businesses in general.
Meanwhile, Nigerian start-ups are also boosting renewable energy, a key part of the global ‘green recovery’ of Covid-19.
At the start of last year, Lagos-based Rensource Energy raised $ 3 million in equity from Proparco – a development finance institution partly owned by the French Development Agency – with support from the ‘EU, as part of the Africa Renewable Energy Scaling Mechanism.
The funds will contribute to Rensource’s plan to develop, build and operate more than 100 mini-grids, providing clean, affordable electricity to 250,000 small and medium-sized businesses and saving 30,000 metric tonnes of CO2 emissions each year.