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Report: In 2020, foreign investments dominated 71% of Nigeria’s startup funding

On record, foreign investments make up the larger part of Africa’s startup funding. As stated in the Techpoint Africa West Africa Decade Report, 81.3% of the total amount invested in West African startups that have raised at least $1 million in the past ten years came from outside the continent.

Likewise, Techpoint Africa’s annual Nigerian Startup Report also confirms this. In 2020, Nigerian startups owed 71.2% of their investments to foreign funders. According to the report, foreign investors contributed $85.8 million out of the approximately $120.6 million that Nigerian startups raised throughout the year.

Source: Nigerian Startup Funding Report 2020. Intelligence by Techpoint Africa

Meanwhile, the year-on-year funding size comparison depicts a 213% fall from $377.4 million in 2019 and a 47.8% drop from $178.3 million in 2018. This huge dip from 2019 reflects that Nigerian startups, like other parts of the continent, may have been on the receiving end of investor pessimism that came with the pandemic.

Interestingly, compared to other members of the Big Four—Kenya, South Africa, and Egypt— Nigeria fared better based on Partech’s analysis (PDF).

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What’s more? Regarding the number of deals, 2020 has the lowest number of deals from local investors in the past three years.

Despite the commendable performance in 2018 and 2019, local investments didn’t impact the overall size that much, as foreign investments made up the bulk of the total amount.

Should we blame this on existing systemic issues like inadequate funds, investors apathy, or anti-innovation policies?

To invest or not to invest

If nothing changed from the pandemic, it’s the teaming number of talents and startups in Nigeria. It is a no brainer that there’s even more motivation to build tech solutions with Paystack’s $200 million exit.

If anything, this may have also bolstered more High Network Individuals(HNI) interest to fund startups. Since more startups mean more calls for investment.

Syndicate investment initiatives like Future Africa, ‘Syndicate’ by CcHub, and women-funded FirstCheckAfrica claim to be receiving interested investors in droves into their community.

However, the Nigeria tech ecosystem seems to be in a delicate state. The government has been consistent in springing up surprise regulations that could stifle innovations or make it difficult to run them.

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The Lagos state Okada ban is still fresh in the memory; Nigerian lawmakers want to pass a bill that could end digital media platforms; the most recent is the restriction on cryptocurrency trading in the country.

Investors who have been at the receiving end of such regulations might be reluctant to invest further. However, players in the digital space are beginning to figure out how to engage the government or simply game the system.

To find out how these funds and deals are distributed across fintech, online retailing, healthtech, mobility and logistics, and cleantech, get a copy of the Nigerian Startup Funding Report 2020 here. Also, check out previous reports while you look out for quarterly funding reports as the year unfolds here.


Newsbites: Spotify in Africa


On March 25, 2021, Techpoint Africa will be hosting the brightest minds in decentralised finance/crypto at the Digital Currency Summit tagged “Building the money of the future” Click here for more details, registration and sponsorship. Location: Fourpoint by Sheraton, V.I. Lagos.


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