It is an incredibly exciting time to be in Nigeria’s technology startup ecosystem.
Despite widespread economic malaise, Nigeria’s Telecommunications and Information Services, the best proxy for the growth of tech-powered companies in the country, has grown by 57% since 2017, compared to overall national GDP growth of 6%. In effect, the sector has grown ten times faster than the wider economy in the last half-decade.
There is a lot of excitement in Nigeria’s tech ecosystem, given the fundraising activity and the high valuations that follow. However, there have been rising doubts about the sustainability of startup valuations given the current economic malaise that troubles the Nigerian economy
It is important to think about valuations because they matter for the investors who fund startups and the founders who run them
However, it is not possible to get a meaningful answer to the question of whether Nigerian startups are overvalued because the act of valuing startups is more art than science
Yet that’s not the most impressive statistic.
In 2021, Nigeria’s startups raised $1.8 billion in venture capital (VC) funding, more than Kenya and South Africa combined ($1.4 billion). And the money keeps rolling in. In the first quarter of 2022, Nigerian startups raised $600 million, nearly double the amount raised in the whole of 2020 and 80% of the 2019 value. In fact, 2019 is the only year where Nigerian startups raised more than $600 million—the value they have raised so far in 2022.
Everyone is excited. Well, not everyone.