Only 5.9% of the 188 founders in northern Nigeria surveyed reported having access to grants or VC funding as investors are wary of the region.
The Nigerian tech ecosystem is one of the fastest growing in the world as more founders have built innovative solutions to some of the most pressing issues across various sectors from finance to agriculture, logistics and e-commerce, among others. Between 2015 and 2022, about 400 tech startups in the country raised a combined sum of over $2 billion. This is higher than funding raised in any other country in Africa. So far, the Nigerian tech ecosystem makes up about 30% of funded startups on the continent.
While this growth is impressive, it has so far materialised mostly in Lagos state, southwest Nigeria, where most startups and corporate businesses are headquartered. Founders in other parts of the country struggle to build thriving startups like their counterparts in the southwest. This has been due to a variety of reasons, ranging from poor government policies to lack of capital.
In October, TechTank Labs (TTL), a venture studio in Kano, released a report on the state of the tech ecosystem in northern Nigeria. The aim was to identify the challenges and opportunities that startups and stakeholders face in the region in order to provide actionable insights and recommendations for a more vibrant and sustainable ecosystem.
Challenges facing startups in northern Nigeria
Between 2017 and 2021, Nigeria’s population surged by 15.01 million, with the north alone contributing to 68.7% of this number. Current estimates place the population of northern Nigeria at approximately 128 million, 58% of the entire country’s populace. This population size offers startups opportunities to scale as there is already a large market available for products and services. Regardless, this has not been the case as the majority of startups in the region still struggle due to a number of challenges.
Lack of access to funding stands out as the most pressing challenge for startups in northern Nigeria. There are not enough VCs in the region, and founders have a difficult time attracting funding from outside the region as investors are typically wary of investing in startups outside Lagos. Also, of all the startups surveyed, 46 reported a shortage of skilled workers.
According to Maryam Shittu who is an executive at Nigeria Sovereign Investment Authority (NSA), the biggest challenges facing the tech ecosystem in the north are closely tied to the availability of digital talent and funding.
“Without skilled talent and the necessary financial backing, it’s difficult for the ecosystem to grow and compete on a national, let alone global, scale. This is reflected in our investment activities; we have not yet invested in any startups from the north-east, northwest, or north-central regions,” she shared.
Idris Ayo Bello, the founder of Loftylnc Capital, shared that the company has a portfolio, Afropreneurs Fund 3, which has so far invested $500,000 into northern Nigeria.
Opportunities for startups in northern Nigeria
For the report, TTL surveyed 188 startups across diverse niches including agriculture, health, education, and finance. Of the startups sampled, 15% generated over ₦5 million ($6,200) in the last fiscal year, with some exceeding ₦500 million ($628,000) and even ₦1 billion ($1.2 million). The most profitable sectors in the region are fintech, edtech and agritech, with over ₦500 million ($628,000) in revenue.
While the majority of these startups are currently profitable, only 5.9% of founders surveyed reported having access to grants or VC funding. So far, there are 39 key ecosystem entities operating in northern Nigeria, including seven VC firms, seven incubators, and 25 innovation hubs spread across different states, with notable concentrations in Kano, Abuja, and Kaduna. These organisations, however, still have funding problems as they do not have enough for all startups in the 19 states that form the region.
1. Agriculture and Manufacturing
Agricultural activities in Nigeria are more widespread in the north, due to land availability and favourable soil and climate conditions. The north has more smallholder farmers than any other part of the country, which presents a notable opportunity for startups to leverage technology to enhance agricultural practices, streamline supply chains, or improve food processing. Investing in agri-tech solutions that address local challenges can yield significant returns. According to the report, some of the opportunities exist in areas like:
- – Precision agriculture
- – Remote sensing
- – Agricultural drones
- – Smart irrigation systems
- – Crop insurance and agricultural extension services
With the global shift towards online education, edtech startups in northern Nigeria have the potential to reshape the educational landscape. Investing in platforms that offer localised content, teacher training, or innovative learning tools can be highly beneficial. Similar to the agricultural sector, the edtech space also has an outlier with over X1 billion in revenue.
Despite its large population, northern Nigeria has the lowest financial inclusion rate in the country, with only 34% and 24% of adults in the north-east and north-west, respectively, having access to bank accounts. There is an increasing need for more innovative tech-enabled financial solutions in this region. So far, fintech startups in the region have aimed to bridge the financial inclusion gap, providing services like mobile banking, peer-to-peer lending, and digital payments. Some of these startups, like Sudo, have done revenues as high as ₦500 million ($628,000), according to the report.
Northern Nigeria has a strong informal economy which is also an opportunity for startups and investors. A Central Bank of Nigeria (CBN) survey in 2021 revealed that the region had the highest rate of cash transactions in the country, with over 70% of all POS transactions paid in cash, compared to 55% for the rest of the country.
Other opportunities in the financial space include:
- – mobile payments
- – microfinance
- – digital insurance solutions
- – investment platforms
- – blockchain technology applications
The tech ecosystem in northern Nigeria has the potential to become one of the most burgeoning ecosystems in the country, but not without the active participation of all key stakeholders. There are huge gaps for government participation and investors to fill in building the ecosystem, and until these are met, the region’s tech scene will fall short of its potential. By investing in better infrastructure, building stronger talent pipelines, and making more funding available for founders, the tech ecosystem in northern Nigeria will undoubtedly thrive. To read the full report from TTL, click here.