The pace at which the technology industry is growing in Africa is unprecedented. Across the continent, countries are developing their technology sectors, and specifically their IT sectors at a rate not seen before, According to the Global Startup Ecosystem Index Report 2021 by StartupBlink. South Africa takes the 48th spot in terms of Startup ecosystems, followed by Kenya, Nigeria and Rwanda, which get placed 61st, 63rd and 69th respectively. Still, many companies, especially in the western world, miss out on the potential that this continent holds for their business. Through a series of articles, we will be confronting your biases and preconceptions about Africa as a place of technological development. First in this series is Nigeria, the giant of Africa.
While South Africa is currently still in the lead in terms of developed and vibrant tech industries on the continent, Nigeria is catching up at an extravagant rate, meaning it could soon be leading the African tech industry. At the moment it is a leading hub for entrepreneurship, has an ever-growing number of global venture capitalists, a youthful and ambitious population with direct access to technology, and has the most significant number of startups in Africa. A report compiled by fDi Intelligence found that Nigeria had the highest volume of startups in Africa, with over 750 companies receiving a total of $64.1 million start-ups related funding in 2020. As such, the potential in this country is undeniably huge.
Consequently, almost everyone, including the government, is focused on the technology industry. Even crude oil, the mainstay of Nigeria’s economy, is struggling to retain its position. To further lend credence to the strategic importance of the tech industry, the National Bureau of Statistics (NBS) stated that the contributions of ICT to Nigeria’s Gross Domestic Product (GDP) for the second quarter of 2020 (Q2 2020) was 17.83 per cent. Understanding the direction that the tech industry is heading into requires a look back at the road it came from. The creation of the Nigerian tech industry is the result of a number of social and economic circumstances.
Economic downturn as fertile ground for new industries
For the longest time, Nigeria’s economy was primarily supported by the oil industry, with it making up 65% of the country’s Gross Domestic Product. Within the last two decades, the value of crude oil dropped significantly though, from its highest peak of $147.27 in 2008 to $82.51 in 2021. This crash has significantly affected the earnings and revenue of the Federal Government of Nigeria. The lack of economic diversity and decreasing oil prices drove the Nigerian government to take out loans for its recurrent and capital expenditures. During this time, the diversity of economics became a focal point for investors in the country. Even though the government has not done much to kick start the Nigerian tech industry, it has come forward to regulate it with the Nigerian Startup Bill’s proposal and other regulations to sanitise the sector. The bill is a joint initiative by Nigeria’s tech startup ecosystem and the Presidency to guarantee sustainable growth of the sector.
As of July 2021, Nigeria has more than 108 million internet users. This is 53.51% of the Nigerian population. This is above average compared to other African countries. These numbers are what bolstered Elon Musk to include Africa as one of the continents to deploy Starlink. Starlink is a satellite internet service by SpaceX and plans to launch in Africa by late 2021, starting with Nigeria. The interesting thing about Starlink is that it will target those in rural areas and individuals in locations where internet access has been inconsistent. In other words, under-served communities will now be able to access fast and reliable internet.
Interestingly, Nigeria has skipped some of the traditional steps of tech development, where the majority of internet penetration is through smart devices. Around 90% of the total population have mobile phones. It now depends on whether they are using an internet-enabled phone. With the increase in internet and mobile phone penetration, Nigerians have unlimited access to information, making them more aware, access to financial services, ease of communication and opportunity to build businesses.
Nigeria is not an island. So, whatever happens in other parts of the world would have a spiral effect or impact on Nigeria. So as Europe, the United Kingdom and North America are digitally revolutionising their economies, Nigeria can’t be an exception. Hence, whether the countries like it or not, the economy has to shift from a crude oil-based economy to one driven by technology. And Nigeria understood this message quickly, having already started its journey towards the digital economy.
Although Nigeria is not THE leading tech industry in Africa, the country has achieved so much. One of the most exciting achievements for the Nigerian tech industry is the existence of unicorn startups (startups with over a billion-dollar valuation). This non-exclusive list includes Interswitch, Jumia, Andela and Flutterwave. And of course, more startups are not yet unicorns but are actively providing services needed by Nigerians.
Additionally, Nigerian startups are consistently attracting investment from venture capitalists, angel investors and private equity firms. As a result, Nigerian startups have raised $276.5m in the first seven months of 2021. This is based on fund announcement analysis of TechCrunch and TechCabal. The $276.5m raised so far is close to $300m raised in 2020. This trend is set to continue.
Next steps to make Nigeria become a leading tech industry
Nigeria has the opportunity to be the leading tech industry in Africa. However, certain issues need to be addressed before Nigeria can beat South Africa and Kenya.
In the ease of doing business, Nigeria ranked 131st out of 190 countries in 2020. Economies ranking from one to 20 are more straightforward and more friendly. Some of the metrics for determining the score are starting a business, dealing with construction permits, getting electricity, registering property and getting credit, among others. All these metrics have to be met if Nigeria is serious about attaining this position. Infrastructure development can’t be downplayed in any economy. For Nigeria, there is a severe need for the country to revamp its infrastructure. This has stunted the growth of not only the Nigerian tech industry but its entire sector. There can never be growth if there is no infrastructure development.
The Nigerian tech sector may be booming, but female participation is low. So, programmes and initiatives that would usher more women into the industry need to be launched. For example, Zwarttalent, through the Zwart Academy reserves 50% of its admission for girls. This alongside women-focused accelerators, incubation hubs and more investments in female-led startups, will undoubtedly boost female participation in tech in Nigeria.
Government regulations and legislation can break or make an industry. In the case of the Nigerian tech industry, the regulations should focus on stimulating and supporting the healthy development of local startups and other players invested in growing a sustainable tech sector.
Nigerian potential in an international context
Nigeria has a youthful population, and many of the challenges being faced in the country most affect them. However, with youths having access to the internet and its adjunct technologies, they leverage these resources to solve these problems. Youth in Nigeria is becoming increasingly digitally literate and skilled in IT skills, yet to a large extent, they are still locked out of the global market. Zarttech has made it their mission to be one of the keys to unlock these talents and connect them with the global IT market through remote outsourcing and outstaffing.
Connect with us to see how we can act as a bridge for you, whether you’re a senior IT specialist or a company looking to hire remote IT professionals.