Fintech is the leading sub-sector of the Nigerian startup space, both in terms of levels of activity and amounts of funding secured.
That is according to the Nigerian Startup Ecosystem Report 2022, released by startup-focused news and research company Disrupt Africa, which utilises Disrupt Africa’s datasets, expertise and networks to document what startups are doing what in the country, who is making investments, and who is providing ecosystem support.
It is released in partnership with Quona Capital, a venture firm focused on fintech that can expand access for underserved customers and small businesses in emerging markets; Sabi, Africa’s leading provider of commercial infrastructure for the distribution of goods and services; and MAX, which is building Africa’s largest mobility-tech platform. Other partners are Talking Drum Communications, Newtown Partners, Kwik, and LipaLater.
The publication takes as its starting point a list of 481 Nigerian tech startups for which enough data was available. A grand total of 173 of those startups – 36 per cent – are fintech ventures, almost three times more than its nearest challenger – e-commerce and retail-tech.
In terms of sub-sectors, activity is diverse, though payments and remittances (46 startups, 26.6 per cent of Nigerian fintech ventures) and lending and financing (34 startups, 19.7 per cent of Nigerian fintech ventures) are clear leaders. There is also significant activity within the blockchain, investtech, personal finance and business administration verticals.
This breakdown is broadly reflective of the major trends across Africa, with payments and remittances the “original” fintech space, by which we mean it is the longest-standing and busiest of all fintech sub-sectors. The lending and financing space is consistently and increasingly popular among startups, given the opportunity presented by the fact that African consumers struggle to access traditional credit-based services. Nigeria has relatively high activity compared to its peers across the continent in areas such as blockchain, investtech, and open banking, yet is underserved when it comes to insurtech.
The Nigerian fintech space is by far the biggest employer within the country’s broader startup ecosystem, accounting for 8,653 jobs, an average of 50 per startup. Six of the biggest 10 employers in the Nigerian startup ecosystem are fintech companies – RenMoney (892), Cowrywise (570), Flutterwave (541), TeamApt (460), FairMoney (385), and Kuda (356).
Fintech is also the most popular sector when it comes to Nigerian startup funding, as it is across the rest of the continent. This trend is only becoming more pronounced. So far in 2022, the space has already attracted US$507 million – accounting for 67.8 per cent of Nigeria’s total funding for the year to date. The growth in the amount of investment going to Nigeria’s fintech sector is also astonishing, particularly so in the past couple of years when the total amount of fintech funding has begun to top the half billion dollar mark.
Which other sectors are seeing activity?
Coming in second behind fintech in terms of startup activity is the e-commerce and retail-tech space, with 58 startups accounting for 12.1 per cent of the Nigerian total. Nigeria has a special reputation when it comes to e-commerce, being the base for African pioneers Jumia and Konga, yet with extremely high levels of churn in the sector, and unreliable levels of funding, it has lost out to fintech in the popularity stakes with aspiring entrepreneurs.
The types of activity being undertaken by startups within this sector are extremely diverse. Eleven (19%) are general, multi-product online stores – think Jumia, or Amazon for an international example. Nine (15%) are retail-tech solutions, by which we mean tech-based products and services designed to help existing physical retailers digitise and scale their operations, an area which has been a growing niche within the wider digital commerce space.
Beyond that, there is activity within niches such as food and drinks, apparel and accessories, furniture and decor, B2B, and auto.
E-commerce and retail-tech is marginally more Lagos-centric than other sectors, with 52 of the 58 startups, or 90 per cent, located in the city. There is also activity in Abuja, Ibadan, Port Harcourt, and Aba.
E-health is the third most populated sector within Nigeria’s startup landscape, with 45 startups making up 9.4 per cent of the total. As in other markets, Nigerian e-health startups have been boosted in the last couple of years by the shift towards contact-free and digital solutions occasioned by COVID-19, with consumers and medical institutions suddenly interested in virtual services as never before.
The Nigerian Startup Ecosystem Report 2022 is available to all for free, making the data and analysis contained in its pages accessible to those for whom the information is most valuable – entrepreneurs.
The publication, which is the 18th released by Disrupt Research, is over 50 pages in length and provides a detailed overview of the Nigerian startup ecosystem and its development over the last 5-10 years. It involves analysis as to what areas startups are active in, a detailed look at funding and M&A trends, and detail the range of startup support services available to Nigerian entrepreneurs, including hubs, incubators, accelerators, and government, corporate and university initiatives.
