Fintech is the main driver of Nigeria’s continent-leading startup ecosystem

Fintech is the leading sub-sector of the Nigerian startup space, both in terms of activity level and secured funding.

It follows Nigerian Startup Ecosystem Report 2022published by startup-focused news and research company Disrupt Africawhich uses Disrupt Africa’s dataset, expertise and network to document which startups are doing what in the country, who is making investments and who is providing ecosystem support.

It is published in collaboration with Capital of Quonaa 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 technology platform. Other partners are Talking Drum Communications, Newtown Partners, Quickand LipaLater.

The publication is based on a list of 481 Nigerian technology startups for which enough data was available. A total of 173 of these startups – 36 percent – ​​are fintech ventures, almost three times more than its nearest challenger – e-commerce and retail technology.

In terms of subsectors, activity is diverse, although payments and remittances (46 startups, 26.6 percent of Nigerian fintech ventures) and lending and financing (34 startups, 19.7 percent of Nigerian fintech ventures) are clear leaders. There is also significant activity within blockchain, investtech, personal finance and business administration.

This breakdown largely reflects the key trends across Africa, with payments and remittances being the “original” fintech space, which we believe is the longest-lived and busiest of all fintech sub-sectors. The lending and financing space is consistently and increasingly popular with startups, given the opportunity offered 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, but is underserved when it comes to insurtech.

The Nigerian fintech space is by far the largest employer in the country’s wider startup ecosystem, accounting for 8,653 jobs, an average of 50 per startup. Six of the top 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 $507 million – representing 67.8 percent of Nigeria’s total funding so far this year. The growth in the amount of investment going into Nigeria’s fintech sector is also astonishing, especially in the last couple of years when the total amount of fintech funding has started to top half a billion dollars.

What other sectors are seeing activity?

Second behind fintech in terms of startup activity is e-commerce and retail technology, with 58 startups accounting for 12.1 percent of the Nigerian total. Nigeria has a particular reputation when it comes to e-commerce, being the base of African pioneers Jumia and Konga, but with extremely high levels of attrition in the sector and unreliable levels of funding, it has lost out to fintech in the popularity stakes with aspiring entrepreneurs.

The types of activities carried out by start-up companies in this sector are extremely varied. Eleven (19%) are general online stores with several products – think Jumia, or Amazon for an international example. Nine (15%) are retail-tech solutions, which we mean technology-based products and services designed to help existing brick-and-mortar retailers digitize and scale their operations, an area that has been a growing niche within the broader digital commerce space.

Beyond that, there is activity in niches such as food and drink, clothing and accessories, furniture and decor, B2B and cars.

E-commerce and retail technology is marginally more Lagos-centric than other sectors, with 52 of the 58 startups, or 90 percent, located in the city. There is also activity in Abuja, Ibadan, Port Harcourt and Aba.

E-health is the third most populated sector in Nigeria’s startup landscape, with 45 startups accounting for 9.4 percent of the total. As in other markets, Nigerian eHealth startups have been boosted in the last couple of years by the shift towards contactless and digital solutions brought on by COVID-19, with consumers and medical institutions suddenly interested in virtual services like never before.

The Nigerian Startup Ecosystem Report 2022 is available to everyone for free, making the data and analysis on the pages available to those for whom the information is most valuable – entrepreneurs.

The publication, which is the 18th published by Disrupt research, is over 50 pages long and provides a detailed overview of the Nigerian startup ecosystem and its evolution over the past 5-10 years. It involves analysis of the areas startups are active in, a detailed look at funding and M&A trends, and details on the range of startup support services available to Nigerian entrepreneurs, including hubs, incubators, accelerators and government, corporate and university initiatives.