By Rédaction Africa Links 24 with Gibson Emeka
Published on 2024-01-20 08:03:23
In Nigeria, tech startups are currently facing challenges in securing funding from investors due to the shutdown of some prominent young companies last year. Kingsley Eze co-runs Nairaxi, an e-Commerce and on-demand logistics startup in Abuja, the capital of Nigeria. Despite the company’s successful track record, funding has been limited to Eze, family, and friends, making expansion difficult.
Eze attributes the reluctance of investors to the caution stemming from the failures of some startups in the country, along with interest rate hikes in the Western economy. The setbacks of prominent startups such as 54Gene, Lazerpay, Vibra, Payday, and Hytch, which lost over $70 million of foreign investors’ funds, have also contributed to the cautious approach of investors.
According to economist and investment expert Paul Alaje, the neglect of business principles and overreliance on initial success and technology have led to the collapse of many startups in Nigeria. This is reflected in the 54% drop in funding for startups in Africa between January and October of last year compared to the same period in 2022, as reported by Briter Bridges, a London-based research firm.
Eze expressed concern that the high failure rate of Nigerian startups, projected to be at 60%, makes it a risky investment for most investors. Alaje suggests that Nigeria’s business ecosystem needs an overhaul, with a focus on implementing policies that promote proper business management and showcasing successful examples such as Paystack, a Nigerian payment processing company that was acquired for $200 million in 2020.
Venture capitalists in Nigeria have also pointed to poor infrastructure, lack of accountability by business owners, and the foreign exchange crisis as contributing factors to the collapse of many startups. Despite these challenges, Eze remains committed to building his business from its generated revenues.
In conclusion, the Nigerian tech startup ecosystem is facing a downturn in investor confidence due to the high failure rate of startups and the impact of external economic factors. The call for policy reforms and a more deliberate approach to supporting successful businesses reflects the need for a comprehensive overhaul of Nigeria’s business environment.
Read the original article on VOA
