Nigeria’s technology industry is quickly becoming a leader, as the growth of digital platform businesses is rapidly increasing due to factors, such as an improving business environment that supports startups in digital destinations and investor interests, internationally and locally – from a growing middle class comprised of mainly young adults. These factors contribute to a dynamic tech ecosystem, thereby making the country’s largest city, Lagos, the most valuable startup ecosystem in Africa.
Technology cuts across all industries, therefore, all you have to do as a business manager is to look at the challenges present across industries to get a sense of potential opportunities in Nigeria’s technology industry. Some of the major challenges in Nigeria include infrastructural development, education and talent development, and financial inclusion.
These challenges plague the Nigerian economy, and technology is currently being used as a tool to address them. Looking at each subset provides us with a broad overview of the opportunities in Nigeria’s technology industry.
Education and Talent
Presently, Nigeria is experiencing an education crisis, as approximately 10.5 million children of school age are not in school – the highest in the world. With that said, the proliferation of internet usage amongst the youth has ushered forth the exploration of opportunities to train and educate people through online courses or to simply connect students with mentors and teachers. As of 2017, 76.2 million out of 180 million Nigerians have Internet access.
PrepClass is one of these companies in Nigeria that is currently helping students prepare for different forms of standardized tests and examinations. Described as an academic solution provider, the company provides learning solutions by connecting students with tutors to assist with test and examination preparation.
Meanwhile, CodeLagos and Andela are both organizations bringing software development skills to the African youth. Andela raised a new $40 million Series C round in late 2017, thereby increasing the company’s ability to match trained African developers with global companies.
E-commerce and Payments
As the tech scene evolves in more developed countries, the evolution tends to consist of a similar progression. Looking at the tech scene in the U.S as an example, the tech scene as it pertains to trade developed as follows. It started with listing sites such as Craigslist, pushed forward to e-commerce platforms, such as eBay, then moved on to payment solutions such as PayPal. As the e-commerce space develops in Nigeria, there is a similar, yet fragmented ecosystem forming. This ecosystem is dominated by listing sites, e-commerce platforms, payment solution providers, and third-party logistics providers.
Over the years, Jumia, the leading e-commerce company in Nigeria, built its own ecosystem to support its initial e-commerce marketplace. Through acquisitions and in-house developments, Jumia now offers a platform where a full range of products and services, such as food, hotels, housing, and cars, can be purchased. In February 2016, Jumia broke records by raising $425 million from AXA, Goldman Sachs, Orange, and CDC at a $1 billion valuation. This was the largest round of venture capitalist fundraising ever done in Africa, and it made Jumia stand out as a leader in the e-commerce world.
Due to the fact that Nigeria’s retail market is still dominated by informal markets, such as open-air markets and kiosks, there is still room for retail to become more formalized. Technology solutions, such as inventory management products and cashless payment solutions, have yet to be adopted by the majority of retailers, which presents an opportunity for service providers to bring business owners in the Nigerian retail industry easier ways to conduct transactions and maintain business operational visibility.
However, because making payments in Nigeria is still an issue, consumers are slowly adopting new methods of paying online in what otherwise remains a very cash-based market. Therefore, there is still an opportunity to increase “payment trust” between consumers and companies.
Interswitch, a payment company founded in 2002, has led the way to establish payment trust, and currently owns the majority of market share in payment processing in Nigeria. The company launched a $10 million ‘ePayment growth fund” for startups in the payment industry across Africa. Meanwhile, Paystack and Amplifypay are amongst the latest payment solutions that provide secure gateways for one-off and recurring payments between consumers and businesses in Nigeria.
In recent times, financial inclusion in Africa has become more of a necessity due to its position as a driver of economic growth. With Nigeria’s large population, prioritizing financial inclusion is even more necessary as 4 out of 10 Nigerians are still underbanked, which means that they lack access to a full range of basic financial services.
Improving access to the hundreds of millions of men and women who are presently excluded from financial services would make way for the creation of a large depository of savings and investable funds, while simultaneously increasing the financial literacy rates of Nigeria’s population. This increase in financial literacy would subsequently spur long-term wealth generation in the area.
In Nigeria, there is a growing opportunity for financial service companies to use technology as a way to offer a secure way to engage in banking services. These financial service companies can also bridge the gap between in-person banking and companies that facilitate banking on one’s personal phone or through an agent network spread around the country. Paga is one such successful fintech company, as they have 6 million registered clients and have seen significant returns on their mobile money transfer services and agent network, having processed $500 million in mobile payments in 2016 alone.
Using technology as a tool for financial inclusion is not limited to individuals, as there are still untapped opportunities to bring this kind of technology to businesses across Nigeria, where the limited access to capital with low-interest rates has hindered the growth of many enterprises in the region.
This capital for businesses can be sourced from different pockets of the world and not just locally. Nigerians in the diaspora remitted $22 billion in 2017, the highest in the sub-Saharan region, and the fifth highest in the world. With this huge inflow of capital from Nigerians abroad, almost doubling the Foreign Direct Investment (FDI) of $12.2 billion in the same year, the opportunities to increase the ease and reduce the cost of remittance serves as an opportunity for digital payment solution providers to get money to individuals and business efficiently.
Aside from the decline in entertainment industry growth rates (relative to global GDP growth rates), which has become a global trend, the media sector in Nigeria continues to grow as opportunities in developing local content, such as films, television show, comics, and gaming occur. The Nigerian Film Industry (also known as “Nollywood”) is recognized around the globe as the second largest film producer in the world by creating around 2,500 films per year. The amount of films produced annually makes Nigeria’s film industry second to only India’s Bollywood.
iROKOtv is one of the first-movers that captured opportunities to deliver local content online to a market base that seeks local film content in a digital format. Once coined “the Netflix of Africa”, iROKOtv raised $19 million in 2016 in a deal positioned to build the media company’s market share of local African content that continues to draw a larger audience as more Africans come online.
Surprisingly, global media giant Netflix seems to be leaving Nigeria and other African countries out of its original content production plans in coming years. With an $8 billion original production budget in 2018, Netflix’s plan to produce content for their global audience in Australia, Korea, and India, leaving out African content production, where production costs associated with developing high-quality content is still a major setback.
However, the growing appetite for Nigerian content is quite apparent with the proliferation of online news sites, magazines, and blogs, which disseminate information to a growing audience base that is highly engaged on social media. New media companies are cropping up and old media companies are adapting by using tech tools to create and distribute content to serve this growing demand.
Access: Infrastructure, Computing Devices, and Telecommunication
Currently, Nigeria boasts one of the largest telecommunications markets in Africa. The leading companies consist of MTN, which is a South African-based multinational company that has a market share of 37.21%; Glo, which is a Nigerian multinational company; Airtel, which is an Indian-based multinational telecommunication company; and 9mobile (formerly known as Etisalat).
Nigerian telecommunications subscribers spanning mobile networks spent a large amount of their household income on telecommunications services last year. In fact, $9.14 billion (N3.208 trillion) was spent by Nigerian subscribers to purchase airtime credit in order to access data and voice services on their mobile devices through different mobile network operators.
With a current internet penetration of 40 percent in Nigeria, there is a growing interest in companies looking to increase the accessibility of the internet to the vast Nigerian market. U.S. tech giants, such as Google and Facebook see this as an opportunity to extend their reach within the African continent.
In Nigeria and 26 other African countries, Google is releasing Google Go, an app that will help internet users overcome various obstacles, such as a lack of high-speed connectivity and the high cost of data on the continent. Along with laying fiber-optic cables across the continent, Google’s is working to meet the needs of young African consumers who are demanding quicker internet speeds and cheaper mobile phones. Presently, Nigeria imports $745 million worth of telephone devices.
The growing need for internet access in Nigeria, whether it’s for individuals or businesses, bodes well for companies that provide the infrastructure that serves as the foundation for Nigeria’s technology industry’s ecosystem. Telecommunications and networking equipment suppliers will continue to have the opportunity to supply networking and communication infrastructure, such as fiber cables, data infrastructure equipment, and enterprise solutions to a growing Nigerian market.
Connecting People & Businesses, Facilitating Development, and Building Trust
Nigeria’s technology industry and the solutions built as a tool to solve various problems within the country has a very important role to play. With the myriad of challenges that have plagued the maximization of its potential, Nigeria can leverage different solutions given by Nigeria’s technology industry to provide the most value while also adapting said solutions to fit local needs. These local needs consist of connecting people and businesses, facilitating infrastructural development, developing talent, growing businesses, and building trust.