Tuesday, November 19, 2019

Startups in Nigeria are beating the odds to succeed

Entrepreneurs in Nigeria have an oft-repeated saying that is borrowed from New York: “If you can make it here, you can make it anywhere.”

The phrase captures the daily challenges that come with running a business in Africa’s largest economy. And since tech startups exist within the ecosystem, they face their share of difficulties too. A new survey of Nigerian tech firms offers a glimpse into the tough realities of running a tech startup in the country.

The survey was conducted by two Washington-headquartered organizations—ONE Campaign, an international non-profit seeking to fight extreme poverty, especially in Africa, and the Washington think tank Center for Global Development.

More than half the respondents identified the lack of a reliable electricity supply as a severe constraint. A majority of the startups reported 30 or more power outages every month. It’s likely that many startups keep the lights on by investing in generators that cost a lot to run.

That’s money the startups could have put to other uses, as 60% of them reported access to credit as a major obstacle. Nigeria annually features among the top destinations in Africa for startup investment, but much of the funding goes to established ventures with high-profile or foreign-trained founders. For many others, the reality is much more stark given local banks’ reluctance to provide loans to startups, and the high interest rates they charge when they do.

Meanwhile, wealthy Nigerians who might fund home-grown startups still seem reluctant to do so. Entrepreneurs also reported the following obstacles: Political instability, corruption, multiple government taxes and levies. And then there are stories of harassment by the police.

For its part, the Nigerian government points to its improved rank on the World Bank’s Doing Business 2019 report—it went from 146 last year to 131—as proof of its efforts to improve the business climate. But, as the World Bank’s report measures progress more by changes to policy rather than its implementation, it could be argued that it’s getting easier to do business in Nigeria only on paper.

But the workarounds to some of the problems that plague Nigeria’s business environment may come from the tech ecosystem itself. From off-grid energy companies trying to drive up electrification, to fintech ventures looking to boost financial inclusion and access to credit—startups are struggling against the odds. And sometimes beating them too.

By Yomi Kazeem


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