Startups in Nigeria.
For almost two decades, passed after the end of the civil war (1999), Nigeria has been following the basic democratic principles of Federal governance. However, extremist organizations (most notably Boko Haram), which are still active in northeastern regions, present direct and clear danger to country’s fragile internal peace. The important factor, which contributes to current political instability in Nigeria, is country’s division to Christian North and Muslim South.
With its almost halve-a-trillion dollars GDP, Nigeria is the African leading economic powerhouse. In 2014, after a decade of record oil prices, Nigeria outperformed its major rival — South Africa. However, despite its heavy reliance on the oil export, Nigerian economy is well diversified into another industries including mining, financial services, manufacturing and information technologies. Another important GDP component is remittances. Almost 18 million Nigerians, which are living in USA and EU, send home more than $20 billion annually.
Nigeria has the largest population in Africa (190 million) — 4x increase since 1970th (50 million). With almost halve of country’s population being 14 years old or younger, Nigeria is projected to became one of the major contributors to the overall population growth on the planet in the nearest future. Nigerian major city — Lagos — is the most populated city in Africa (15 million inhabitants).
Nigerian economy is sufficiently large and well diversified to host multiple high-tech startups in wide variety of sectors, including e-commerce, entertainments, social networks, e-marketplaces, e-jobs and FinTech. Lagos is internationally recognized as one of the main African centers of Internet economy.
Nigerian generation of young and well educated consumers is growing very fast and that creates a stable base for future expansion of local e-businesses. Additionally, Nigeria has maintained long lasting relationships with the Western Wold (almost all of Nigerian oil flows to the North America and Europe). Local expatriates community is very affluent and many promising high-tech companies are launched by Nigerians immigrants.
On the downside, Nigeria is still politically instable, its economy is overdependent on oil export and its bureaucratic system is notoriously slow and inefficient. That creates a challenging market environment, which negatively affects long-term perspectives of the local startup ecosystem.
Business Notes for Startups Founders:
- political climate: not friendly;
- economic climate: moderately friendly;
- regions to focus: locally;
- industries to focus: many including e-commerce, e-services, entertainment, social networks, e-marketplaces, e-jobs and FinTech;
- major limitations: sharp GDP decline (growth rate is negative 1%), overdependence of country’s exports on commodities market prices (specially on crude oil, which accounts for 9% of GDP, with daily production of 1.8 million barrels), high inflation (16%), very high CB interest rate (14%), high personal income tax rate (24%), very high administrative and legal barriers to SME, political instability;
- stimulus: communication sector is fast growing and already accounts for 10% of GDP, high-low-income population (per-capita exceeds $2500), fast growing generation of young mobile Internet users, fixed Internet penetration rate is close to 50%, matured startup ecosystem (notably in Lagos);
- opportunities: to build a variety of mobile services aimed at young generation of consumers.