Foreign investments in Nigerian startups fell by 65.83 per cent year-on-year to $410m in 2023 from $1.2bn in 2022. This significant decline has resulted in Nigeria losing its top spot in terms of total startup investments on the continent to Kenya.
According to a comprehensive analysis of African startup funding in 2023 by research firm ‘Africa: The Big Deal,’ Kenyan startups managed to raise just under $800m, claiming the top spot in Africa. On the other hand, Nigeria finished the year as number four, falling behind Kenya, Egypt, and South Africa.
The dominance of the Big Four countries, including Kenya, Egypt, South Africa, and Nigeria, continued in 2023, as they attracted 87 per cent of the total startup funding on the continent. These four countries were home to 71 per cent of all startups that received funding of $100k and above.
Regarding the decline in investments, ‘Africa: The Big Deal’ noted, Nigeria is the country where the most dramatic change happened in 2023. While the country still had the highest number of startups raising $100k or more, the amount they raised was divided by 3 year-on-year, reaching $410m compared to $1.2bn in 2022 and $1.7bn in 2021.
As a result, Nigeria’s share of Western African funding continued to drop, reaching 68 per cent, down from 85 per cent in 2021 and 77 per cent in 2022. This represents the lowest regional share of any of the Big Four markets since the data collection began in 2019.
Despite experiencing a 25 per cent decline, Kenya managed to raise just under $800m in 2023, securing the largest funding share at 28 per cent of the continent’s total. Egypt, with 48 startups raising $100k or more in 2023, had the lowest number among the Big Four. However, due to the declines in Kenya and Nigeria, Egypt secured the second spot on the continent with $640m in funding.
According to ‘Africa: The Big Deal’, South Africa’s share of regional funding remains the highest at 97 per cent. The 70 startups that secured $100k or more in funding cumulated $600m, representing 21 per cent of the continent’s total. South Africa was the only one of the ‘Big Four’ countries that did not witness a decline in total funding between 2022 and 2023, with an 8 per cent year-on-year increase.
Overall, startup funding in Africa declined by 39 per cent to $2.9bn in 2023. This decline raises concerns about the sustainability and growth of the startup ecosystem on the continent.
While Nigeria’s startup investment landscape has experienced a significant setback, it is crucial to understand the multifaceted factors that contributed to this decline. It is paramount for stakeholders to identify areas of improvement and create an environment that fosters innovation, entrepreneurship, and attracts foreign investments.
By addressing challenges such as infrastructure, regulatory frameworks, access to capital, and skills development, Nigeria and other African countries can regain their positions as leading startup hubs on the continent. The resilient and dynamic nature of Africa’s startup ecosystem offers immense potential for growth and job creation, driving economic development across the continent.
Investors and policymakers must collaborate to create an enabling environment that supports startups, encourages innovation, and encourages foreign investments. Supporting a robust and thriving startup ecosystem will provide opportunities for entrepreneurs, strengthen the economy, and position Africa as a global destination for innovation and entrepreneurship.
Achieving a vibrant and sustainable startup landscape will require concerted efforts from governments, private sector players, and development partners. By nurturing and investing in local talent, promoting cross-border collaborations, and creating conducive business environments, African countries can attract more investments and propel their startup ecosystems to greater heights.
