Nigeria Shunned By Investors As Startup Funding Drops To $2.2 Billion

Investors Nigeria

In 2024, Kenyan innovators received more checks from startup investors than their Nigerian counterparts. According to “Africa: The Big Deal,” East Africa raised the most money on the continent for the second consecutive year ($725 million), with Kenya accounting for 88 percent ($638 million) of the total.

According to the data insight firm that analyses startup funding of $100,000 and above, startups in Africa raised $2.2 billion in equity, grants, and exits in 2024. This represents a 25 percent decrease from the $2.9 billion raised in 2023 and a 53 percent fall from the $4.6 billion raised in 2022.

A significant portion of the $587 million raised in West Africa in 2024—$410 million—went to Nigeria. Excluding exits, the business said that 188 African ventures raised $1 million or more in 2024, a 10% decrease from 2023.

In 2024, the year’s second half had a large increase, while the first half saw a steep drop. “Startups in Africa have raised $780 million in total (excluding exits).” In June, Africa: The Big Deal stated, “This is a 31 percent decline from H2 2023, and an even more pronounced 57 percent decline from H1 2023 if we want to account for seasonality.”

It was the second-best semester since the start of the “funding winter” in mid-2022, with startups raising $1.4 billion during the upswing in the latter half of the year. The two huge agreements made by Tyme Group and Moniepoint in the fourth quarter (Q4), which turned into unicorns, contributed to these figures.

Further examination of the 2024 budget details showed that while Egypt raised $400 million, funding for Northern Africa decreased by 22% to $478 million. While funding to its region decreased by 18% to $397 million, South Africa managed to raise $394 million.

Kenya, Nigeria, Egypt, and South Africa—the Big Four—received 84 percent of all start-up capital, excluding exits, as is customary. According to Francis Vesta, an investment associate at Madica, the drop in African startup funding reflects broader global economic factors, such as tighter venture capital markets and higher interest rates.

“Specific industries may have begun to be less attractive for investors due to a combination of factors such as the spending power of end users (heightened by inflation) and alternatives, among others,” he pointed out.

The US-based venture capital company Nubia Capital’s managing partner, Davidson Oturu, observed that a funding correction in 2024 made it a quiet year for entrepreneurs.

“Funding to Africa generally has dropped after the high of 2022, and what we are seeing could be a correction of the system where valuations are now more pragmatic, and investors are not willing to put money into just any sort of startup but are looking for those providing real services and can deliver good returns,” according to him.

According to one investor, investors are increasingly more interested in sustainable business models that generate income.

Industry analysts pointed out that the drop in startup investment in Nigeria, which has long dominated the continent, highlights more significant problems. For example, according to research by DealMakers Africa, Kenya surpassed Nigeria as the African nation with the most private equity agreements in 2023.

According to a Stears analysis, Nigeria only managed to attract 23% of investments in the third quarter of 2024, as private capital migrated to South Africa and Kenya. The report statedSouth Africa and Kenya were exceptional performers, each contributing to one-third of all private market transactions in Q3.”

Oturu pointed out that structural and economic reasons are connected to Nigeria’s challenges.

Nigeria, ranked 131st in the world in the World Bank’s most recent assessment, struggles to do business easily. The substantial fall of the Naira in 2024 saw it trade at historic lows, increased exchange rate volatility, and might have turned off international investors, he said.

He pointed out that investors and entrepreneurs are now uncertain due to policy inconsistencies, such as sudden changes in fiscal or regulatory frameworks. “Nigeria needs to remove these obstacles and establish a more stable and investor-friendly environment if it wants to regain its position,” he concluded.

In 2024, Kenyan innovators received more checks from startup investors than their Nigerian counterparts. According to “Africa: The Big Deal,” East Africa raised the most money on the continent for the second consecutive year ($725 million), with Kenya accounting for 88 percent ($638 million) of the total.

According to the data insight firm that analyses startup funding of $100,000 and above, startups in Africa raised $2.2 billion in equity, grants, and exits in 2024. This represents a 25 percent decrease from the $2.9 billion raised in 2023 and a 53 percent fall from the $4.6 billion raised in 2022.

A significant portion of the $587 million raised in West Africa in 2024—$410 million—went to Nigeria. Excluding exits, the business said that 188 African ventures raised $1 million or more in 2024, a 10% decrease from 2023.

In 2024, the year’s second half had a large increase, while the first half saw a steep drop. “Startups in Africa have raised $780 million in total (excluding exits).” In June, Africa: The Big Deal stated, “This is a 31 percent decline from H2 2023, and an even more pronounced 57 percent decline from H1 2023 if we want to account for seasonality.”

It was the second-best semester since the start of the “funding winter” in mid-2022, with startups raising $1.4 billion during the upswing in the latter half of the year. The two huge agreements made by Tyme Group and Moniepoint in the fourth quarter (Q4), which turned into unicorns, contributed to these figures.

Further examination of the 2024 budget details showed that while Egypt raised $400 million, funding for Northern Africa decreased by 22% to $478 million. While funding to its region decreased by 18% to $397 million, South Africa managed to raise $394 million.

Kenya, Nigeria, Egypt, and South Africa—the Big Four—received 84 percent of all start-up capital, excluding exits, as is customary. According to Francis Vesta, an investment associate at Madica, the drop in African startup funding reflects broader global economic factors, such as tighter venture capital markets and higher interest rates.

“Specific industries may have begun to be less attractive for investors due to a combination of factors such as the spending power of end users (heightened by inflation) and alternatives, among others,” he pointed out.

The US-based venture capital company Nubia Capital’s managing partner, Davidson Oturu, observed that a funding correction in 2024 made it a quiet year for entrepreneurs.

“Funding to Africa generally has dropped after the high of 2022, and what we are seeing could be a correction of the system where valuations are now more pragmatic, and investors are not willing to put money into just any sort of startup but are looking for those providing real services and can deliver good returns,” according to him.

According to one investor, investors are increasingly interested in sustainable business models that generate income.

Industry analysts pointed out that the drop in startup investment in Nigeria, which has long dominated the continent, highlights more significant problems. For example, according to research by DealMakers Africa, Kenya surpassed Nigeria as the African nation with the most private equity agreements in 2023.

According to a Stears analysis, Nigeria only managed to attract 23% of investments in the third quarter of 2024, as private capital migrated to South Africa and Kenya. The report statedSouth Africa and Kenya were exceptional performers, each contributing to one-third of all private market transactions in Q3.”

Oturu pointed out that structural and economic reasons are connected to Nigeria’s challenges.

Nigeria ranked 131st in the world in the World Bank’s most recent assessment, as it is challenging to do business easily. The substantial fall of the Naira in 2024 saw it trade at historic lows, increased exchange rate volatility and might have turned off international investors.

He pointed out that investors and entrepreneurs are now uncertain due to policy inconsistencies, such as sudden changes in fiscal or regulatory frameworks. “Nigeria needs to remove these obstacles and establish a more stable and investor-friendly environment if it wants to regain its position,” he concluded.

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