Some Defining Moments in Nigerian Tech Startup Ecosystem in '22 that will Shape '23

Given the worldwide tech funding crunch caused by the economic meltdown, which resulted in mass layoffs, downsizing, and outright shutdown in the global tech industry, the Nigerian tech startup ecosystem performed exceptionally well in 2022. According to various figures released by individual companies, funding for the year dropped from $1.5 billion in 2021 to around $1.3 billion in 2022.

The sharp drop in funding is due to the ecosystem’s inability to sustain the funding momentum seen in the first quarter, when large deals were announced. Funding was slower in the second quarter and then increased in the third quarter, with some landmark deals announced, however, the Nigerian tech ecosystem ended the year on a sour note, with a further drop in funding in the fourth quarter.

While it is true that the Nigerian tech ecosystem did not raise as much funding in 2022 as it did in 2021, there were some defining moments in the space that will serve as catalysts for further development of the ecosystem, in terms of internet penetration, financial inclusion, and enabling the environment for startup growth. The startup Act, 5G rollout, the launch of payment service banks (PSBs), the launch of Equiano cable, global tech companies setting up offices in Nigeria, Starlink entry into Nigeria, and Techstars Launches in Nigeria are just a few examples.

The Nigerian Startup Act

A startup act is a legal and institutional framework in a country for the advancement of startups. It contributes to the creation of an environment that promotes the formation, growth, and operation of startups within a country.

Senegal became the second African country to pass a national startup act in December 2019, following Tunisia’s historic bill in April 2018.

President Muhammadu Buhari signed the Nigeria Startup Bill (NSB) into law on October 19, 2022.

The Nigeria Startup Act, now known as the NSB, was first introduced in June 2021 and was passed by the the National Assembly in July.

This accomplishment was the result of a collaborative effort between Nigeria’s tech startup ecosystem and the presidency to harness the potential of the country’s digital economy through co-created regulations.

According to Isa Ali Pantami, minister of communications and digital economy, the Act will go a long way toward creating and developing an enabling environment.

Furthermore, the startup Act provides for the development and growth of technology-related talent.

Pantami went on to say that the act contains provisions that will alter the industry’s narrative. He mentioned that one of the provisions includes the President’s Council for Digital Innovation and Entrepreneurship.

The council’s role is to ensure the regulatory framework’s monitoring and evaluation, as well as to formulate and provide general policy guidelines for the achievement of the Startup Act’s objectives and to provide overall guidance for the harmonization of laws and regulations that affect startups.

5G Rollout in Nigeria

For a long time, 5G has been heralded as a game changer in the connectivity space; according to GSMA report, 5G will add $2.2 trillion to Africa’s economy by 2034. Many African countries have begun trials with Gabon as early as 2019, but few have commercially launched 5G. This is largely due to issues with spectrum regulation clarity, commercial viability, and deployment deadlines.

Last year, Mafab Communications Ltd and MTN Nigeria Plc emerged as the two successful winners of the 3.5 gigahertz (GHz) spectrum auction for the deployment of Fifth Generation (5G) technology to support the delivery of ubiquitous broadband services in Nigeria after 11 rounds of bidding that lasted eight hours.

The two winners emerged in a keenly contested 3.5GHz Spectrum auction conducted by the Nigerian Communications Commission (NCC), in collaboration with the Federal Ministry of Communications and Digital Economy.

MTN Nigeria kicked off an open 5G pilot ahead of commercial launch in seven cities, while Mafab is expected also to kick off soon

Meanwhile, the second phase of the 5G bid is ongoing with Airtel emerging as the sole bidder and winner.

The emergence of Airtel as the sole bidder led NCC to cancel the entire auction process, announcing the telco as the winner of the 3.5GHz spectrum for the 5G license.

The 5G rollout will help in providing employment opportunities, achieve a fully digital economy, and boost financial inclusion in Nigeria.

The Launch of payment Service Banks in Nigeria (PSBs)

MTN, Globacom, and Airtel’s launch of payment service banks is a singular masterstroke that will deepen the fintech sector and further drive financial inclusion in the country.

MTN introduced the MoMo PSB, Airtel introduced the SmartCash PSB, and Globacom introduced the MoneyMaster PSB.

Following the Central Bank of Nigeria’s (CBN) final approval for a Payment Service Bank (PSB) licence, MTN Nigeria’s fintech subsidiary, MoMo Payment Service Bank (MoMo PSB) Limited, formally began operations in May 2022.

Similarly, Airtel Africa obtained a full Payment Service Bank license from the Central Bank of Nigeria (CBN) through its subsidiary in April of that year, after receiving in-principle approval in 2021.

In the same vein, Globacom launched the MoneyMaster PSB, a payment service bank, in October. On May 30, 2022, the PSB began commercial operations.

Equiano Cable

Google and cable landing partner WIOCC announced the landing of the Equiano subsea cable in Lagos, Nigeria on April 21, 2022.

The cable named after Nigerian-born writer and abolitionist Olaudah Equiano is a cutting-edge infrastructure based on space-division multiplexing (SDM) technology, with 12 fiber pairs and a design capacity of 144 Tbps, roughly 20 times more network capacity than the previous cable built to serve this region. The Equiano cable will aid Nigeria’s digital transformation.

Global Tech Companies setup Offices in Nigeria

A physical presence demonstrates an organization’s dedication and show of confidence in a country. Some global technology companies established offices in Nigeria in 2022.

Microsoft opened a new African Development Centre in Ikoyi, Lagos, in March. The $100 million investment by the multibillion-dollar corporation will be used to provide software engineering solutions to Africa.

Also, Amazon Web Services (AWS) opened its first office in Lagos, Nigeria, in November, five years after opening its first office in Johannesburg in 2017. Additionally, Liquid Intelligent Technologies officially launched operations in Nigeria in December, after previously expanding to Zambia in August.

Starlink Live in Nigeria

In May, 2022, Elon Musk’s Starlink received approval from the NCC to provide internet service in Nigeria.

Techstars Launches in Nigeria

Techstars announced the ARM Labs Lagos Techstars Accelerator Programme in April, with the goal of assisting fintech and proptech startups with products that serve an African audience.

The announcement marked a departure from the accelerator’s five-year halt in Africa, where it had over $500 million in assets under management (AUM). Techstars previously ran an accelerator program in South Africa from 2016 to 2017, in collaboration with Barclays Bank, where they invested in 21 startups.

The foregoing events in Nigeria’s tech startup ecosystem in 2022 will not only have a far-reaching impact on the space, but will also catalyze the ecosystem’s maturation and serve as springboards for additional investments in the sector this year.

For example, the Startup Act will remove bottlenecks in establishing and investing in startups in the country, whereas the 5G spectrum, Equiano cable launch, and Starlink entry will be game changers because they will disrupt so many sectors of the tech economy, drive the gig economy, deepen internet penetration, and support the CBN’s cashless policy.