Focus on innovation: Both state and private entities are pouring finance into the burgeoning start-up culture

As both the largest market in Africa in terms of value and population, and a major rising player in ICT uptake and investment, Nigeria’s reputation as a centre for technology start-ups and innovation-driven development has progressed rapidly. One of the major drivers for this is the enormous domestic demand. In June 2016 the country was home to 92.3m internet users, according to the Nigerian Communications Commission, the federal telecoms regulator, 99.9% of which accessed online services via GSM mobile handsets. A significant percentage of these users were quite active across a range of popular websites and mobile apps. Indeed, more than 15m Nigerians were active social media users at the end of 2015, according to We Are Social, a global advertising agency. “Nigeria is a particularly brand-conscious society and competition in the mobile phone market is strong,” Frank Li, managing director of Huawei Nigeria, told OBG.

Indigenous Focus

Taking into account this large and growing user base, a wide variety of technology companies have set up shop in the country in recent years. Most major multinational tech brands are well known in Nigeria, with products and services from Google, Apple, Microsoft, Intel and Dell, particularly among the nation’s large youth population, of which two-thirds is below the age of 24, according to the UN Population Fund. However, a growing number of local technology firms have also gained a foothold in Nigeria. Indigenous tech stalwarts like iROKOtv and Jumia have gained considerable market share in the digital media streaming and online marketplace segments, respectively, by offering Nigeria-tailored products and services at prices that the nation’s rising middle class population can afford.

More recently, these companies have increasingly been joined by a raft of new start-ups and entrepreneurs looking to tap into the rapid expansion of the country’s ICT sector and the growing appetite among the tech-savvy youth population for locally produced digital content and services. “The Nigerian government must make an effort to nurture the country’s young and technologically competent talent, and create incentives and an enabling environment that allows them to stay in the country rather than leave for opportunities abroad,” Bola Akindele, group managing director of Courteville Business Solutions, a Nigerian business development firm, told OBG.

Public Sector Efforts

While the private sector has been the motor for growth in ICT activity, the government has nonetheless also taken on a noticeable role, making a concerted effort in recent years to “nurture, cultivate and expand ICT innovation and entrepreneurship within Nigeria”, according to the mandate of the recently launched Office for ICT Innovation and Entrepreneurship (OIIE), for instance.

The government’s current push for ICT sector innovation builds on previous efforts dating back more than a decade. In April 2001 the government established the National IT Development Agency (NITDA) to develop and implement the country’s national IT policy and oversee the burgeoning technology sector. In 2007 the agency’s mandate was broadened considerably as a result of the National IT Development Act, under which NITDA was charged with creating a framework for “the planning, research, development, standardisation, application, coordination, monitoring, evaluation and regulation of IT practices, activities and systems in Nigeria”. Since then, NITDA, which operates under the Federal Ministry of Communications, has been the government’s primary ICT-focused entity and a cornerstone of the sector.

In recent years, in particular, NITDA has taken the lead on formalising the state’s efforts to establish and strengthen Nigeria’s technology innovation and start-up culture. In 2013 the agency established the IT Development Entrepreneurship Accelerator (iDEA), an incubation centre that runs tech entrepreneurship training programmes and offers a wide range of services to both new and existing ICT-related startups. Entrepreneurs and start-ups that are accepted to iDEA receive advice and support on a wide range of topics, including fundraising, venture capital, product architecture, business development, hiring, business modelling, marketing and leadership skills.

As of mid-2016, 10 start-ups were housed at iDEA, which operates centres in Lagos and Cross River State. These include i.SEC, which provides a digital authentication system for financial services and has raised about $10m in funding; Verge, a cloud-based inventory management system; and Afrobus, a bus ticketing and booking service.

Recent Push 

At the centre of the government’s efforts is the OIIE, a subsidiary of NITDA, which has overseen the development of a handful of new initiatives since opening in 2015. The OIIE’s programme offerings are organised around five pillars, namely the facilitation of an innovation ecosystem; supporting entrepreneurship; encouraging inclusive development; the commercialisation of new ideas into sellable products; and enabling partnerships between the state, private sector, domestic and foreign investors, NGOs and other entities in support of fostering the development a thriving ICT sector.

One of OIIE’s highest-profile programmes is StartUP Friday, a semi-regular meet-up of Nigeria’s ICT innovation community, including investors, policymakers, mentors, co-founders and entrepreneurs. Since the first StartUP Friday meeting took place in February 2016, the OIIE held four additional iterations in March, April, July and August, with an additional meet in September. In its first four editions, the event attracted nearly 1000 start-up founders plus 75 investors, with 30 start-up pitches delivered and investments totalling N57m ($180,000) put towards local tech-focused start-ups. The September event was planned to coincide with a visit to Nigeria by representatives of Y Combinator, a well-known seed accelerator based in Silicon Valley, which will be on hand at the gathering to hear pitches from Nigerian start-ups.

Financing ICT Growth 

The OIIE also plays a major role in distributing public investment in ICT projects. In 2015 the office awarded more than N50m ($158,000) to a handful of entrepreneurs, start-ups and other entities involved in technology innovation in Nigeria. The OIIE partners with a variety of local accelerators, companies and other ICT organisations, including iDEA; the Co-Creation Hub (CCH), a nonprofit ICT incubation centre located in Lagos; Andela, a private sector tech incubator; the global consultancy firm Accenture; and the government’s National Youth Service Corps, a youth training initiative.

Additional financing for ICT innovation development is distributed by the government-funded ICT Innovation Fund, which was proposed and developed by the previous government and has been carried on by the country’s current leadership. The N300bn ($947.1m) fund, which is managed by EchoVC – an early-stage, technology-focused venture capital fund based in Lagos – was established in part to create new opportunities in the country. Indeed, according to EchoVC, the innovation fund is expected to generate upwards of 35,000 new jobs in the country.

The firm estimated that the fund will yield around 40-50 investments of varying amounts – from $25,000 to $1.5m – over four to five years. “We made four investments in Nigeria in 2015 and anticipate making up to 10 seed-stage investments in 2016,” Eghosa Omoigui, EchoVC’s managing partner, told local media in January 2016. “Our focus is on technologies that support underserved populations. Investments target high-growth services and scalable products in select markets, with distinct and sustainable competitive advantages, all of which affect daily life and provide essential services in large growing markets.” Specific sectors the fund aims to target for investment include digital media, content and advertising, e-commerce, linguistics, last-mile technologies and consumer-facing internet services.

Private Sector Focus 

In recent years a range of private sector entities have moved to take part in the development of Nigeria’s ICT start-up segment. Andela, which was established in 2014 and operates out of Lagos and New York, recruits talented Nigerians and trains them to code and then hires out its in-house workforce to, largely foreign, firms. The company’s business model has the secondary effect of generating a growing pool of Nigerian coding talent, which will support the development of a local ICT industry for the foreseeable future. “Consumers taste in technology products is rapidly changing. For companies to keep pace with shifting demand, they must constantly invest in innovation,” Li told OBG.

The CCH, meanwhile, is officially a non-profit entity, though it has garnered the support of a wide range of major technology firms including Google, Oracle, Microsoft, Samsung and the South African telecoms operator MTN. Like iDEA, the CCH provides tech entrepreneurs and start-ups with a wide range of business development services, with a focus on mobile applications. Based in the Lagos mainland neighbourhood Yaba – colloquially called Yabacon Valley, for the cluster of tech-related players that have gathered there over the years – the CCH was established in 2011, making it one of Nigeria’s first start-up incubators. Over the past five years the organisation has housed more than 50 tech start-ups, including WeCyclers, a waste recycling firm, and BudgIT, which deals with government accountability and public budgeting.

The Wennovation Hub, meanwhile, focuses on guiding and funding already-existing tech start-ups in exchange for partial ownership. Launched in 2011 the firm has taken equity in a wide range of companies from its offices in Lagos and Ibadan. The firm, which was created by a small group of local businessmen, hosts regular competitions, meet-ups and other events to identify potential beneficiaries of its services. It has played a role in numerous well-known ICT start-ups over the years, including Hutbay, an online real estate marketplace, and the mobile platform development firm Nerve Mobile, among others.