Flutterwave is an online payment infrastructure provider headquartered in San Francisco. Its customers include global giants like Uber and Microsoft and tiny local start-ups. In 2021, five years after it was founded, Flutterwave became a unicorn (valued at over a billion dollars). In early 2022, a series D funding round of US$250 million brought that value to $3 billion dollars. If things go well, it plans to IPO within the next two years.
Impressive, right? But the most impressive part is that Flutterwave isn’t an American company. It was founded in Lagos by three Nigerians, and its biggest markets are in Nigeria, Kenya, and South Africa.
Flutterwave is not the only success story from the Nigerian tech sector. Four other Nigerian companies – Interswitch (a payments service), Jumia (Africa’s Amazon), OPay (a mobile money provider) and Andela (a tech school and placement service) – are each worth over a billion dollars, making Nigeria home to five of Africa’s seven unicorns. Others are in the pipeline.
Many of these companies are less than ten years old. They are riding a hot tech market in Nigeria, turning Lagos into the most vibrant tech ecosystem on the continent. In 2021, it became the African city with the largest number of tech start-ups, overtaking Nairobi aka Silicon Savanna. So rapid has the growth been that Lagos tech’s cute moniker, “Yabacon Valley”, is still little known.
What’s Yabacon Valley’s secret? (From Yaba, the suburb at the centre of the boom.) It’s the population. With nearly 220 million people, Nigeria is almost twice as large as the second-largest African country (Ethiopia, at 120 million). Lagos, with 27 million people, is the largest city on the continent and one of the largest in the world. Were it a country, Lagos would be the continent’s seventh-largest economy.
A large population, relative political stability over the past two decades, rapid urbanisation, and the relative affordability of smartphones and internet access have supercharged the country into a hotbed of problem-solvers. This is happening despite exclusionary financial systems, loose but out-of-touch regulation and limited physical infrastructure. As in Kenya, Nigerian start-ups are leapfrogging limited legacy systems.
As an example, Nigerians, and many other Africans, can buy a wide range of items online, from food to electronics, pay using their phones, and receive their orders at home. To a Westerner, this might seem routine. But on a continent in which most adults do not have a bank account and where street addresses are practically non-existent, it’s magic. Yet, thanks to these start-ups, Nigerians take it for granted, too.
It takes innovation across many fields to imitate Silicon Valley in a low-infrastructure environment. But, as I wrote in 2019, perhaps the most important of these fields is Fintech. Having solid rails along which to efficiently move money is crucial not only for economic growth, but also for including people at the margins. Nigeria’s tech boom has both proven this and taken it to a whole new level. Its three Fintech unicorns (Opay, Interswitch, and Flutterwave) are each more valuable than the country’s biggest bank. Others are in the pipeline.
Lagos has become so frenetic that the city is turning into a global centre of tech investment. Big venture capital firms, especially from the United States and China, are investing. In 2021, Nigerian start-ups raised $1.7 billion, accounting for more than a third of the combined $4 billion raised by all African start-ups in that year. Nearly half of the money went to Fintech.
Flush with venture capital cash and under pressure to grow, Nigerian start-ups are in the early stages of a continental buying spree. Deep-pocketed start-ups are acquiring, merging and expanding across the continent, producing a new class of continental giants.
This could be a problem for competition later, but there is still plenty of room for both scrappy players and giants. The problem that’s more likely to tarnish the sector is ethical behaviour. For instance, Flutterwave is currently under investigation in Kenya for fraud and money laundering, a mere few months after being rocked by a sordid managerial scandal. It is not the only Nigerian start-up to stumble.
In the early days Nigerian internet users were, fairly or not, most closely associated with “yahoo boys”, those enterprising email scammers who’ve parted many a victim from the contents of their wallets. But now the tech sector faces the challenge of growing up without repeating the mistakes made by the Silicon Valley cowboys whose “move fast and break things” gave us teen-addictive social media and deliberate lawbreaking like Uber’s early days.
As the new leader of African tech, Nigeria’s start-ups must make sure they don’t poison the water for everyone else.