Funding for Nigerian startups hit three-year low of $410m

The amount of funding that Nigerian startups raised declined to the lowest in at least three years in 2023, a new report by a research firm, Africa: The Big Deal, has shown.

The funding reduced to $410 million from $1.2 billion in 2022. The amount caused Africa’s biggest economy to lose its spot as the top on the continent to Kenya.

“Nigeria is the country where the most dramatic change happened in 2023. While the country still claimed the highest number of start-ups to raise $100k or more (146, 29 percent of the continent), the amount they raised was divided by three year-on-year (-67 percent) to reach $410million, compared to $1.2billion in 2022, and $1.7billion in 2021,” the report said.

Read also: Nigerian startups attract least funding as Kenya dominates in Africa

It said as a result, its share of Western African funding continued to drop to reach 68 percent, down from 85 percent in 2021, and 77 percent in 2022.

“This is the lowest regional share of any Big Four market since we started collecting the data in 2019. Of course, even though it represents only 13 percent of the funding, there is a wealth of activity beyond the Big Four.”

Apart from Africa: The Big Deal report, foreign investments into Africa’s most populous nation dropped to $654.7 million in the third quarter, the lowest level since the National Bureau of Statistics (NBS) started collating the data in 2013.

The total foreign investments into the country declined for the second straight quarter by 36.5 percent to $654.7 million in Q3 from $1.03 billion in the previous quarter.

It also declined on a year-on-year basis by 43.6 percent from $1.16 billion in Q3 2022.

The report also revealed that with just under $800 million raised in 2023, Kenya attracted the most funding, 28 percent of the continent’s total.

“While it suffered a decline (-25 percent year-on-year), its share of Eastern Africa’s funding grew from 86 percent in 2022 to 91 percent in 2023,” it said.

It added that in Egypt, 48 such ventures raised $100k+ in 2023, the lowest number out of the Big Four. But thanks to a year-on-year decline (-20 percent) more moderate than Kenya and most importantly Nigeria, it was enough for the country to claim the second spot.

“Egypt’s share of North African funding grew from 72 percent in 2022 to 95 percent in 2023 (+23pp, by far the strongest progression), due both to the magnitude of MNT-Halan’s fundraising, and Algeria and Tunisia’s inability to repeat their strong 2022 performance.”

South Africa’s share of regional funding remains the highest at 97 percent. The 70 start-ups who raised $100k or more in the country cumulated $600 million in funding i.e. 21 percent of the continent’s total.

The country was the only one of the Big Four not to see its total funding shrink between 2022 and 2023 (eight percent year-on-year).