Iyinoluwa Aboyeji, the co-founder of Future Africa, a venture firm in this interview with Frank Eleanya, examines the tech investment landscape in Nigeria and the roles government and local investors can play in the growing digital economy.
You once tweeted that many are rejoicing over investors interested in Nigerian tech, that there’s Egypt that’s coming behind. Can you give us an overview of the growth of the ecosystem in Nigeria?
So there’s usually this thing they call the Digital Economy Diagnostic, which is done by the World Bank and it measures different digital economies around five metrics. I think that’s usually like my default when it comes to these types of assessments. The five matrix, digital infrastructure and digital platforms, digital financial services, digital skills, and then digital entrepreneurship. Now, I think we’re naturally doing really well. If you ask me about digital entrepreneurship, right. We’re still the largest destination for funding on the continent. I don’t think that’s going to change anytime soon.
There’s obviously a need for more investment in digital infrastructure. I think we’re largely at the bottom of the pyramid when it comes to infrastructure. Outside of Lagos a lot of the infrastructure that is required to build things on the internet does not exist. We mostly have ops. That is the only thing that most parts of the country have. There is no coordinated strategy to deepen internet infrastructure and other important things.
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Why do you think startups in Nigeria have continued to attract as much investment as they have in 2021?
I think what’s happening is that in our country startups have the ability to find wins through the many obstacle courses that the politicians and the regulators put up in a way that is commendable. It’s the only reason why we continue to excel is. I definitely don’t want you to think it’s normal. It’s not. Nigeria startups have mission-driven entrepreneurs and they’re focused on big problems.
Nigerian tech ecosystem did not make the top five ecosystems in Africa in a new report. Do we really have an ecosystem and if we do why are they not in the top five on the continent?
We definitely do have an ecosystem in Nigeria. An ecosystem is a growing community of investors, angel investors, corporates, entrepreneurs, and talents. We might not always be meeting because of COVID-19, but you can’t tell me it doesn’t exist in Nigeria.
On the subject of rankings, I’m very careful with them especially when it comes from an organisation that sees Nigeria as a data Blackmore.
When you’re putting ranking together, you have to juxtapose it with reality, especially objective data.
How do we address the infrastructure side of the equation? Can we ignore the government role and build them?
It starts with the government taking it seriously. Unfortunately, unlike most things, you can’t do infrastructure all by yourself, no matter how serious you are.
The government has to be serious about it and make it a priority. This means setting up a broadband office, anybody that comes in with a broadband challenge would have it expedited.
It also has to include states because of the Right of Way. The other thing is, we have a lot of existing infrastructure; Galaxy Backbone and NITEL have a lot of infrastructures. I don’t know the big deal in handing those assets to private individuals who can run them better. That’s what a serious government will do.
I was in Morocco in 2019 and I saw how integrated the universities there are to the tech ecosystem. What is really happening in Nigeria? What is, why is that not the case here?
It is also the government. It has not prioritized putting people who are ambitious enough in specific roles to take on this modern-day broadband challenge. The government has looked at tech for a very long time like a portfolio: “You people do what you do.”
There is no consultation, no engagements with the industry. And this is the industry that contributes the highest to the GDP.
We are doing the best we can and I hope the country sees that. To do more than this requires the country to be serious about its own future.
Future Africa has done about 16 deals and we have seen local investors now playing more active roles in funding. Is this a continuing trend or a one-off?
We started off that trend where we insisted on bringing in local capital into the deals. The deals have done very well. We have even seen some quiet exits. There is quite a bit that has already been done. I doubt that we can go back.
We have been on this journey of creating trends in tech since Andela and we haven’t seen people go back to what it used to look like. Any time we match forward, we match forward. I don’t think it is going to be different. It will continue to get better.
People are seeing money in their pockets and valuations go up. The market sentiment is good for tech at least for a little while longer.
What has changed with these local investors?
They were distracted by speedy returns. Back in the days, you could get 17-8)18 percent from treasury bills. The naira then was not great but it was fair.
But things have changed. And these investors have seen all these companies scale and get more investments. They have also seen some of their colleagues collect a hundred times their money in 4-5 years, so they don’t want to miss out.
I am not deluded that some investors care about building the future as we take it. Some investors might. But most are coming because of the returns and the lack of alternative returns anywhere else at the moment.
What are investors thinking about some of the new regulatory policies that seem to target tech startups?
There is a need for more consultation with the tech industry. I don’t know why there is often the desire to out of the blues criminalise innovations by some of the older regulators. I suspect it is because of a lack of understanding and education about how all these things work. I am always embarrassed for the government because at the end of the day it is like fighting water. It doesn’t have enemies.
You can ban what you want to ban but as the crypto episode has shown us, you have very little enforcement or control, legally and otherwise. Regulation should always seek to include. What are you going to do, are you going to seize people’s phones? You can’t do anything.
When you have patriotic investors and entrepreneurs as we have in Nigeria, you take advantage of their appeal and their desire for patriotism. It is from that state they are willing to be governed by your rules. I am yet to see any Nigerian tech entrepreneur who says “I don’t want to be regulated.” All of them want to be regulated.
Keep in mind where the money is coming from. It is coming from the US and it is a country of laws. The money requires legitimacy in the market. The government is very fortunate that we are raising our money from those people rather than mobsters.
We have seen 2 unicorns in Nigeria that did not need to IPO before reaching the feat. Is this a trend?
We are caught in between two markets. The Nigerian Market might be quite shallow and the US market might not understand Africa as an investment destination just yet. But I think there will be more public investments. There are platforms that are gearing up to provide that kind of liquidity in the market. I hope the NSE is opening its eyes to see what is possible. I think it should be doing more engagement with the tech industry. Very soon you should be able to see some listings.
