Four charts showing tech sector hurdles in 2023

The rise in inflation, naira devaluation, foreign exchange loss, and removal of subsidies, among others, in 2023 negatively impacted Nigeria’s technology and telecommunications sectors.

Funding rounds, foreign investments, and broadband penetration all experienced a significant decline, many startups couldn’t cope with the pressure, which led to major shutdowns and layoffs in 2023.

Here are four charts to better understand the state of the industry:

Nigeria’s ICT growth rate slowed down

In 2023, Nigeria’s Information and Communication Technology (ICT) growth rate declined to 7.9 percent from the 9.7 percent reported in 2022, according to Gross Domestic Product (GDP) data.

The National Bureau of Statistics (NBS) reported that the real GDP growth rate for the fourth quarter of 2023 was 6.33 percent, marking the lowest growth rate in comparison to Q1 (10.32 percent), Q2 (8.6 percent), and Q3 (6.69 percent).

Despite the decline in the growth rate of the telecom sector in Q4, the sector’s contribution increased to 16.66 percent, up from 16.22 percent in the same period of 2022.

The ICT sector comprises the activities of telecommunications and information services, publishing, motion picture, sound recording, music production, and broadcasting.

Capital inflow to telecom sector dipped by 70%

Foreign capital flows into the Nigerian telecommunication sector declined by 70 percent in 2023, according to data from the National Bureau of Statistics.

The industry analysis on capital importation revealed that in 2023, the total foreign inflow into the telecom sector was $134.7 million, a huge fall compared to the $456.6 million reported in the same period in 2022.

This shows that Africa’s biggest economy is finding it increasingly hard to attract investments in the telecom sector despite reforms implemented by the current administration to lure back foreign investors to boost economic growth.

According to the NBS, on a quarter-to-quarter basis, Q3’23 reported $64.1 million, the highest amount reported during the year, while Q4’22 with $168.2 million was the highest quarter with the most investment in 2022.

Nigeria startup funding hit hardest

Startup funding in Nigeria as of 2023 reported a 59 percent decline to $468 million in at least three years in 2023. Data from Partech, an African research platform revealed that Nigeria reported the least funding among the big four in 2023, however, the country recorded the highest number of deals.

South Africa became number one, overtaking Nigeria as the powerhouse of the African tech ecosystem with $$548 million, Egypt with $432 million, and Kenya with $335 million in equity funding.

The report said, “Despite leading the market, all four countries witnessed a considerable decrease in funding due to prevailing market challenges. Nigeria (-59 percent YoY) and Kenya (-56 percent YoY) experienced a significant reduction in their equity funding from 2022, while Egypt and South Africa saw declines of 45 percent and 34 percent, respectively.”

Broadband’s slow pace slowed Nigerian’s connectivity

According to the Nigerian Communications Commission, the broadband penetration rate in Nigeria as of December 2023 reached 43.7 percent compared to 47.3 percent in the same period of 2022.
The data revealed that more Nigerians remain connected to 2G, with the network controlling 57.8 percent (129.4 million) of the mobile subscriptions market as of December 2023.

According to the recent Strategic Blueprint presented by Bosun Tijani, minister of communications, innovation, and digital economy. Broadband penetration refers to area of Internet access market that high-speed or broadband Internet has captured.