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PwC says Nigeria fintech to see traction as banking services slows

Verve adoption grows as fintechs embrace local payment cards

In a bid to take advantage of the inadequate banking services in Africa’s biggest country, fintech in Nigeria is set to witness further growth, a new report by PricewaterhouseCoopers (PwC) shows.

The report titled Growing the Nigeria technology system through the capital market states that the fintech sub-sector has the biggest share of Nigerian tech start-ups at 36 percent, with payments and consumer lending being the focus of almost half of the sub-sector.

“Insufficient banking services (particularly in rural areas), a young population, increasing smartphone usage, and regulatory efforts to increase financial inclusion, created advantageous openings for fintech.”

“Fintechs have jumped at the chance to provide improved propositions across the value chain to address problems with affordable payments, quick loans, and flexible savings and investments, among others,” it reports.

Nigeria is one of the continent’s more established startup ecosystems, with firms like Interswitch dating as far back as 2002. The country has produced five out of seven unicorns in Africa which are; Interswitch, Flutterwave, Opay, Andela, and Esusu4, of which Andela is not in the fintech space.

According to a 2022 Africa startup report by Partech, the number of tech start-ups securing funding in Africa has grown by 108.7 percent from 55 in 2015 to 653 in 2022, while total equity funding raised annually increased by 167.3 percent from $277 million to $4.9 billion in the same period.

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Nigeria, South Africa, Kenya, and Egypt’s “Big Four” are currently the central focus of the African tech ecosystem and have received 73 percent of funding in Africa, with Nigeria startups leading of which the fintech sector receives more funding.

To accelerate the growth of the tech ecosystem, the governments in some African countries have created initiatives such as; Program 12J in South Africa that provides tax deductions for investors, the Finance Act 2020 in Nigeria that reduces taxes for startups, the Nigerian Startup Act 2022 providing a framework for the development of the Nigerian technology and innovation ecosystem, among others.

BusinessDay reported that the Nigerian government has raised a $618 million fund aimed at supporting tech and creative sectors for young investors to spur the growth of innovation in the continent.

A report by Intelligence by Techpoint shows that In January 2023, 23 African startups raised a little over $70 million across 24 funding rounds. In February, there was a significant improvement, as 44 startups raised more than $675 million in 48 funding rounds. In terms of distribution, South Africa and Kenya had 10 startups represented, Nigeria had nine startups, and Egypt had six startups represented.

“No other sector has raised more capital than fintech in the past five years, and February 2023 was no exception. Startups in the financial services industry raised $572.9 million and made up 84 percent of the funding received throughout the month,” it reports.

Further analysis of the PwC report disclosed that there have been several initiatives in the Nigerian capital market geared towards promoting innovation, and growth as well as a technology-driven capital market.

“In December 2022 the Securities and Exchange Commission (SEC) approved the NGX Rules for listing on the Technology Board. The Rules aim to attract technology companies to the capital market with less stringent listing requirements (compared to other listings boards) and provide Issuers, sponsors, investors, and advisors with important information about admissions, listings standards, disclosure, and notification requirements for the Technology Board.”

However, the top 10 companies by market capitalisation on the Nigeria stock exchange were dominated by ICT and Industrial goods companies accounting for 70 percent of the total market capitalisation, as Airtel Africa Plc takes the lead with N6.1 billion, the report said.