Why global startups struggle to scale after entering Nigeria – Itana CEO

Foreign startups entering Nigeria are finding that identifying opportunities in Africa’s most populous economy is much easier than turning those opportunities into profitable and scalable businesses, according to Mayowa Olugbile, chief executive officer of Itana.

Speaking to BusinessDay, Olugbile said many international founders, especially from the United Kingdom, are attracted by Nigeria’s large consumer market, fast-growing digital economy and expanding startup ecosystem but often struggle with operational realities after entering the country.

“The core challenge is not whether opportunity exists in Nigeria, it clearly does, but how to seize these opportunities in practice,” Olugbile said.

Nigeria has become one of Africa’s biggest technology markets, driven by fintech growth, rising smartphone adoption and increasing venture capital interest. Lagos, in particular, has positioned itself as a leading African tech hub competing for global investment and talent.

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Yet several foreign-backed startups have struggled to survive after expansion into the market.

Naspers-backed OLX Nigeria shut down local operations after years of struggling to monetise its classifieds business amid intense competition and difficult market conditions. Swedish-backed Efritin also exited Nigeria after facing challenges linked to internet penetration, high data costs, customer trust issues and weak consumer purchasing power.

Analysts say those failures reflect broader challenges facing foreign companies trying to scale in Nigeria despite the country’s strong long-term growth potential.

The Itana CEO said many international founders underestimate the complexity of operating in Nigeria, particularly when attempting to manage expansion remotely.

According to him, incorporation processes, licensing requirements and regulatory procedures can appear fragmented for foreign businesses unfamiliar with the system. “For many UK founders, the initial friction comes from understanding how the system actually works beyond the surface level,” he added.

He stated that the challenges often go beyond regulation and include understanding informal business dynamics, local decision-making structures and relationship building.

“A common challenge for UK founders is understanding how the market works in practice. Success is often determined by factors such as who you meet, what you learn, and how quickly you can translate insight into action,” Olugbile said.

Industry experts say foreign firms that fail to localise operations or build strong local partnerships often struggle with customer acquisition, pricing models and distribution networks in Nigeria’s highly competitive market.

Olugbile said founders who engage directly with regulators, operators and local ecosystem players tend to move faster and make better strategic decisions than companies relying mainly on remote market research.

“What we consistently see is that founders who engage directly with the ecosystem and prioritise these relationships move faster overall,” he said.

To reduce those barriers, Itana has launched programmes such as its “Doing Business in Africa Tour,” aimed at connecting foreign founders with regulators, investors, operators and potential business partners.

Olugbile said many startups make early expansion decisions based on incomplete information, creating problems that emerge later during scaling.

“Without that level of access and context, founders are often making decisions with incomplete information. That can slow down or even undermine market entry in the short term, as well as create challenges later when trying to scale,” he said.

He noted that successful market entry requires more than rapid incorporation or regulatory approval.

“Effective market entry is about combining speed with understanding. That means having a streamlined path to incorporation and compliance, while simultaneously building a clear view of how the market functions,” he said.

According to him, understanding customer behaviour, competition, pricing patterns and local business culture early can significantly reduce operational risks.

The comments come as Nigeria attempts to attract more foreign investment following economic reforms that include foreign exchange liberalisation and fiscal adjustments aimed at restoring investor confidence.

The Itana CEO said Nigeria’s innovation ecosystem is becoming more connected to global technology markets, especially London’s startup and financial sectors.

“There is a clear shift underway from isolated ecosystems to interconnected ones. London and Lagos are increasingly operating as part of the same innovation corridor,” he said.

He added that Nigerian startups are increasingly expanding into the UK while British firms are looking at Nigeria as a strategic growth market because of its young population and rising digital adoption.

However, structural challenges continue to slow expansion for many foreign companies already operating in the country.

Olugbile identified infrastructure shortages, inconsistent regulations, logistics bottlenecks and limited operational predictability as key barriers to scale. “Investors need confidence that frameworks are predictable as they grow,” he said.

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Power shortages, transport inefficiencies and connectivity gaps continue to increase operating costs for businesses in Nigeria, especially startups trying to scale rapidly across multiple cities.

According to Olugbile, Nigeria’s bigger challenge is no longer attracting foreign companies but helping them scale efficiently after arrival. “Ultimately, the challenge is not attracting investment, but enabling it to scale efficiently once it arrives,” he revealed.

He added that digital infrastructure platforms such as Itana’s special economic zone model are designed to reduce regulatory and operational friction while giving foreign firms easier access to Nigeria’s business ecosystem.

“Bridging that gap between entry and execution will be central to unlocking the next phase of growth,” Olugbile asserted.