Technology and E-Commerce firms operating in Nigeria are seeing valuations soar as investors take positions ahead of them becoming profitable.

Analysts say investors are betting on growth to drive future profits by lining up funding, and building huge valuations on many diverse technology firms operating in Africa’s most populous country.

“The Nigerian tech industry is now on the path of consolidation…as the focus in virtually every segment of the industry from e-commerce to entertainment streaming to classifieds and online listing is scalability,” said consulting firm Sawubona Advisory Services Limited in its most recent Technology Note.

“The thought of profitability is beginning to weigh in more strongly, especially on those businesses that are exposed to a lot of startup and growth investment.”

Konga.com is said to have raised between $40million to $60million in Series C funding from Naspers and Kinnevik, leading to a valuation of between $160 million -$200million according to tech industry blog TechCabal.

Jumia, an ecommerce platform backed by Rocket Internet also raised €120m (or $150m) late last year, valuing the business with operations in 10 countries at €445m (or $555m).

Meanwhile Omidyar Network and Echo VC recently invested $1.2million in hotels.ng, a Nigerian hotel search and listing site.

A review of the results from the 2013 rebased GDP exercise revealed that the technology industry as captured in the telecoms and ICT component accounted for 9.6 percent of GDP and was the second largest contributor to GDP growth after Trade and Manufacturing.

Nigeria’s online retail business popularly known as electronic commerce is booming as Africa’s largest cell phone market converges with increasingly cheaper internet access.

Nigeria had 145.4 million active cell phone lines and 86.9 million internet subscribers, as at April 2015 according to data from the Nigerian Communications Commission (NCC), while International bandwidth brought by undersea cables, has increased about 26 times to more than 9,000 gigabits per second (9 terabits).

One market research firm suggests that Nigeria, which is Africa’s most populous country, will have almost tripled its online purchases in just three years to more than $1 billion by 2014.

Konga.com saw a record breaking 1440 percent year on year increase in online revenue last year during its black Friday sales promotion tagged Yakata.

Sim Shagaya, Konga CEO disclosed that at its peak, the site was processing N50 million worth of orders every hour and that Konga sold 500 percent more items in the two days of Yakata than it did in all of 2012.

“Over 40 percent of the people who shopped had never bought online before. On the day we received more traffic on mobile devices than desktop and mobile contributed over a third of sales which is a clear pointer that mobile is the way Nigerians will shop online in the future,” Shagaya said.

The improving connectivity and increase in businesses done online is spurring the need for data centers.

MainOne Cable Co Ltd., which operates an undersea cable connecting West Africa to Europe, opened a $40 million data center in Lagos in January. The center will provide reliable Internet access and host information for clients such as banks, phone companies, government bodies, and a growing number of dot-com businesses, MainOne Chief Executive Officer Funke Opeke said at its launch.

“The large markets in Nigeria make it possible to build a technology company worth $1 billion. We have one in our portfolio,” said Yemi Lalude, founder and Managing Partner at Adlevo Capital, a technology focused African venture capital firm, at the 11th Africa Private Equity (PE) and Venture Capital Association (AVCA) conference held in Lagos.

PAT MELIK

Coronation Research
Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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