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Nigerian tech companies are struggling, but they will be just fine

Nigerian tech companies are struggling, but they will be just fine, Impact of COVID-19 on startups

About two months ago, the Nigerian government was in celebration mode after the latest World Bank Ease of Doing Business report showed that the country’s ranking improved by 15 points to 131. While this is not bad at all, everybody knows that doing business in Nigeria is generally uneasy. This is corroborated by a recent survey by One Campaign and Centre for Global Development, which focused on how Nigeria’s problems are militating against the country’s tech startups.

The survey: According to the survey, there are three major problems facing the Nigerian tech ecosystem. Two of these are all about the regular problems which companies in Nigeria face daily. You probably already guessed what we are talking about – inadequate electricity supply and lack of access to funding.

Poor electricity supply: As much as 57% of the tech startups that were interviewed in the course of the research identified inadequate electricity as their biggest challenge. According to them, they incur extra costs trying to generate electricity for themselves. Unfortunately, this is money that could have been meaningfully invested in growing their businesses.

Inadequate access to finance: In relation to funding, majority of the tech startups also complained about how difficult it is to access loans from banks. Note that Nigerian banks are generally reluctant to lend money to small businesses out of fear of bad loans. But the Central Bank of Nigeria has recently increased banks’ loan deposit ratio (LDR) to 65%. This will take effect in December 2019, thereby forcing banks to lend to the real sector of the economy.

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Moving on, the third problem facing the Nigerian tech ecosystem is the fact that female IT professionals find it a lot more difficult to survive, compared to their male counterparts. First, the survey found that fewer female tech professionals are employed in the first place. Even female tech entrepreneurs are discriminated against, especially when it comes to accessing financial facilities.

[READ MORE: Three tech startups offer solutions to nation’s health, property, auto problems]

A Vibrant Sector: Despite these challenges, the Nigerian tech ecosystem is doing just fine. The survey found that many of the companies operating within this space are relatively small with an average of ten employees. Services they render range from financial services to e-payment, e-commerce, e-health, education, retail, and more. Quite a lot of them are also owned and managed by young professionals.

As far as putting an end to the problems these startups are facing, the survey found that the onus might, indeed, lie within the ecosystem. In other words, while off-grid energy companies are working hard to solve the problem of electricity in Nigeria, the country’s fintech firms that are equally working hard to ensure financial inclusion for all. This does not mean that the government does not have any more role to play.

To read the full report, click here.

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