Stakeholders in the tech ecosystem have said that role of local investor confidence is the path to woo foreign capital investment into Nigeria as the nation seeks to improve funding inflow.
Speaking at the Third edition of Duale, Ovia & Adedipe Breakfast Law series titled ‘The Nigerian Tech Ecosystem: Policies Investments and Global Trade’ on Thursday, May 2, 2024, Kyari Bukur, Chairman of ARCA Payment, highlighted the necessity for local investors to demonstrate confidence in the market as a precursor to attracting foreign capital.
- Bukur, referencing insights gleaned from conversations with industry professional Kola, Co-founder Venture Platform said,“local investors must first show that they have confidence in the founders before you can attract foreign investors.
Kyari’s address also delved into additional considerations concerning regulatory frameworks and policy formulations within the tech ecosystem.
What he said
- “Policies and investments in global trade are paramount, given their integral role in facilitating the free flow of goods and services. However, innovation in Africa extends beyond mere replication; it must embody genuine creativity and market creation. Achieving this necessitates addressing regulatory challenges and fostering an ecosystem conducive to innovation.
- “Despite the allure of unregulated sectors, FinTech in Nigeria operates within a heavily regulated landscape, necessitating compliance with stringent standards alongside innovation.”
According to him, supportive policy extends beyond legislation to effective implementation and the strengthening of intellectual property rights. Regulatory bodies like the SEC and CBN play pivotal roles, with forward-thinking initiatives such as regulatory incubation programs and sandboxes fostering innovation.
What other experts said
During a panel session tagged, “Unlocking Investment Policies, Reforms and Regulations”, Adesuwa Okunbo-Rhodes, the founder of Aruwa Capital Management, highlighted a significant downturn in both venture capital and private equity activity.
Discussing on the prevailing situation, Okunbo-Rhodes contextualized the decline as part of a recurring trend, noting similar occurrences over the past 15 years. However, she maintained an optimistic outlook, asserting the importance of ‘looking inward‘ to bolster local investment.
- “ I am a big proponent of looking inward. I believe that we have local investors like Aurora Capital Management, the fund that I run, where we’re still very much actively deploying even in this environment.
- “So I think that the reforms that government and the policies that can be introduced are for us to start harnessing the local investors and the local environment to make it more attractive for local investors to invest in this terrain.”
According to her, with a substantial pool of pension assets amounting to approximately $25 million, predominantly underutilized, there is a significant opportunity to drive innovation and support the growth of local startups.
Initiatives like the startup act signal progress in this direction, yet there’s more to be done to fully unlock the potential of domestic investment for the benefit of our local economy and entrepreneurial ecosystem.
Backstory
Foreign investment inflows into Nigeria have experienced a notable deceleration in recent years, primarily attributed to stringent capital controls, escalating insecurity, and deficient infrastructure, which collectively pose significant challenges for external investors.
Particularly in the tech ecosystem where African startups witnessed a steep decline in funding. Specifically, startup funding in Nigeria which was down by 67%.
According to data sourced from the Nigerian Exchange (NGX), foreign participation in the Nigerian equities market dwindled to 8.15% in January 2024. This marks a decline compared to the figures of 13.92% and 12.76% recorded in the preceding and corresponding months of 2023, respectively.
One of the major deterrents for foreign investors is the difficulty in repatriating their earnings promptly and seamlessly amongst other regulatory and policy based factors. This obstacle has emerged as a formidable barrier, impeding the active involvement of foreign investors in the Nigerian market.