The ambitious $5 billion funding target for Nigerian startups set by the Minister of Communications, Innovation, and Digital, Dr. Bosun Tijani, is becoming infeasible with the continuous decline in funds attracted by the country’s innovators in recent times.
Going by the Minister’s plans unveiled upon assumption of office in 2023, this target is to be achieved in 2027 by ensuring a 50% increase in funding each year from the $1.2 billion attracted by the startups in 2022.
However, data from 2023 and up to Q1 2025 suggests otherwise, as funding continues to decline.
At the end of 2023, Nigeria slipped from the top position it occupied for years to become 4th in Africa as startups in the country managed to raise about $400 million, marking a significant decline from 2022.
In 2024, the country’s startups also raised about the same amount and remained among the top 4 in Africa in terms of funds raised for the year.
According to data tracked by the Nairametrics Dealsbook, Nigerian startups raised around $100 million in Q1 2025. While this showed some resilience in the face of the current global capital tightening, it fell far short of the growth required to meet the country’s 2027 target.
Why is funding declining
Industry analysts believe a combination of factors is driving the decline in startup funding, not only in Nigeria but globally.
These factors include rising global interest rates, a shift in investor focus, and persistent challenges within Nigeria’s startup ecosystem.
According to the founder of Startup Arewa, Jega Mohammed, venture capitalists are now looking toward other verticals such as Artificial Intelligence, big data, cybersecurity, automation, and blockchain, hence the decline in regular tech startup funding.
For the founder and CEO of Kippa, Kenedy Ekezie, whose company benefited from the funding boom between 2021 and 2022, raising a total of $11.6 million, the dynamics have changed, and startups will have to look inward for funding.
“There is a global capital meltdown happening right now, and fundraising has slowed down for startups worldwide, including in Africa. As it is now becoming harder to raise capital in the current market and external funding becomes more challenging, Nigerian startups will have to rely less on outside funding and look for more local investors,” he said.
Beyond funding, Nigerian startups face policy challenges
A recent report by Startup Graveyard identified funding shortages as the primary cause of African startups’ failure in 2023 and 2024.
- However, beyond that, it pointed to specific challenges in Nigeria, especially in the areas of regulation and policies.
- The report noted that Nigeria’s startup ecosystem faces unique hurdles, including unreliable power supply and sudden regulatory changes.
- It added that some startups in the country have changed their business models and developed innovations to suit the current regulatory policies, which have also hindered potential international investment.
“Notable cases, such as the Central Bank of Nigeria’s introduction of the cybersecurity levy and Electronic Money Levy Transfer (EMTL) as government-mandated fees for all electronic transfers, visibly affected fintech startups that gained traction for free mobile money transactions,” the report stated.
Role of Nigeria Startup Act
To achieve the $5 billion target, Minister Tijani said the government would be pushing for more local funding through the implementation of the Nigeria Startup Act, which was signed into law in October 2022.
He said the Ministry would also establish an active sandbox environment that encourages and empowers innovators and entrepreneurs to develop unique solutions for sectors historically considered to have limited exposure to technological innovation.
“By removing regulatory barriers and providing the required support, we aim to inspire innovative, problem-solving approaches to existing challenges,” he stated.
- While much of the implementation recorded so far of the Act is the startups’ labelling, through which Nigerian startups are encouraged to get registered on the government’s portal, the National Information Technology Development Agency (NITDA) said it is making progress with funding.
- According to a spokesperson of the Office for Nigeria Digital Innovation, the subsidiary of NITDA in charge of the implementation of the ACT, 75 startups have been labelled as of May 2025, and the Office is addressing the funding issue through the establishment of a $40 million Startup Investment Seed Fund.
- The ONDI stated that the Fund set up in May this year has secured $20 million from the Japan International Cooperation Agency (JICA), while the Nigeria Sovereign Investment Authority is to match the remaining $20 million.
- As part of the implementation, the ONDI said it has also set up a Startup Consultative Forum to drive information sharing and collaboration in the ecosystem with respect to policy proposals, information on startups that qualify for labelling; and deliberation on a memorandum to the National Council for Digital Innovation and Entrepreneurship (NCDIE).
What you should know
Former President Buhari signed the Nigeria Startup Bill 2022 into law on October 19, 2022, to put an end to the legal uncertainties that had trailed the startup industry in the past. It provides for what qualifies a company to register and obtain startup status.
The Act stipulates, among others, that:
- Before a company can be labeled a startup, it must obtain a certificate known as the startup label. This means that only companies with the startup label will be recognized as startups.
- It mandates that a Startup Support and Engagement Portal should be established to facilitate the issuance of the startup label and also bridge the gap between regulators and startups. It also spells out the requirements for a company to obtain a startup label. Companies issued with a startup label have obligations under the bill, and failure to comply with these obligations can result in the revocation of their startup label.
According to the Act, for a company to be named a startup, it must be a registered limited liability company that has been in existence for not more than ten years from the date of incorporation, amongst other requirements.
