Why Nigerian startups are turning to debt over equity

Debt now accounts for a record 41% of all capital raised by African tech startups, up from just 17% in 2019, according to Partech Africa’s annual venture capital report.

Nigerian founders are part of that shift, though from a smaller base than regional leaders Kenya and Egypt.

Three founders with direct experience of the funding market have now told Nairametrics why that shift is happening, from three different angles.

Businesses are reaching a level of revenue predictability that lenders can finally underwrite. Equity has become harder, slower and more demanding to raise. And new local channels are now letting capital reach borrowers that could not access it a few years ago.

What they’re saying

Babatunde Akin-Moses, founder of the digital lender Sycamore, has just lived through a debt raise, and says the shift reflects businesses finally reaching the discipline institutional lenders require.

• “Debt and equity serve different purposes. That is why I often talk about smart capital. When you raise equity, you give up part of the business. Debt, provided you have the capacity to service it, allows you to finance growth without continually diluting your shareholders,” he told Nairametrics.
• Institutional lenders, he added, are not swayed by a good story. “They need to believe you can repay them.”

That scrutiny, he said, was central to Sycamore’s own commercial paper issuance.

• “Investors wanted to understand our business model, financial performance, loan book quality, governance, growth strategy, liquidity management and, ultimately, our ability to meet our obligations,” he said.
• “That discipline helped our N3 billion Series 1 offer become significantly oversubscribed, with demand exceeding the initial offer by over 230%.”

He is also careful to add a warning of his own.

• “Debt is not a badge of honour,” he said. “If your business model cannot comfortably support the cost and repayment profile of the debt, raising debt simply creates another problem.”

Temitope Ekundayo, co-founder of the Lagos-based private capital platform GetEquity, argues the more important story is not debt replacing equity at all, but equity itself changing shape.

• “Dollar equity is still deploying,” he told Nairametrics. “It’s just going to established, revenue-proven businesses rather than early-stage ones. The diligence cycle that used to close in eight weeks now runs six months and goes considerably deeper.”

What has stepped in for earlier-stage companies, in his account, is often still called equity but behaves like debt.

• “Local equity has stepped into part of the gap, but it isn’t really venture capital anymore as I see it,” he said. “It wants collateral, guarantees, profitability within the year, sometimes a board seat and a personal guarantee from the founder. That’s a lender’s risk appetite in an equity wrapper.”

Ekundayo also pushes back on the idea that debt itself is a fallback option.

• “Debt isn’t a survival instrument here. That framing undersells it,” he said. “It’s become the most well-structured capital still available: priced, tenored, covenanted, structured with a defined exit and no permanent claim on the company. That’s precisely why it’s accessible.”

That same structure, he argues, is exactly what makes debt wrong for a company that has not yet found its footing.

• “It’s precisely why it’s wrong for pre-revenue companies, on all three counts,” he said. “The structure assumes a repayment schedule they can’t underwrite, the cost of capital assumes margins they don’t have, and the risk sits with a founder who has no second source of repayment if the month goes badly.”

Oluwaseyi Ayodeji, an AI infrastructure programme leader and founder of Regal Stack, agrees that maturity is the real driver behind the continental shift, but is not convinced the evidence yet justifies applying that conclusion to Nigeria specifically.

• “The usual explanation is that equity became more expensive, so founders turned to debt. That is certainly part of the story,” he told Nairametrics. “But I think the deeper driver is maturity. Debt only works when lenders can underwrite against predictable revenues, and a decade ago, very few African fintechs had reached that point.”

His caution about Nigeria is direct.

• “I am not extending that conclusion to Nigeria yet,” he said. “The naira lost roughly 70% of its value between mid-2023 and late 2024, while much of the available debt is priced in dollars. Maturity may make debt possible. It does not necessarily make it wise, not without the underlying economics to support it.”

And Ekundayo points to a structural change underneath all three arguments that he says gets asked about least: who is actually willing to lend, and where that capital originates.

• “The most interesting part of all this, and the least covered, is that local naira capital is now backing alternatives,” he told Nairametrics. “Money that had nowhere to sit but treasury bills and bank deposits can now reach private credit through instruments and distribution that didn’t exist five years ago. That’s the structural change. Founder sentiment is downstream of it.”

The data behind it

Partech’s longer-term figures show debt’s share of African tech funding climbing from 17% in 2019 to 24% in 2022 and 35% in 2023, dipping to 31% in 2024, then jumping to 41% in 2025 as debt volume surged 63% year on year to $1.64 billion.

Total African tech funding reached $4.1 billion in 2025, and Partech Africa General Partner Tidjane Dème described the rise of debt as the year’s most structural shift.

• The most recent monthly data complicates that picture. In July 2026, African startups raised just $102 million across 44 disclosed deals, according to Africa: The Big Deal, the weakest month since March 2025.
• Equity accounted for only $25 million, the lowest monthly equity total in more than seven years, while debt supplied $75 million, or 74% of the total, driven by four transactions: M-Kopa’s $30 million facility from the Dutch development bank FMO, Bridgement’s $20 million raise, BioLite’s $11 million round and Nesa Power’s $9 million financing. None was Nigerian.
• That July figure should not be mistaken for a straight-line shift toward debt. Across the first seven months of 2026, African startup funding was down 27% year on year to $1.46 billion, and debt fell even harder than equity did, down 44% to $529 million.

Western Africa, the region that includes Nigeria, accounted for just $5.9 million of July’s total, the smallest share of any region that month.

Nigeria’s own numbers

Inside the 2025 continental figures, Nigeria’s picture is sharper still. Kenya led African debt financing that year with $498 million, Egypt followed with $246 million, and Nigeria came in third with $160 million, up 132% year on year but still only 19% of the country’s total funding.

Nigeria’s equity funding, meanwhile, actually fell 21% that same year, the only one of Africa’s four largest markets where equity declined in 2025.

• Debt is growing fast off a small base while equity shrinks, which is exactly the dynamic Ekundayo’s and Ayodeji’s arguments both attempt to explain from different directions.
• Ayodeji’s own reference point for the maturity argument, Moove, illustrates both the case for debt and the limits of applying it to Nigeria directly.
• Moove began financing vehicles through comparatively small debt facilities. Its revenue later scaled to nearly $400 million in 2025, up from $275 million the year before.
• The company had also repaid roughly $100 million in earlier loans in full before reportedly closing in on a $1.2 billion debt round to help finance its role in Alphabet’s Waymo robotaxi rollout in the United States.

But Moove’s debt is underwritten against a global, largely dollar-denominated revenue base spanning multiple markets, not Nigerian naira earnings specifically. This is precisely the exposure Ayodeji says Nigeria’s own currency history should make lenders and founders think harder about before assuming the same confidence applies at home.

The bottom line

Debt is rising quickly in Nigerian startup financing, but from a small base, and mostly among companies mature enough to prove predictable revenue to a lender.

For most founders, especially earlier-stage ones, the bigger change is that both equity and debt have become harder, more conditional, and more tightly tied to proven revenue than they were a few years ago.

As Ekundayo put it, the market is sorting itself by maturity, debt for the companies that can prove predictable revenue, equity that increasingly carries some of the demands of debt for those still trying to get there.