Nigeria's tech sector will step out of its comfort zone of basic fintech solutions if the right ecosystem is created through public investment.
Nigeria has emerged as Africa’s tech hub thanks to the 10-fold growth that the country’s ICT sector enjoyed between 2001 and 2018. The country’s entrepreneurs launch some 50 promising tech start-ups each year, collectively raising as much as USD100 million per annum.
With over 86 million citizens enjoying access to the internet (46.1% of the population), Nigeria was ranked seventh in the world in 2016 in terms of number of internet users, just below Russia and Japan. The internet penetration rate has shown healthy growth over the last four years, with Nigeria overtaking both Russia and Japan by June 2019. “Digital technology is essential for Nigeria’s economic diversification. Access to internet and mobile has improved markedly over the last decade, helping drive non-oil GDP growth,” observed the Economist Intelligence Unit in a report on the country’s digital transformation. The report went on to emphasize that the “creative industries, financial services, fast-moving consumer goods, and leisure have all benefited from digital.” Nigerian entrepreneurs are particularly savvy in the use of technology in the finance sector. Currently, there are fintech solutions in Nigeria that provide unbanked people with conveniences such as paying the bills, transferring money, and even arranging a loan online. In 2019, fintech start-ups such as TeamApt, OneFi, and Kudi had an altogether successful year, raising over USD5 million apiece. Older companies such as Paga and multinational fintech service providers operating in Nigeria were even more successful in raising funds. However, not everything is rosy in the tech sector, not even in fintech, the country’s supposed strong suit. Fintech start-ups cannot singlehandedly bring about nationwide financial inclusion in a country of over 190 million. The traditional banking sector, with its sizable customer base, must also go digital if the country wants to remain the fintech hub of Africa in the coming years. Furthermore, despite all its merits, the tech sector in Nigeria is built on shaky infrastructure. The majority of fintech start-ups in Nigeria revolve around mobile payments, which either work on the GSM network or basic internet connections. And, the absence of a national ID system means that fintech start-ups have a tough time figuring out who is using their services and making sure that all transactions are lawful. Many have been suggested that a true expansion of telecoms infrastructure and the implementation of a nationwide ID system will hugely improve the fintech ecosystem in Nigeria. Fortunately, there has been some progress in the latter area. In 2019, the country started an ambitious five-year national identity number (NIN) project with the support of the World Bank. With over USD433 million provided by the World Bank, Nigeria will be able to create a national identity database that will not only facilitate fintech enterprises, but also assist in matters of national security. Digital transformation is even less tangible in sectors such as oil and gas, which contributes a healthy amount to the government’s revenues. Though the country produces just under 2 million barrels of oil per day and has some 37 billion proven barrels, the industry’s tech infrastructure is far from robust. Nigeria currently lacks the required basic equipment to monitor and control its downstream oil industry, let alone AI-powered exploration and field management systems. It is estimated that the nation has lost over USD40 billion to oil theft over the last decade, which could be prevented with the implementation of surveillance systems. With so many unaddressed areas, there is plenty of room for development in Nigeria’s tech sector, and the country’s skilled workforce is up to the job. However, the tech sector should step out of its comfort zone—that is to say, basic fintech solutions—and explore new horizons. As was seen in the case of the national ID project; however, this will be possible only with more investment in infrastructure by the government and international entities such as the World Bank.