Nigeria’s $5 Billion Startup Dream Faces Setback Amid Economic, Regulatory Pressures
Nigeria’s ambition to raise $5 billion in startup funding by 2027 is looking increasingly unrealistic as investment in the country’s tech ecosystem continues to decline. The goal, set by the Minister of Communications, Innovation, and Digital Economy, Dr. Bosun Tijani, relied on a consistent 50% annual growth in funding from the $1.2 billion raised in 2022. However, data from 2023 to Q1 2025 shows a downward trend, with only $400 million raised annually in 2023 and 2024, and just $100 million secured in Q1 2025.
The funding drought is not isolated to Nigeria but reflects a broader global trend. Analysts attribute the decline to higher global interest rates and shifting investor interest toward emerging sectors such as artificial intelligence and blockchain. Nigerian entrepreneurs who once thrived on foreign capital are now being urged to seek local investors as venture capital becomes increasingly scarce worldwide. Startups like Kippa, which raised millions during the boom years, acknowledge the changing landscape and stress the need for internal funding strategies.
In addition to limited funding, Nigerian startups face policy and regulatory obstacles that are further discouraging investment. Reports have highlighted persistent challenges like unstable power supply, sudden policy shifts, and government levies on digital transactions, all of which have negatively impacted fintechs and tech innovators. The regulatory environment has led some startups to alter their business models to align with evolving government policies, a move that has sometimes deterred international investors.
To counter the funding gap, the government is banking on the Nigeria Startup Act, signed into law in 2022, to stimulate growth. The Act aims to formalize and support the startup ecosystem through incentives, regulatory easing, and funding mechanisms. Key elements of the Act include startup labeling, a digital support portal, and eligibility standards for startup status. The implementation so far includes the registration of 75 startups and the establishment of a $40 million seed fund, half of which has been secured from the Japan International Cooperation Agency.
Despite these efforts, much of the initiative remains in its infancy. While the government is optimistic that the Act will unlock more local capital and attract global partnerships, analysts caution that more urgent action is needed. Removing regulatory bottlenecks, ensuring stable policy environments, and expanding funding beyond labelling and forums are critical if Nigeria hopes to reverse the current decline and meet its bold 2027 funding goal.
Source: Nairametrics