The maturity of Nigeria’s fintech industry
In the colonial era and the period succeeding it, Africa was treated as a charity by the western powers. Africa was a dependency in deals, and not as a partner. This unbalanced relationship also means that the terms of exchange became unbalanced and unfair. Whilst money, finished products and advanced services flowed into Africa in ample quantities, natural resources serving as raw materials flowed out of the continent in much larger quantities and African leaders were powerless to negotiate, leading to a culture of dependency.
The twenty-first century world looks a little different. Whilst Africa still remains poor in comparison to the rich western countries, there is a significant shift in the dynamics. With increased development, self-awareness and access to technology and information, African leaders now have more to bargain with. Also, there is an increase in human capacity development within many African countries as more people become educated, attain financial inclusion, acquire mobile phones, and get connected to the internet. Africa, therefore, no longer has only raw materials to sell, and no longer has to be dependent on foreign powers for everything as many Africans are also developing indigenous capacity.
In Nigeria, Africa’s largest market, the sectors currently showing promise include the Creative, Agriculture and Technology Industries. One of the fastest growth areas is Financial Technology (Fintech), the utilization of technological innovations to help companies, business owners and consumers better manage their financial operations and processes. Nigeria is currently home to over 200 fintech companies while Fintech brands like Remita, Interswitch, Paystack, Flutterwave, Kuda Bank, Paylater and Piggyvest have already become household names. They are not only thriving but also attracting a lot of investment into the country.
According to a 2020 report by McKinsey on the state of Nigeria’s fintech industry, the country’s bustling fintech scene raised more than $600 million in funding between 2014 and 2019, attracting 25 percent ($122 million) of the $491.6 million raised by African tech startups in 2019 alone—second only to Kenya, which attracted $149 million. Same year, Nigerian fintech giant, Interswitch, announced it had reached a valuation of $1billion, the first African firm to do so, after a huge investment from Visa.
Flutterwave, a digital payments infrastructure and services provider, raised a $35M Series-B round led by US venture capital firms Greycroft and eVentures in January 2020. Aella Credit, a digital payment, lending and investment facilitator, secured a $10 million debt financing round from a Singaporean company – HQ Financial Group. Kuda Bank, which provides full banking services on a secured a US$10 million seed round in November 2020 – the biggest seed round ever to be raised in Africa, led by Target Global with participation from Entrée Capital and SBI Investment.
Africa’s increasing capacity and the need for a more balanced term of trade was reflected in the recently concluded Equity for Africa Summit in the United States, where African leaders clamoured for a more equitable relationship with their western counterparts, with regards to investments into the continent. Hosted by a foremost Christian institution, the Liberty University, Virginia, with the theme, ‘Transforming the World through Judeo-Christian Values,’ the Summit was aimed at facilitating networking between African leaders and American business leaders to stimulate investment in African countries.
Participants at the event include Vice President of Liberia H.E. Jewel Howard-Taylor, Governor of South Sudan Denay Chagor, Vice President of Nigeria H.E. Yemi Osinbajo, President of Ghana H.E. Nana Akufo-Addo, and the Immediate past US Secretary of State, Mike Pompeo. A number of African companies and American business leaders also participated in the event.
In his address to the summit, tagged, ‘Transforming the World through Judeo-Christian Values’, Osinbajo called on world leaders to end unfair burdens on the developing world. According to him, the principle of fairness obliges people to strive to build a fairer world, a world which takes account of the interests of the poor and marginalised.”
It means a world that does not impose unfair burdens on developing countries when global cooperation is required,” said Osinbajo
A core component of proceedings at the summit involved deliberations on intensifying Foreign Direct Investment (FDI) into Africa. One of the areas of opportunities is the BUILD Act, signed into law by former president, Donald Trump in 2018 with the purpose of allowing American entrepreneurs and investors to invest in Africa and help create more jobs with up to $60 billion ready to be unlocked for financing projects in Africa.
More than ever, Africa’s largest economy is ready to maximize these potential investments as the country is now home to a number of innovative enterprises maximizing technology to serve a fast-growing population. While the increased investment into Nigeria’s fintech sector is a welcomed development, it is worrisome that the bulk of investment is coming from foreign entities. Meanwhile, a few of the leading technology firms in the country have remained completely true to their indigenous nature. This includes SystemSpecs, the provider of Remita and Paylink, and one of the corporate participants at the just concluded summit. However, like the proverbial prophet who is not honoured at home, this innovative pioneer may eventually succumb to the allure of foreign investment in an attempt to unravel its real worth.
It is time for the government and other local stakeholders to step up and begin to actively pour in investments into these promising entities otherwise, Nigeria’s fintech sector may soon be controlled completely by foreigners. Yet this does not in any way, dispute the fact that African Fintech, especially in Nigeria, has come to stay.
Stevens is a public affairs commentator.