Nigerian fintech scene shows record expansion
Africa has caught the world’s attention with its advancements in the financial technology (fintech) space and usage of mobile money. The Nigerian fintech landscape, specifically, has the ability to become one of the most significant leaders in Africa’s innovation.
Nigeria has exhibited growth in mobile money operations from an average monthly transaction value of $5 million in 2011 to $142.8 million in 2016 1. There are a few key ingredients that are enabling Nigeria to be a leader in fintech innovation; its growing population (according to the UN’s projections, the population in Nigeria is expected to be larger than the population in the United States by 20502) and talented workforce with a strong entrepreneurial spirit. A survey conducted by Global Entrepreneurship Monitor reveals that 85% of Nigerians see good opportunities to start a firm in the area where they live, and 87% believe they have the required skills and knowledge to start a business5. Additionally, mobile penetration and usage is very high with smartphone penetration of over 23 million and an estimated 150 million active subscriber lines in the country1. Lastly, like many countries in Africa, Nigeria is not constrained by the legacy systems of the traditional banking industry, allowing for new technologies and solutions to fill the financial gap.
Irrational Innovations, a venture capital focused on fintech in Africa, mapped out and analyzed the growing fintech ecosystem in Nigeria – consisting of over 50 companies with investments exceeding $200M in the last 2 years1. Much like many other countries in Africa, Nigeria’s start-ups have developed effective payment and lending models; close to 37% of fintech startups in Nigeria fall into the categories of payments and remittances and 32% offer lending and financing. The remaining 31% of startups fall under a new generation of products and services that didn’t exist in the space before 2015. For example, NairaEx and NairaSwitch are two companies that allow users to buy and sell bitcoin. Casava aims to be the first company in Africa to offer peer to peer insurance to consumers (in a market where 86% of the population is uninsured8). Other relatively untapped sectors in the Nigerian fintech ecosystem, including wealth management, business solutions, savings, banking, and trading, provide unprecedented opportunities for entrepreneurs and investors.
This year, Interswitch became Nigeria’s first fintech unicorn, a payment processing company valued at over $1 billion. Additional multi-million dollar fintechs (fintech companies) are becoming common in the country. As the fintech space in Nigeria continues to flourish and investments grow, Nigeria may reach its fullest potential as one of the global leaders of the fintech space.