In 2014, the Nigerian government will launch a $15 million technology venture capital fund, aimed at funding businesses in the sector that have considerable growth potential. The National Information Development Agency has committed around $3.5 million, with the remainder sourced from the private sector.
This year the African Venture Capital Association held its annual conference in Nigeria for the first time, and leading finance houses are running the rule over companies that have begun to generate real revenues. Businesses like Konga and its competitor Jumia now employ hundreds of people – and have begun to make money. Their potential is immense – penetration of online retail is less than 0.1%. Payment problems, linked to the scarcity of credit cards and mobile money services in the country, as well as the relatively small number of people who are online, has curtailed the growth of the sector. With bandwidth coming down in price, this gap in the market will inevitably be filled.
Incubators and investors, such as Spark, are pursuing an explicit strategy of identifying and backing companies that find these gaps – companies such as hotels.ng, which maintains a listing and booking service for Nigeria’s thousands of guest houses and hotels. These businesses are already going concerns, but could take off very rapidly as more and more of Nigeria’s population get access. Even Spark’s founder, Jason Njoku, who has raised millions for iROKOtv, which distributes Nollywood movies worldwide, has said on a number of occasions that once the access issue is solved for Nigeria’s huge youth population, it will transform the size of his business, which already has six million viewers in 178 countries.
The industry could do more than just make money for VCs and entrepreneurs, however. Nigeria’s young population needs jobs, and the hope is that the new economy of technology, and telecoms could provide these. Businesses, such as Jobberman, which has become the continent’s biggest job marketplace, streamline the route into employment for young Nigerians; companies such as Pagatech and Solo make the process of payment more efficient, reducing their costs and helping them to grow and hire. Online retail businesses recruit in areas from technology to distribution and warehousing. Agriculture can be made more efficient and profitable using mobile payments and insurance. Alongside the direct jobs created, there are efficiency savings to be made across the economy.
The cost of power and a scarcity of skills have historically made life difficult for entrepreneurs, as well as big business. Funding was hard to come by, and founders could often find more attractive opportunities in big companies or overseas. With a new impetus building behind the sector, that is changing, Davies says.
“It’s not been an environment that was conducive, but now we’ve got the kind of ministers that we have in Segun Aganga and Omobola Johnson, who are trying to break down barrier … Tech is moving … Two or three guys might make a couple of million dollars out of being here [at iDEA] today.”