A recent report by TLP Advisory, a venture capital law firm revealed the alarming financial struggles within Nigeria’s startup ecosystem. Nearly half of venture-backed Nigerian startups founded in the last decade generate a mere annual revenue of less than ₦10 million ($6,000). In stark contrast, only 15% of these startups boast annual revenues exceeding ₦250 million ($149,000).
Startups in Nigeria face significant barriers to growth. Insufficient capital tops the list, hindering their ability to expand. Limited market reach and unclear regulatory policies further compound their challenges. Additionally, outdated revenue models hinder innovation and progress. These obstacles collectively hinder the potential of Nigerian startups.
Nearly 16% of respondents admitted to stagnant growth over the last decade, with 8% unsure if they’re growing at all.
About 30% of startups reported taking four years or more to secure their first funding.
Femi Longe, co-founder of Nigeria-based accelerator CcHub said “People who raised money in US dollars, who are earning in Naira, and who have to report to investors who invested in US dollars, need to be doing almost three times more work and earning three times more income because the currency has devalued by more than 70%.”
High interest rates and complex funding processes further deter many from seeking venture capital. However, alternative funding sources have proven critical, with angel investors including family and friends (43%), debt financing (18%), and grants (15%) contributing to startup growth.
Startups also struggle with talent retention, particularly in marketing departments, which affects their visibility and growth. Poor company culture is a key factor, with 20% of startups admitting they lack any identifiable culture.
“Culture is what your company rewards and what your company punishes,” explained Tomiwa Aladekomo, CEO of Big Cabal Media. Companies with unclear career paths and limited employee engagement face higher turnover rates, as remote work and transferable skills make job-hopping easier.
Nigeria’s regulatory environment remains a significant hurdle. Taxes, licensing, and compliance requirements burden startups, with many founders calling for stronger collaboration with policymakers under the Nigerian Startup Act.
Despite the challenges, founders remain optimistic. “It’s still day zero for Nigeria’s startup ecosystem,” said Olumide Soyombo, founder of Voltron Capital. “Because if you look at our trajectory against other markets like India and Latin America, they’re probably 10-15 years out so it’s still a journey to go.”
