Big without Nigeria

7 min readJul 26, 2022


About 70–75% of the startups I have reviewed as an analyst were from Nigeria, or were looking to expand to Nigeria as a secondary market. It’s no secret that Nigeria is the go-to market for a decent number of African startups. It seems that the default answer to ‘what is your expansion plan’, is ‘Nigeria’. So why is this the case? Let’s break down the case for Nigeria into; 1. Why Nigeria and 2. Why not Nigeria.

Why Nigeria

1. Lagos is the buzzy tech city of Africa.

Lagos is the unofficial startup hub of Africa. It’s the silicon valley rush all over again. We have seen this previously with cities such as Tel A Viv in Israel and Bangalore in India. For Nigeria, this all started back in 2009 with the likes of Paga making remittances, bill payments, and sending and receiving money a breeze. This was the beginning of the fintech wave in Lagos. The fintechisation has seen the rise of other leading startups such as Flutterwave, Paystack and Opay. The reason fintech companies did so well in Lagos, is because they are the backbone of any internet business; and Nigerian businesses and individuals were in desperate need of these services given the country’s rigid banking system.

As the startups grew, so did the number of VCs who came rushing in to tap into the ‘African potential’. This encouraged more founders to create more startups and the cycle kept on going. Since then, the country produced 5 of the 7 unicorns in Africa. Additionally, it secured 60% of all funding raised in the continent in 2021. With such a thriving tech ecosystem, it seems obvious that if a startup wants to win, it must stay close to where other startups are winning.

2. Size matters and the population said, “bigger is better”.

Nigeria is the most populous country in Africa with about 200 million people. But what could this mean for a startup? If a company gets it right, it could win a very big portion of the market and scale rapidly. For example, you have a company, making an app targeting 18 to 40-year-olds with smartphones and access to the internet. In Nigeria, that gives you a TAM of about 35 million people. This alone is about 3 times the entire population of Rwanda! Even winning a small portion still gives the company a significant market share compared to other smaller countries. Let’s compare this to Senegal, which has a population of 16 million people, using the same example above. If the company wins a small portion of the total addressable market in Nigeria, say 10%, that would give it 3.5 million users. For the company to achieve the same volume (from the same demographic) in Senegal, it would need to win about 40% of the market, from a TAM of 8 million people. That is a whole lot of effort for the same user volume. Winning big in one region also saves a company the cost of scouting, learning and setting up in a new location. This process could take anywhere from a couple of months to years, all the while, the company is not generating revenue from that operation.

Another advantage is that a huge population has numerous innovation opportunities. Countries with large populations such as India, China, the USA, Brazil and in our case Nigeria often follow the same pattern of disparity, inequality and unevenly distributed resources. What this means is for every city like Bangalore, Shanghai, New York, Sao Paulo and Lagos, there are equally big places like Shravasti, Guizhou, Detroit, Piauí state and Taraba state respectively. These places are greatly underserved and riddled with poverty. These regions lack infrastructure, quality education, have low literacy levels, no financial inclusion and health care is inaccessible. Oftentimes, local governments don’t have the capacity, know-how or interest in improving the status of these regions. This can be seen as an advantage by pioneering founders and innovators, who can develop and capture a significant portion of the underserved population. A great example from Nigeria is Rural Farmers Hub. According to one of its founders, Adegun, the startup is very active in the northeast as it contributes to rebuilding communities post-insurgency.

3. Regulation.

This first point ties in closely with the population point. If a company only had one option to figure compliance out, wouldn’t it want to be in a place where winning a smaller portion of the market would go a long way? Think of it this way, if a company could have a neo-bank in Africa, it would rather deal with Nigerian regulators, with a plan of capturing 10% of the market. In the long run, this is easier than figuring out the compliance in more than one market at the same time; to achieve the same user volume.

Second, Lagos being a tech hub has played a huge role in defining and shaping research and policies in different sectors. Fintech companies are shaping policies in alternative lending, digital banking, digital currencies, KYC etc. These policy iterations and improvements make it easier for other startups to set up in a location that is more familiar with certain tech or is welcoming to innovations.

Why not Nigeria

1. Regulations

Nigeria’s regulations can also be your undoing as much as they can make it easier for you. While getting regulated in Nigeria would go a long way, it can be a harrowingly hard process. It takes well-established and connected founders sometimes years to get full compliance. This is a challenge for large, well-funded and resourced fintech companies as well. Unlike these companies, a new startup may not have the resources to keep up the fight for long. What’s more, is that this blocker goes beyond the fintech space. Promising start-ups have had to stop operations due to the rapidly shifting position of the government. For example, bike-hailing apps, a promising alternative to Lagos’s traffic jams and poor road network, were banned for safety and security reasons by the Lagos state government.

2. Competition

The buzzier the place, the busier it is. Lagos is probably one of the most competitive markets in the world. This is mostly the case for fintech companies, however, with the rise of other sectors, competition is getting stiffer and stiffer. Currently, Nigeria is the leading country in Africa when it comes to the number of startups. This number was estimated to be around 3,300 in 2020!

3. Market familiarity

This is directed toward companies that plan to expand into Nigeria from other African markets. What is your company’s familiarity with the Nigerian market? How vast are your specialists? Do you have the time and resources to figure it out in the fast-paced Lagos ecosystem? Is the opportunity large enough to warrant the risk? It can be easy for a company to find itself chasing the ‘Nigeria is next’ fad. Take the time to see if the market is right for you.

4. Ease of expansion

It’s easier to have some industries expand regionally, for example, logistics. If a company is set up in Kenya, it’s probably easiest to expand to other East African countries first, before tackling the rest of Africa. Therefore, it can be surprising seeing a logistic tech company planning its expansion to Lagos, miles away from its HQ, all in the name of winning a ready market. This can also apply to markets such as mobile money, where certain regions already have overlapping service providers.

5. Lagos vs Nigeria. It is not the same

As much as Lagos is the tech hub of Africa, Nigeria as a whole isn’t leading in the African tech ecosystem. According to research done by fDi Intelligence, the country ranked 6 out of the 17 countries selected for the study. The report judged and ranked the countries on business climate, cost-effectiveness, connectivity, employee experience and economic potential. This showed the huge disconnect between Lagos’ ecosystem and the rest of the country; which has security issues, poor infrastructure and recurring political instability. In the study, Nigeria was missing altogether in the top 10 rankings for categories such as cost-effectiveness and the level of country-wide tech talent. This highlights the frustrating state of conducting business in Nigeria as a whole, where entrepreneurs must contend with stifling government policies, infrastructural issues such as poor internet speed, access and connection, and a host of other systemic challenges. South Africa, Kenya and Egypt ranked 1,2 and 3 respectively due to economic potential, business friendliness and infrastructure investment. Countries such as Ghana, Morocco and Tunisia are doing as well in areas such as cost-effectiveness and infrastructure development and initiatives.

The startup culture glorifies big wins and continuous never-ending rapid growth. To get that, founders can easily overlook important factors that drive a company’s success in a specific market. Africa is a huge continent with massive opportunities; it is possible to be big without Nigeria.




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