Starting A Business In Nigeria? These New Capital Sources Are Your Best Option


“As a first-time entrepreneur, your first source of funding should probably be your friends, family or personal savings, before seeking angel or VC funding,” says Ozioma Obiaka, a Director at TalentBase, a Lagos-based HR and Payroll software provider.

Ozioma is part of a growing wave of Nigerians who have come back to Nigeria after several years of studying and working in the Diaspora.

Positive Macroeconomic trends in emerging economies, and economic stagnation in the West, have drawn numerous repatriates (repats) to Nigeria.

While many repats have found opportunities in emergent professional sectors such as investment banking and consulting, a recent McKinsey Global Institute study on Nigeria (Nigeria’s Renewal, July 2014), found that Nigeria is developing a large consumer class who by 2030, are projected to number 160 million, and triple their discretionary spending to almost $1 trillion.

Co-Founder of Easy Taxi Nigeria, Bankole Cardoso, also a repat, is particularly buoyant when discussing the opportunities in Nigeria: “The Nigerian market is ripe with opportunities that are not available in the West. With our youthful population there is a market for almost everything and over the next 20 years the Nigerian economy will become one of the biggest in the world.”

Many have the following things in common in their quest to raise startup capital: bootstrapping; capital from friends and family; and knowledge/access to Nigeria’s nascent network of startup incubators, angel investors, and venture capital.

Nigeria’s network of venture capital firms, angel investors, and startup incubators, may well be increasing in number, but according to Ozioma, “they typically want to see some form of progress before committing any capital to a venture.”


Startup incubators:

Startup incubators are usually collaborative programs run by both public and private entities, designed to help early stage businesses grow, by providing workspace, seed-funding, training, and mentoring.

Examples of Nigerian oriented incubators include: Co-Creation Hub, the Tony Elumelu Entrepreneurship Program (TEEP), and Wennovation Hub.


Angel Investors:

Angel investors are affluent individuals that provide capital for business startups, usually in exchange for ownership equity or convertible debt. Typically, angel investors have also sought to collaborate with each other in what is commonly referred to as angel investor networks. Angel investor networks, which sometimes partner with incubators, enable angel investors to pool their resources, in order to help budding entrepreneurs.

Examples of Nigeria focused angel investors include: Opeyemi Awoyemi – Co-founder at Jobberman and investor in Cashenvoy, and Chika Nwobi – Founder of, and investor in Jobberman. A prominent angel investor network is the Lagos Angel Network (LAN), an initiative of the Wennovation Hub.


Venture Capital:

Venture capital is money provided by investors to early stage firms and small businesses with perceived high growth potential. The majority of venture capital comes from a group of wealthy investors, investment banks and other financial institutions. The aforementioned groups pool their resources into partnerships called venture capital firms.

One key difference between venture capital and angel funding is that venture capital is probably more suited to early stage businesses that have already received angel funding, but require a significant injection of funds to accelerate growth.

Two other differences between venture capital and angel funding include:

  1. Venture capitalists often require a board seat, and a board of directors to be formed, thereby giving them a stake in major company decisions.
  2. Venture capitalists conduct lengthy due diligence before deciding on whether to invest in a company – sometimes six months or longer.

Examples of Venture capital firms with Nigerian interests are Adlevo Capital and EchoVC Partners.


Government and Other Funding Schemes

For the vast majority of Nigerians who are unable to start businesses due to a lack of bootstrap funds or capital from friends/family, a bank loan and government Small and Mediem Enterprise (SME) funding initiatives are the most visible paths to startup capital.

Examples of government SME initiatives include the Enterprise Graduate Empowerment Scheme funded by Nigeria’s Enterprise Bank, the Youth Employment in Agriculture Programme (YEAP), and the Youth Enterprise With Innovation in Nigeria (YOUWIN).

Though an obvious route to startup capital, bank loans are often very hard to attain for the average Nigerian. “Basically they don’t get the loans. If they are lucky, the interest rates charged by the banks will be closer to at least thirty percent”, says Olubunmi Asaolu, Head of Equity Research at FBN Capital. When added to other costs such as generator fuel, bank loans even when given, are a major hurdle for Nigerian entrepreneurs seeking startup capital. Moreover, government initiatives though helpful, are often not as scalable or efficient in the fund disbursement process, as they proclaim to be.

The World Bank’s 2015 Doing Business rankings offers a mixture of quantitative results, as to the ease of raising finance for a business in Nigeria: ranking a paltry 170 out of the 189 economies surveyed overall, 52nd in getting credit (up 73 places), and 129th (up 9 places) in starting a business.

The new avenues of startup capital are beneficial and growing in number, but in order to truly be inclusive, more effective government SME programs, in tandem with lower interest bank loans, are needed. Joint ventures between banks and the government, where business literacy is promoted, thereby lowering the risk on the part of banks to give startup capital, is a start.

All groups have a part to play in helping more Nigerians fulfill their entrepreneurial potential.


By Tosin Taiwo

Tosin is Lagos based entrepreneur and human resources professional. He is interested in start-ups, current affairs, and sports.


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