During a recent interview, Private Equity and Venture Capital Guru Abi Mustapha-Maduakor spoke extensively on the rise of Fintech companies in Nigeria and what lies ahead.
Disclaimer: The interview below was not organized or conducted by EntrepreneurNG. We have shared it under permission because we believe that in answering some questions, Abi Mustapha-Maduakor identified major critical indicators of the Fintech industry and what lies ahead for Nigeria.
Who is Abi Mustapha-Maduakor
Abi is the Chief Executive Officer of the African Private Equity and Venture Capital Association (AVCA), and brings several years of strategic leadership, financial and investment management and operational management to the role.
Prior to this role, she was Head of Business Operations and Finance at MedAccess (subsidiary of the CDC Group), which focuses on providing innovative finance to facilitate access to medicines across Africa and Asia.
She has held leadership roles in AVCA as Chief Operating Officer and as the Special Adviser to the Minister of Industry, Trade and Investment in Nigeria, where she focused on programs and policies to spur private sector investment and SME growth.
She began her career specialising in Group Treasury structured products in Royal Bank of Scotland and Lloyds Banking Group and qualifying as a Chartered Accountant through Ernst & Young.
Abi is currently completing the Oxford Executive MBA at Saïd Business School. She holds an MEng in Chemical Engineering from Imperial College London.
Excerpts from the Interview
Question 1:
There has been significant activity in the African tech ecosystem. Do you see this sector growing, at least in terms of diversity of funding for fintech startups in Nigeria? Are there any figures to quantify or further illustrate this?
Abi Mustapha-Maduakor (AMM): Technology has developed into one of the highest interest emerging sectors for private equity and venture capital investment in Africa. According to AVCA’s Sector Snapshot on Technology, published in April 2021, there were 572 reported Private Equity (PE) and Venture Capital (VC) fund investments in technology in Africa between 2015- 2020, totaling $6.5 billion. Technology has certainly disrupted various sectors on the continent resulting in the development of innovative homegrown solutions to address challenges therein. In 2020, investments
in technology and tech-enabled companies operating across a variety of sectors accounted for 55% of the total PE and VC deals recorded in Africa, according to AVCA’s 2020 Annual African Private Equity Data Tracker. The sector is poised for exponential growth as the continent catapults further into a digital revolution, bringing efficiency, reducing fragmentation and driving innovation within and across entire sectors. The improving depth and breadth of digital connectivity on the continent is gaining international recognition: eight of the 25 economies identified as outperformers (countries with high Global Innovation Index scores relative to their level of economic development) in the 2020 edition of the Global Innovation Index were from sub-Saharan Africa. These strides towards digitalization across the continent will catalyze further public and private investment in the sector. Nigeria attracted 14% of PE and VC fund investment in Africa’s technology sector (2015-2020) and we expect this trend to continue going forward. Particularly, the fintech industry in Nigeria experienced significant increase in 2020 and attracted increasing [interest] from a wide range of domestic and institutional investors. In 2020, fintech companies in Nigeria raised $112 million from investors; we can certainly expect to see an increase in commercial capital allocated to the same.
In particular, fintech in Nigeria is attracting significant investor interest. In 2020, fintech startups headquartered in Nigeria raised capital from investors based in the United States, Nigeria, United Kingdom, Japan, Singapore, Ghana, and Morocco to name buta few. The sector is further fueled by a number of growth drivers. Regulatory changes were a key enabler to growth in the fintech industry in Nigeria in 2020. The Central Bank of Nigeria implemented the Regularity Sandbox, allowing CBN-licensed firms to live test new and innovative products in a controlled environment before launching their products to the public. This push to create a strong and dynamic digital finance ecosystem set Nigeria on a positive path to receiving diverse and multiplied funding for startups in the fintech space.
Question 2:
Do you see momentum picking up for the fintech industry in Nigeria going forward this year too with Covid?
Abi Mustapha-Maduakor (AMM): The Covid-19 pandemic was not a headwind but rather a catalyst for innovation in Africa’s tech ecosystem. Although the pandemic ushered a period of subdued investment activity in Africa, this lull in deal-making was short-lived. By mid-2020, investors were exhibiting renewed confidence in the continent, and the year saw several PE and VC deals benefitting fintech startups. Examples include the $60 million Series B investment round in Thunes led by Helios Investment Partners and the $30 million Series B investment in Chipper Cash.
Examples of late-stage PE deals in the second half of 2020 include the $30 million investment in mobile-technology insurer BIMA by Leapfrog and other investors in September 2020, as well as the $20 million investment in digital payment solutions provider Global Accelerex by African Capital Alliance in November 2020. Looking ahead to 2021, we can expect the pace and volume of technology investment in Africa to continue gaining momentum. Fintech startups Chipper Cash and Flutterwave, the two most recent additions to the continent’s limited breed of ‘unicorns’ (startups that reached a $1 billion valuation), both successfully raised $100 million + Series C funding rounds in 2021.
Long-term growth fundamentals remain in place driving the expansion of technology in Africa. Within the fintech space, the rapid growth of mobile and internet penetration in sub-Saharan Africa, coupled with challenges related to traditional banking infrastructure and services in the region, have laid the foundations for fintech to flourish and transform the financial services sector on the continent. According to AVCA’s 2020 Annual African Private Equity Data Tracker, financial technology accounted for 70% of the total number of deals within the financial sector in 2020, and consistently attracts a significant proportion of the value of private equity funding channeled to the continent.
We expect this trend to persist into 2021.
