Market Analysis Project
Market: Financial Technology
Geographical Area: Nigeria
Market Outlook & Size
Nigeria has the largest population in Africa with over 206 million people. Nigeria even though it boasts
of one of the largest or even largest populations in Africa but has one of the lowest financial inclusion
rates. According to the Enhancing Financial Innovation & Access (Efina), 35.9% or 38.1m Nigerians are
financially excluded. This has led to the rapid growth of the financial technology sector to solve the
problems attached to the traditional finance and banking sector and bridge the financial inclusion gap.
The Nigerian fintech sector has become more attractive to investors over the years, FinTechs have
accounted for ~10% of direct investment into Nigeria from 2017-to 2019 and can contribute pre-COVID 19 estimates of up to $3bn - EFinA2020. According to Frost and Sullivan Nigeria's FINTECH revenue is
expected to reach US$543.3m in 2022 from US$153.1m in 2017. With the accelerated rate of fintech
adoption digital payments have increased drastically more than fivefold since 2014, reaching $256
billion in 2019.
However, there is still so much opportunity for growth as McKinsey estimates that FinTech accounted
for only 1.25% of retail banking revenues in Nigeria in 2019. According to Efina, less than 30% of adult
Nigerians use products or services from non-bank formal financial institutions. Only 4% utilize money,
and about 25 utilize microfinance banking. These are not amazing numbers but show room for
expansion. In the area of marketing, only 22% of Nigerians are aware of mobile money services by no
bank financial services providers and most of these Nigerians make up the 52% of indigenes that live in
the urban. This brings about the question of which and what services cater to the remaining 48% of
Nigerians that live in rural areas. Most fintech companies focus on payments, remittances, savings,
lending, and insurance leaving out other sectors that could be disrupted by financial technology e.g
healthcare, transportation, education e.t.c
In the area of regulations and regulatory bodies, the Central Bank of Nigeria(CBN) guidelines on
Payment Service Banks (PSB) is restricting competition in the financial services space CBN PSB
Guidelines. By mandating very elevated capital prerequisites for the PSBs, CBN is preventing
competition. Though in recent times regulatory bodies are becoming more friendly in terms of startup
regulations and requirements and the Federal Executives Council's approval of the Nigerian startup bill is
an example of this.
Customer Analysis & Perceptions
Nigeria's Fintech adoption is cheerled by the youths as people from the ages 15-64 account for 53.77%
of the country's population according to Statista The aesthetic factor to fintechs over traditional banking
and finance companies is the lack of numerous physical centers which reduces operating cost by a huge
margin but this acts as a double-edged sword as Nigerians over the age of 30 are skeptical of
organizations or companies with little to no physical locations. This advantage allows fintech to offer
customers compelling benefits. For example,
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Kuda, A Nigerian Neobank offers its customers, 25 free transfers every month and loans with
0.3% interest per day.
Sumo trust, A Nigerian fintech offers 10-15% interest on savings per annum which is more than
the 2-5% banks offer
Piggyvest, A Nigerian savings fintech offers 8-10% interest on savings and allows customers to
save in dollars.
All this coupled with the fact that fintechs generally have more flexible and less stringent KYC
requirements than banks makes fintechs more appealing to customers.
Nigeria majorly consists of low-medium income households so the average Nigerian is looking for means
to spend less, save more, and generate more revenue which fintechs provide solutions.
Market Trends
Key Trends
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Payment gateway(Payment as a service)
Virtual Naira and Dollar Cards
Digital Banking for Consumers and SMBs
Lending and BNPL services
Cross Border Payments
Blockchain Payments & Services
Insurance
Numerous High Valued Startups are seeking capital raises for expansion into other regions and the
development of new products to survive the highly competitive fintech space, leaving customers
brimming with excitement after every raise wondering what's next for the ever-growing biotech
ecosystem. One of the most valued services offered by fintech startups in recent times has been the
creation of virtual cards, due to the restrictions offered by regular banks cards in terms of spending
limits and not working on international platforms (Netflix, Youtube, Spotify, etc) this has been a lifesaver
for many customers.
Grassroots banking-as-a-Service seems to be the latest thing in the fintech space. Thus business model
uses IT infrastructure and agency banking to help local financial institutions tackle financial inclusion for
underserved communities. Grupp is one of the startups that offer grassroots banking as a service
solution. Grupp utilizes a silent middleman strategy to help MFBs offer financial services in communities
and even set up local agent bank networks, agency banking is becoming a commodity.
With so much potential in the Nigerian fintech space, it's one of the easiest to enter as there is room for
expansion and financial inclusivity isn't where it should be. The problem commonly associated with the
Nigerian fintech space is the lack of regulation surrounding the space. In 2021, we witnessed the SEC
and CBN move to block the accounts and restrict the operations of wealth management startups the
likes of Trove finance, Bamboo, and Chaka as they were not registered in the country and not allowed to
sell foreign securities to Nigeria. This led the startups to have to cooperate with regulators to acquire a
newly created license to offer this service from the SEC to continue operations.
At the moment, most startups venture into unregulated or vaguely regulated areas. The Start-Up Bill
when passed into law would play a crucial part in the rise of the tech industry in Nigeria. Nigerian StartUp Bill (“the Bill”), a suggested regulation is a product of the Nigerian Startup Bill Project (an initiative of
Nigeria’s tech startup ecosystem and the Nigerian Presidency geared towards harnessing the potential
of the Nigerian digital economy through co-created regulations). The Bill when passed into law, will
ensure that Nigeria’s laws and regulations are friendly, clear, planned, and will work for the tech
ecosystem.
Apart from the Start-Up Bill, the Central Bank of Nigeria (“CBN”), the Securities and Exchange
Commission (“SEC”), and other financial regulatory agencies have issued different memos and
regulations directed toward the development of the fintech industry.
Deal Activity
2022 Q1
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Flutterwave raised $250 million in its Series D funding round valuing the startup at over $3
Billion
Cassava, a digital insurance startup raised $4 million in its pre-seed funding round
Bamboo, a brokerage app that allows Nigerians to trade US stocks raised $15 million in its
Series A funding round
Credpal, a BNPL service raised $15 million in equity and debt in its bridge round
Moove, a mobility fintech startup raised $105 million in its Series A2 funding round
Bridgecard raised $440k in its pre-seed round
Afriex, a blockchain startup raised $10 million in its Series A round valuing the startup at $60
million
2021
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MFS Africa acquires Baxi for an undisclosed amount in an all-cash acquisition. The secondlargest acquisition in Nigeria
Flutterwave acquires Disha for an undisclosed amount.
Piggyvest acquires Savi.ng
Chipper Cash raised $250 million in its Series C funding round valuing the startup at $2 billion
Flutterwave raised $170 million in its Series C funding round valuing the startup at $1 billion
Kuda, a Neobank $25 million in its Series A funding round.
Fair Money, a lending startup raised $42 million in its Series B funding round
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Busha, a block chain and crypto startup raised $4.2 million in a seed funding round
Prospa, an online bank for SMBs raised $3.2 million in a pre-seed funding round
OnePipe, an API fintech raised $3.5 million in a seed funding round
Kippa, Money management for SMBs fintech raised $3.2 million in a pre-seed funding round
Sparkle, a Neobank raised $3.1 million in seed funding round
PayHippo, a credit startup raised $1million in pre-seed and $3 million in seed funding rounds
Klasha, a cross-border payment fintech raised $2.4 million in seed funding round
Kuda, a Neobank $55 million in its Series B funding round valuing the startup at $500 million
2020
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Stripe acquires Paystack for $200 million+. The largest startup acquisition in Nigeria
Kuda, a Neobank $10 million in its seed funding round
Flutterwave raised $35 million In its Series B funding round
Aella Credit, a credit startup raised $10 million in debt financing
2019
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Dealdey, e-commerce startup shutdown
Opay raised $120 million in its Series B funding round
Opay raised $50 million in its Series A funding round
Caketunes, an online marketplace startup for producers and beat sellers shut down
Fair money raised €10 million in its Series A funding round
Oyapay, a startup built for offline businesses to accept payments shut down
Buycoins, a crypto startup raised $1 million in its seed funding round
Kuda, a Neobank $1.6 million in its pre-seed funding round
Nomba formerly Kudi, raised $5 million in its seed funding round
OneFi, a credit startup raised $5 million in debt financing .