Lagos, capital of fintech

The take-away

  • Nigeria is one of the most attractive African countries for international investors. Fintech receives around one-third of this funding.
  • Only 40% of Nigerians have a bank account, but more than 60% have a smartphone – a good basis for developing digital financial solutions.

“The advantage of doing business in Lagos is that everything you need is here: financial institutions, supervisory authorities and service providers,” says Adedamola Tolani, an expert at Appzone, which develops online banking software. Appzone is one of about 40 financial technology startups based in Lagos. The fintech industry is strong enough here to attract international investors: since the beginning of the year, the online savings startup Piggybank has raised $1.1 million; Paystack, which encourages businesses to accept digital payments, has secured $8 million from Visa, Stripe and Tencent; and the instant money transfer service Paga has landed $10 million.

Investment in financial technology outstrips the rest of Africa’s growing tech sectors, including healthtech, agritech and e-commerce. In 2017, African startups raised $560 million, with Nigeria one of the most attractive African nations for investors according to a report by Partech Ventures. Nigerian startups accounted for $114.6 million of those funds – nearly one-third of which went to fintechs.

Lagos was therefore a logical location for this year’s African Fintech Summit. The two-day event featured more than 50 speakers, with investors from the United States, Europe and the Middle East meeting with Nigerian entrepreneurs to discuss mobile apps, fintech industry practices and public policy.


A favourable ecosystem

With an estimated population of 186 million people, Nigeria’s potential fintech market is significant. “The Nigerian population is relatively young and made up of digital natives,” says Kenza Berrada, co-founder of B-Part Consulting, a firm that helps transform banking and payment services in Europe and Africa. “It easily adopts new habits and is much more pragmatic in its consumption of financial services, which are no longer an end in themselves but more a means of accessing something else.”

The characteristics Berrada describes make the Nigerian population an ideal target for fintechs. These companies offer an alternative to the traditional banking model, which is relatively unpopular among Nigerians. The World Bank’s Global Findex report states that only 40% of Nigerian adults had a bank account in 2017, and only 6% had an online account. By contrast, more than two-thirds of adults have a mobile phone.

With a view to finding solutions to facilitate international money transfers between people and within families, the Nigerian government has taken a lead in supporting fintech development. In the Central Bank of Nigeria’s recent guidelines on mobile money services, the government recognised the important role mobile services play in helping Nigerians manage their money.

Nigeria’s goal is to “introduce a simple regulatory framework for access and then gradually adapt it as new business models emerge,” Berrada says. “The nation was one of the first to implement new banking regulations with the creation of new statuses for financial services, such as the status of electronic money. This led to the definition of standardised, controlled channels for sending, creating and circulating electronic money. The main purpose of these regulations was to make online payments available in a country where many people have mobile phones but few have smartphones.”

Local roots, international development

Another factor underlying Lagos’s success is the presence of startup incubators such as Passion Incubator, Leadpath, Wennovation Hub and the largest, Co-Creation Hub.

Co-Creation Hub doubles as both an innovation centre and a meeting space that brings together entrepreneurs, public authorities, social partners, investors and developers. More than 90 startups have received support since it was established in 2011. Co-Creation Hub offers entrepreneurs a range of programmes – lasting from several weeks to several months – on launching a startup or accelerating the growth of a company already active on the market. The incubator benefits from its proximity to the University of Lagos, also situated in the suburb of Yaba, drawing on a pool of resources with detailed knowledge of the local market.

Although Berrada expects fintechs to flourish in Lagos over the next four years, she emphasises the need for startups to develop across borders. “We need to define regional areas, for example in Sub-Saharan Africa and North Africa. The main difficulty in Africa today is devising business models that can be exported to other countries. Some African governments have begun working together to establish regions with a common legal and regulatory framework. If Africa wants to continue attracting investors, that’s the challenge that lies ahead.”