Despite Nigeria having many enthusiastic entrepreneurs, the country’s economy does not favor many young entrepreneurs an opportunity to grow their startups. Consequently, the country continues to witness the collapse of many startups. A good example is J-gears startup founded by Andrew Akangbe which was launched in 2015. The company only lasted for two years before the collapse. The company collapsed due to inadequate finance and unfriendly economy in Nigeria.
Before the closure, the company had signed a MoU with a Djibouti based company. The MoU was to expand J-gears operations within Africa. The expansion was to take place on 75-25% profit share terms. It was also supposed to employ over 450 individuals in Djibouti and Nigeria. Besides, the J-gears training program which the startup launched might be closed soon.
Despite the large size of the Nigerian economy, it has failed to have a gradual growth. The country has constantly faced fluctuations and imbalance in more than 3 decades. This is attributed to the collapse of the crude oil market in 1985. In spite of that, the country’s mixed economy is of advantage to businesses and entrepreneurs. Nigerian’s estimated 37 million SMEs contribute much to the economy. It also accounts for 48% of the country’s GDP.
There was an inflation that was realized in the country in 2016 which led to the decline of the GDP. However, the situation ended in 2017 by Federal Government (FG) role. The quick response by the FG was attributed to the SMEs. The country’s 37 million SMEs accounts for above 80% of employment. Many SMEs depends on families’ and friends’ contribution to finance their businesses. However, a small number of SMEs specifically startups have managed to raise foreign capital for business management. However, startups attract more investors compared to traditional SMEs. This is because they offer universal tech-driven solutions.
According to the data released in 2016, Kenya, Nigeria, and South Africa got almost 74.5% of the total funding received by African startups. Additionally, Nigeria that had the largest investment focus got 29% of the total investment in African startups. Moreover, many Nigerian startups such as iROKOtv, Paystack, and ToLet have attracted foreign interest. This gives hopes to Nigerian and African startups on attracting foreign investment. The foreign investment in Nigeria is an advantage to its economic growth. It is also an advantage to the currency’s global recognition although the country’s currency has not received much recognition. The most recent research reports show that not all MSMEs stands a chance of getting employment. It also shows that the initial startups capital for microenterprises is less than ₦50,000. On the other hand, small and medium enterprises are less than ₦10 million. These statistics prove that startups get funding only at the last stage since this is the time when they need to establish a good business. Sadly, only 60,000 of the 37 million MSMEs can offer more employment opportunities and many startups fall here.
Nigeria has more than 1,000 startups that have created over 10,000 jobs. The startups have changed the mode of payments. Salary payment no longer depends on certificates. For instance intern’s salary ranges from ₦30,000 – ₦50,000 and full-timers range from ₦70,000 – ₦400,000. Normally, the salary scale depends on the employee’s role in many startups. All startups undergo three types of expenditures which include resources, people, and technology. Apart from salaries, other money goes to electricity, fuel, logistics, and taxes.
The funds raised by the startups do not necessarily go to the Nigerian banks. Fundings are offered to startups depending on their agreement with investors. But the Central Bank of Nigeria has an important level of rigidity and extreme bureaucracy. The bank’s strict policies affect the dealings of entrepreneurs raising millions of dollars with local banks. Unfortunately, commercial banks are worse.