Equity funding for startups in Nigeria and other African countries dropped to $1.4bn as of September 2023.

The shortfall stood at $1.8bn or 56.25 per cent compared with $3.2bn recorded in the corresponding period of 2022, according to data from Africa: The Big Deal.

The data firm disclosed that September 2023 was the second-lowest month this year in terms of funding raised by start-ups on the continent. It stressed that the month was the second-lowest month for start-up funding in Africa since 2021.

Commenting on the amount raised, it said, “In cumulative terms, start-ups in Africa raised $1.4bn in equity funding in the first nine months of 2023, less than half the amount they had raised in the same period in 2022 and 2021.

“If we include debt and grants, 2023 numbers still track much below 2022 and 2021 numbers, though slightly less dramatically (-40 per cent and -26 per cent respectively). What is particularly pulling the numbers down is the fact that it has now been more than a quarter since the last $100m+ transaction was recorded, and that there have been many fewer of those in 2023 so far compared to the previous two years.”

The firm highlighted that three transactions (equity + debt) made up 58 per cent of all the funding raised last month: Wetility (South Africa) raised ~$48m in a mix of debt and equity; SunCulture secured $12m in debt; and Lupiya (Zambia, female-led) closed its $8.25m Series A.

September follows the trends of startup funding slowdown on the continent and globally. Nigeria has been one of the worst hit on the continent with funding to startups falling to $470m in the last year (July 2022 to June 2023), a 77 per cent decline from the $2bn they raised between July 2021 and June 2022.

Also, total funding into African startups declined by 57.2 per cent year-on-year to $649.30m in the first quarter of 2023, according to Disrupt Africa.

The dip in equity funding has change funding behaviour on the continent with startups on the continent focusing more on debt financing more than they did before. In 2022, borrowing by startups rose by 106 per cent to $1.55bn in Africa, according to Partech Africa.

Responding to the decline in startup funding, the Nigerian government recently announced a plan to help startups raise their total yearly funding rounds to $5bn by 2027.

According to the Minister of Communications, Innovation and Digital Economy, Dr. Bosun Tijani, the country intends to stimulate the growth and sustainability of startups, with a specific focus on those developing innovative solutions for critical sectors of the economy.

He said, “Recognising the critical role of patient capital in the growth of startups, we are committed to increasing the local availability of patient capital. We intend to create an environment for startups to raise the funding they require to thrive locally and promote the domiciliation of startups within our nation.”

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