The Nigerian government has announced plans to establish a new $500 million innovation fund for fintech startups. According to Nigeria’s Vice President, Prof Yemi Osinbajo, the government is seeking support from the African Development Bank (AfDB) to raise the funds.
Prof Osinbajo made the disclosure during the opening ceremony of the 22nd African Securities Exchanges Association (ASEA) Annual General Meeting and Conference organised by the Nigerian Stock Exchange (NSE) in Lagos.
Looks like all that talk is finally translating into 'Chairman do something'. We thank God for small mercies | FG, AfDB Plan $500m Fund for Fintechs – THISDAYLIVE https://t.co/zcCObN6p0M
— tyro (@DoubleEph) November 27, 2018
The idea is to ensure fintechs get the right amount of funding needed to support innovation in the country.
“We are accordingly working with the AFDB to establish a $500 million innovation fund, this will support activity in this sector,” he said. “Given the size of our economy and the potential of technology and creative segment, I am hopeful that capital market operators will work towards innovative financing solutions to lend further support to these two sectors.”
Doubts About the Proposed AfDB Fund
But as resounding as this news seems, there are a few reasons to be a little sceptical.
What are the numbers? In just 3 days, 49 projects worth US$38.7 billion were secured at the #AfricaInvestmentForum. “#Africa is ahead of its time. Business as usual is no longer the norm", said @akin_adesina, President of @AfDB_Group. https://t.co/hveoE8XI4V pic.twitter.com/BGF1FoGABE
— Africa Investment Forum (@AIFMarketPlace) November 19, 2018
For one thing, this is not the first time the Vice President is making such announcement. Prof Osinbajo first broke the news during an interview at first Africa Investment Forum (AIF) organised by the AfDB two weeks ago. During the course of the interview, the Vice President shared sets of vague promises and policies designed to improve competitiveness and growth of the Nigerian ICT sector. One of such promise was the $500 million fund.
“Approaching the AfDB for technology innovation fund was another move we are taking, knowing fully well that the bank has invested so much in innovation in Rwanda, Ivory Coast and some other African countries,” Osinbajo said.
This doesn’t really appear to be a serious policy move. Rather it seemed like an appeal to the AfDB.
Furthermore, there has been no explanation about how the supposed $500 million fund will be raised. Will it be an investment pool, a partnership, a bond, or debt agreement? Nothing is clear.
And the news does comes as an awkward one considering that the Central Bank of Nigeria (CBN) is in the process of upwardly reviewing requirements for fintech license.
CBN’s new capital requirement to get a License to operate as a fintech startup is N5bn. And this is the Lucrative aspect of the #Nigeria #startup ecosystem. This is reserved for the rich and their kids with MIT, Harvard, Yale networks. Not some Bayo from Lautech.
— Niyi. 💻🥃 (@xniyi) November 18, 2018
According to a draft shared by the Bank, startups will need to have at least N5 billion in their coffers to obtain the Payments Service Providers (PSP) Super Licence. The licence covers companies currently operating payment gateway platforms, POS services, switching services etc. But as it stands, only one Nigerian fintech has the funds to obtain that license, and that would only happen if it doesn’t spend on salaries and other expenses.
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