Lagos houses 88.4% of Nigeria’s startups – report

Lagos is said to be the hub housing most of Nigeria’s startup companies, as 88.4% of the 481 companies tracked for the report started or are in the state. According to the Nigerian Startup Ecosystem Report 2022 by Disrupt Africa, approximately 88.4% of the Nigerian tech startups tracked by the report are based in Lagos.

In the report, out of 173 fintech companies tracked, only 12 are outside Lagos. Though, in the 2021 Fintech Times report, Nigeria’s fintech landscape consists of 210 to 250 fintech companies, key stakeholders (banks, telecom companies and the government), enablers and funding partners (i.e. universities and research institutions, investors, incubators, technology and consumers).

So, the number may be more.

Of the 58 e-commerce companies tracked for the Disrupt Africa report, only six are outside Lagos. Two are in Abuja, one in Aba, one in Port Harcourt, and two in Ibadan. In that space is Alerzo, a retail-tech company that employs 684 people.

The e-health space has 45 companies, and 34 are in Lagos. The ed-tech sub-sector boasts 34 companies, but only three are outside Lagos.

The other tech subsectors, including entertainment, marketing, agri-tech, legal-tech, prop-tech, mobility/logistics, etc, have a combined 170 companies that have only 24 outside Lagos.

Why are innovators building in Lagos?

Silicon Valley investor, Derek Distenfield wrote about his visit, saying, “Lagos is exploding with growth, internet connection can be patchy and faces frequent outages…Despite these circumstances, innovation is rampant in sub-Saharan Africa, partly because the younger demographic is chomping at the bit for the adoption of new technologies.”

For now, commerce in Lagos continues to grow and expand its horizon, and with other states only looking on and enjoying the sight, Lagos will remain the country’s centre of commerce.

Journalist, Alex Onukwe, adds to this thought, saying, “most commerce in Nigeria already happened in Lagos before the startup boom, but it’s also because Lagos tends to get the first taste of new technology infrastructure startups needs. 5G is one example of this.”

‘Tomi Davies, Collaborator-in-Chief (CiC) at TVC Labs, says it is a numbers game. He adds that “it is the combination of population and supporting infrastructure that makes Lagos a startup magnet.

“When you have over 20 million people – and growing – mixed with digital and physical infrastructure the way we have it in Lagos, you get the basics. And, on top of that is the perennially entrepreneurial spirit that defines Nigerians.”

Lagos, a home for all

The former governor of Lagos, Akinwunmi Ambode, 2017, estimated that 86 immigrants enter Lagos from other parts of Nigeria every hour, and less than 50% go back. Why not? It is where everything happens and the only state where development occurs, even though it is only in tiny bits.

Lagos is the cultural and commercial centre of Nigeria, home to the most active ports (sea and air), and is the hub of the country’s fastest-growing sector – Technology. It is known to be the largest city in Nigeria and the second most populous city in Africa. However, you may laugh at its mass when you check the map – but that does not matter, yeah?

This indicates that out of 481 companies tracked, 425 (88.35%) are in Lagos. And, because the report is focused only on 481 tech companies, there is every reason to believe the number is more than that.

Lagos is the hub of Nigeria’s startup ecosystem and is the leading startup city in Africa.

The city is home to Bitmama, a fast-growing crypto platform; Cowrywise, a savings and investment platform; Jumia, Africa’s largest e-commerce site; FairMoney, a loan and payments platform, and it is no surprise.

The growth of the tech sector in Lagos is indispensable, knowing how much attention the city draws to itself and its young population. Its centralisation has always guided innovation. And, the city has always been the centre, just as journalist, Alex Onukwe notes:

We had tech companies in the ’90s and early 2000s built wholly by Nigerians. 

Alex Onukwe, Rest of World.

“Lagos happened not because it was intentionally planned. It happened out of necessity,” he said.

“Next time, it’s going to be deliberately designed. Opportunities should be decentralised.”

A few Lagos startup stories

Hotels.ng, which started as a small startup tech firm, is now one of the biggest online hotel booking agencies in Nigeria, using a seed investment of $225,000 in 2013. In 2015, the company also announced a Series A round of $1.2 million from EchoVC Pan-Africa Fund and Omidyar Network.

In 2018, the company launched its international hotel booking platform, Hotel.africa and its flight booking website, Fly.africa.

Jobberman, which started in a Nigerian University hostel in 2009, has grown into one of sub-Saharan Africa’s most popular job search engines. On April 30, 2015, it was 100% acquired by One Africa Media, which is 30%-owned by SEEK – the world’s largest online employment marketplace by market capitalisation.

In 2012, Jeremy Hodara and Sacha Poignonnec, ex-McKinsey consultants, founded Jumia along with Tunde Kehinde and Raphael Kofi Afaedor, in Lagos. Now, it is a marketplace, logistics service and payment service. 

LifeBank, founded by Temie Giwa-Tubosun, Ayo Michael Olufemi, and Adedayo Ayodele, a company that addresses supply and logistic issues in the healthcare sector, started in 2016 in Yaba, Lagos, the city’s tech nerve centre. It has seen expanded to other cities like Abuja.

More recently, PalmPay launched in Lagos, Nigeria, after raising a $40 million seed round led by Chinese mobile-phone maker Transsion. The company said it would use the $40 million seed funding to grow its financial services business in Ghana.

The state government’s role

The Lagos government launched the Innovation Advisory Council in 2011 to help promote innovations in the state.

The governor, Babatunde Fashola, said Lagos has a good mix of successful indigenous companies, and western multinationals who actively engage, support and finance Research and Development in emerging markets.

”We must be under no illusion,” Fashola told the inaugural meeting of the advisory council. ”Cities who fail to harness the power of innovation will eventually become the customers of those that do.

”But we are fortunate, because, for the average Lagos resident, innovation is in the DNA. We must consistently find new ways to combat local challenges and deliver previously unforeseen value.”

In 2020, the Lagos government awarded 23 young innovators and tech firms a total grant of ₦100 million to pursue various technology-driven innovations.

The governor’s chief press secretary, Gboyega Akosile, said the recipients are the first set of beneficiaries to benefit from the ₦250 million seed capital earmarked, in 2019 as a Research and Innovation Fund by the state government.

“Last December (2019), we inaugurated the Research and Innovation Council with a seed fund of ₦250 million in demonstration of our commitment to transform Lagos into a 21st-century digital economy and Smart City.

“The body has a mandate to facilitate investment in science research, innovation, and STEM education throughout the State, and to encourage the development of innovative solutions to problems, using cutting-edge technology,” the governor, Babajide Sanwo-Olu said.

And, just a few days ago, the Lagos government expressed its readiness to support the growth of the technology sector through support for tech companies and startups.

The state Commissioner for Science and Technology, Hakeem Fahm, said the “[current] administration would continue to leverage technology to transform the state’s economy while easing impediments for businesses to flourish.”

The government’s role in aiding the growth of tech companies is totally necessary because doing business in Nigeria is very challenging, especially as Nigeria is ranked 131 among 190 economies in the ease of doing business.

April 2022, World Bank

The state government also announced in June 2021 that it is set to construct the biggest technology cluster in West Africa.

Sanwo-Olu said the Yaba Technology Cluster, called K.I.T.E., would be a free zone that would allow the growth of funding and financing for innovative ideas generated by entrepreneurs in the tech industry and Fintech space, adding that the ecosystem would also offer free labs for the use of startups to take their innovations to from ideation to the next level.

But, that story ends with the announcement.