The Nigerian tech ecosystem had its fair share of challenges in 2022. These are worth remembering

For one, the Nigerian tech ecosystem had a pretty good run this year, with startups securing some significant wins in terms of funding, massive acquisition deals, and a better regulatory landscape.

But while there have been some bright spots, as highlighted in this article, the Nigerian tech ecosystem also had its fair share of troubles in 2022.

Here, we look at some of the major challenges that rocked the Nigerian tech ecosystem this year — from corporate governance issues, regulatory hiccups, and of course, the wave of layoffs.

Let’s go!

Read also: A list of the biggest wins of the Nigerian tech ecosystem in 2022

Corporate governance, workplace bullying, and sexual impropriety

This year, several Nigerian startups were entangled in messy workplace scandals bordering on issues around ethics and corporate governance.

It all started in March when TechCabal published an exposé on the toxic workplace at Bento Africa with its CEO, Ebun Okubanjo, at the eye of the storm. After the backlash, Okubanjo said he would step away from “people decisions,” but remained at the company. The Bento case even birthed a conversation about horrible bosses in the Nigerian tech ecosystem, as over 200,000 people tuned in to a Twitter Space that lasted seven hours.

In April, Africa’s most valuable startup, Flutterwave, was caught in a web of controversy following an article by Nigerian journalist David Hundeyin who accused the company’s CEO and co-founder, Olugbenga “GB” Agboola, of fraud and insider trading, financial impropriety, sexual abuse, and bullying.

In a Medium post, Clara Wanjiku Odero, a former employee of the payments giant, accused Agboola of bullying and workplace impropriety, alleging further that the company refused to pay her her exit remuneration. Agboola, in reaction, vigorously denied both accusations.

In October, embattled founder and former CEO of Risevest, Eke Urum, was found guilty of sexual impropriety, abuse of power, and workplace bullying after a six-week investigation by a panel. Urum’s ordeal dates back to August when he was asked to step aside by investors at the company.

Also in October, Olumide Olusanya, co-founder and CEO of Kloud Commerce, was accused by investors of misappropriating funds and running their investment into the ground, per a report by WeeTracker.

In a petition to Nigeria’s anti-graft agency, the Economic and Financial Crimes Commission (EFCC), the investors alleged that Olusanya had diverted capital invested into Kloud Commerce to personal ventures and burned investor money on expensive hotels and car rentals on dodgy trips outside Nigeria.

Related article: Risevest CEO’s indictment raises serious questions about a lack of ethics in the Nigerian tech ecosystem.

Regulatory hiccups

If there is anything founders in the Nigerian tech ecosystem would agree on, it has to be uncertain — and sometimes unsavoury — regulatory landscape they operate in at home and elsewhere.

In July, Africa’s biggest unicorn, Flutterwave, landed in fresh trouble after a Kenyan High Court froze its bank accounts — alongside seven other companies — over money laundering allegations by the country’s anti-money laundering agency, Asset Recovery Agency (ARA).

The Central Bank of Kenya (CBK) would later issue a circular to announce that Flutterwave and another fintech unicorn, Chipper Cash, were unlicensed to operate in the country as remittance operators and payment services. Flutterwave, in response, said that it entered the Kenyan market by partnering with licensed banks and mobile network operators and was awaiting the result of the license application it made in 2019.

This major setback would later force Flutterwave to discontinue its Barter service, which provides virtual debit cards to customers.

In the same month, accounts holding Ksh45 million ($381,000) worth of funds belonging to two Nigerian fintech companies, Korapay and Kandon, were frozen upon an application by the ARA for allegedly siphoning Ksh6 billion ($51 million) into the country.

In its suit against the two companies, ARA argued that they were part of an international ring of fraudsters using Kenyan banks as conduits of illicit money whose source cannot be established.

But, Korapay maintained its innocence, arguing that the said transactions were part of a process stipulated by the Central Bank of Kenya for securing a payment service provider and remittance operator licenses. Similarly, Kandon denied the allegations of financial impropriety and argued that it complied with Kenyan laws.

Then, in August, a Kenyan High Court froze another Sh400.6 million ($3.3 million) in three separate bank accounts, and some 19 Safaricom M-Pesa pay bill numbers belonging to Flutterwave following allegations of card fraud and money laundering by ARA.

The company would later describe the fresh allegation as ‘completely misleading.’

In an interesting turn of events, the ARA would later withdraw the cases against Korapay and Kandon.

In a letter seen by Technext, dated October 11, 2022, the Director of Criminal Investigations at the National Police Service, Nairobi, Kenya, Mike Muia, said allegations of money laundering against both companies could not be established.

Wave of layoffs

One of the defining moments for the global and Nigerian tech ecosystem in 2022 is the wave of layoffs that saw tech giants — like Meta, Twitter and Amazon — cut their workforce, primarily due to the harsh economic conditions.

A total of 152,542 tech employees have been affected so far, per data from Layoffs.fyi

Several startups in the Nigerian tech ecosystem — like their counterparts across the continent — laid off their staff this year, citing different reasons.

In August, 54gene, a Nigerian health tech company, laid off 95 employees, or about 30% of its LinkedIn-sourced 290+ employees, per a report by TechCrunch. In a statement, the company’s spokesperson attributed the decision to the “current market situation”, adding that 54gene will provide affected employees with statutory support. Two months later, the company’s co-founder and CEO, Dr Abasi Ene-Obong, resigned for undisclosed reasons.

In September, Kuda, the Nigerian Neobank, laid off less than 5% of its 450-strong workforce or about 23 people. Kuda said in an email that affected staff cuts were made across various departments in the company. Days later, TechCabal published a report that stated the company incurred a loss of over ₦6 billion in 2021.

In November, Nestcoin, a Nigerian web3 startup, laid off some employees as FTX’s recent bankruptcy impacted its business. Yele Badamosi, CEO of Nestcoin, shared a statement via his Twitter account that FTX’s fall from grace has affected his one-year-old startup, which held assets (cash and stablecoins) in the now-defunct crypto exchange to manage operational expenses.

A week later, Africa-focused cryptocurrency exchange, Quidax joined the list of African startups that trimmed down their staff strength after the company reportedly laid off 20% of its employees, months after the startup spent millions of dollars on celebrity endorsement deals and TV sponsorships.

Quidax, in a statement, said its decision to cut staff count was in response to unfavourable macroeconomic conditions. Earlier in August, the company slashed employees’ salaries by 30% and team leads’ by 50% for three months. Per the statement, the affected employees will be offered a severance package and support in their transition.

In the same month, Vendease, the Nigerian online marketplace, laid off some of its employees. While TechCabal stated that the company laid off 27 employees, the Notadeepdive newsletter by Olumuyiwa Olowogboyega reported that the layoff affected 40 to 44 employees. 

The company stated that its decision to trim its workforce was meant to address performance-related issues and unrelated to the current global economic downturn. In September, Vendease closed a $30 million Series A to deepen its presence in Nigeria and Ghana and expand to new ones.

Earlier this month, ChipperCash, the pan-African fintech that became Africa’s seventh unicorn in November last year, laid off a considerable chunk of its staff. This comes barely a year after the company raised 150 million dollars at a two billion valuation, a round led by the now embattled crypto company FTX.

Though the exact number of affected workers was stated, Erin Fusaro, the company’s vice president of engineering, said in a LinkedIn post that “a significant amount” of the members of the engineering and IT teams were gutted in the layoff.

Last week, Notadeepdive reported that Softcom, the company behind digital bank Eyowo, has laid off 20 staff of its estimated 200-strong workforce. 

Per the newsletter, the layoffs were preceded by owed salaries that began in December 2021. Employees were informed that they wouldn’t receive their salary for that month on December 25, 2021, and although salaries were eventually paid, 40% of the employees didn’t receive any payment. 

The company’s inability to raise funds and receive payment for its services to clients was said to be the cause of the salary delays. Before the layoffs, Softcom reportedly underwent some restructuring.

Going forward…

As we advance into 2023, the Nigerian tech ecosystem needs to embrace a more stringent approach to address corporate governance and ethics issues. Founders, in particular, need to be educated on leadership and risk management and equally set up systems to respond to matters as they arise. Investors, for one, have a role to play in making these happen.

On regulatory setbacks, the Nigerian government must rise to protect the operations of startups in the Nigerian tech ecosystem — especially outside the shores of the country. A situation where companies are being targeted because of their Nigerian origins is unacceptable. In the same vein, startups are encouraged to thoroughly understand the regulatory landscape of other markets before expanding into them.

Finally, nobody wants to be laid off from their job but layoffs are unavoidable.

Founders and CEOs whose jobs are to handle such sensitive situations with empathy. It’s vital to honestly communicate the financial troubles of the company — or other possible reasons for layoffs — to the employees before cutting staff strength.

We can always do better!

And when the layoffs eventually happen, the affected employees should be provided with the necessary support they require to transition into other roles. Handling layoffs with compassion is said to be the best strategy.