A report by Briter Bridges, a analysis and market intelligence agency specializing in rising economies, has revealed that Nigeria’s tech startups have over $415 million through debt within the final 10 years.
The report titled “Debt Financing in Africa’s Revolutionary Ecosystem” disclosed that African startups typically borrowed a complete of $2.1 billion between 2014 and 2023. Startups from Kenya received the most important chunk of this debt with over $800 million borrowed via 60 offers.
The $415 million borrowed by the Nigerian startups got here because the second-highest on the continent inside the interval. In response to the report, the quantity was borrowed in over 40 offers.
The massive 4 nations by way of startups in Africa, Nigeria, Kenya, Egypt, and South Africa accounted for over 75% of the quantity of whole debt funding by African startups.
Decline in fairness
The report famous that debt financing within the African startup ecosystem had grown over the past 5 years because of a decline in fairness funding.
In response to the report, from 2019 to H1 2023, debt as a share of the whole quantity of funding to ventures in Africa elevated from 4% to 26%.
- “Whereas debt is actually enjoying a task in Africa’s startup ecosystem and improvements on the financing aspect making it extra accessible, one of many greatest drivers of debt’s rise in Africa’s startup ecosystems would be the dramatic fall in fairness funding, which fell from $2.6bn in 2022 to $1.4bn in 2023.
- “Over the previous ten years, greater than $2bn in disclosed debt funding has been raised by digital, technology-enabled, and inexperienced corporations in Africa from greater than 140 funders for a complete of greater than 200 offers,” Briter Bridges acknowledged within the report.
The sectors getting the debt
In response to Briter Bridges, in contrast to with fairness, many of the debt funding is flowing to corporations with collateral with almost 75% of debt funding going to asset-heavy companies in cleantech, mobility, agriculture, and logistics.
It added that whereas debt funding to startups in Africa has elevated, it has not been equally distributed throughout sectors.
- “Debt has sometimes flowed to sectors the place funding could be collateral in opposition to belongings or different collateral like mortgage books. For instance, the sectors by which startups have obtained probably the most funding are cleantech and fintech. However even inside these, there are a handful of merchandise driving it.
- Practically 50% of disclosed debt funding from 2014 to H1 2023 went to cleantech. The bulk went to photo voltaic house kits and pay-as-you-go merchandise. In fintech, the place almost 1 / 4 of debt funding has gone to asset financing and buy-now-pay-later merchandise. In mobility, it served for electrical autos, and inside agtech, it was used to finance agriculture tools,” it added.
The report listed prime debt offers inside the interval together with the $200 million raised by Kenyan startup, Mkopa, $130 million raised by Sunking, one other Kenyan Startup, and $50 million raised by Nigerian startup, Lumos.
