Private equity (PE) and venture capital (VC) have emerged as key drivers of Nigeria’s rapidly evolving startup ecosystem, generating over $1 billion in annual funding and reshaping how early-stage businesses access growth capital, according to a new report by Rome Business School Nigeria.
The report, titled “Private Equity and Venture Capital in Nigeria: A New World of Startup Funding,” highlights how PE and VC investments are bridging funding gaps for startups, enabling innovation, competitiveness, and business expansion across multiple sectors — especially technology.
Nigeria Leads Africa in Startup Funding
Nigeria led Africa’s venture capital market in 2024, attracting approximately $1.18 billion of the continent’s total $3.6 billion VC funding. Major deals such as Moniepoint’s $110 million and Moove Africa’s $100 million rounds underscore the country’s growing investor confidence. Private equity investments also surged by 322% in the first quarter of 2024 alone.
Between 2020 and 2024, Nigeria recorded 404 private capital transactions valued at US$3 billion, accounting for 66% of West Africa’s deal volume and 52% of its total deal value. The average deal size during the period stood at US$9.7 million.
The technology sector remains the top beneficiary, attracting 82% of venture capital activity, amounting to US$2.7 billion. The financial services and infrastructure sectors followed, with US$1.5 billion and US$562 million in deals, respectively. Lagos remains the hub, hosting over 65% of all VC transactions.
Beyond Capital: Mentorship and Market Access
The report notes that PE and VC investors provide more than just capital — they offer strategic mentoring, operational guidance, and market access, helping startups grow sustainably. This model has fostered the rise of Nigerian unicorns such as Flutterwave, Paystack, Opay, PiggyVest, and Kuda, each showcasing the benefits of sound business structure and transparent management.
“Investors value companies with scalable business models, clear control systems, and strong leadership,” the report observes, adding that transparency and efficient management are crucial to sustaining long-term investor relationships.
Challenges: FX Volatility and Regulatory Barriers
Despite its rapid growth, Nigeria’s private capital sector faces significant hurdles, including foreign exchange instability, regulatory inconsistencies, and economic constraints. The report cites Nigeria’s 30% corporate tax rate and 7.5% VAT as major deterrents to investors, alongside unreliable power supply, infrastructure deficits, and insecurity.
In 2023, foreign direct investment inflows declined by 26.7%, driven by investor concerns over currency depreciation and policy unpredictability. Although 2024 saw improvements in Nigeria’s VC profile, deal value and volume fell by 22% and 28% year-on-year respectively.
Technology Sector Tops Investor Interest
Technology continues to dominate PE and VC investments in Nigeria, particularly the fintech industry, which accounts for roughly 60% of VC transactions. Major beneficiaries include Flutterwave ($475 million), Opay ($400 million), Moniepoint ($110 million), and Moove Africa ($100 million). Paystack’s $200 million acquisition by Stripe further solidified Nigeria’s position as a continental innovation hub.
Beyond fintech, emerging sectors such as healthtech, agritech, edtech, and green energy are gaining traction, attracting hundreds of millions of dollars in funding and promising inclusive, technology-driven growth.
PE and VC Boost Corporate Performance and Jobs
The Rome Business School report also reveals that PE-backed firms outperform their peers in governance, competitiveness, and market resilience. Private capital funding has helped revive struggling companies through strategic restructuring and capital injection, enhancing business sustainability.
Private equity and venture capital have also become major contributors to job creation and economic diversification. According to PwC, every $1 million invested in PE/VC-backed firms creates about 40 direct and indirect jobs. With Nigeria’s unemployment rate at 38%, the role of private capital in generating employment and boosting productivity remains critical.
Bright Outlook for the Future
Looking ahead, the report projects sustained transformative growth for private equity and venture capital in Nigeria, driven by economic diversification, youth-driven innovation, and digital transformation.
The nation’s expanding digital infrastructure, rapid mobile and internet penetration, and increasing pension fund participation in private capital are reshaping the investment landscape. In 2024, Nigerian pension funds invested over ₦22 trillion (about $13 billion) in private equity — a sign of growing institutional confidence.
“Technology is the most transformational force shaping the future of PE and VC in Nigeria,” the report concludes. “As the country deepens digital adoption and economic diversification, the demand for private capital will continue to accelerate.”
