Forging a Stronger Tech Ecosystem for Nigeria's Future

In the last ten years, the technology industry in Nigeria has blossomed into existence, expanding out of a small community of startups to a vibrant ecosystem of innovation with venture capitalists around the world taking notice and allocating billions of dollars to the region. Cities such as Lagos have become the new hotspots of digital entrepreneurship and have given rise to tech unicorns and scaling companies that claim to redefine the future of commerce, finance, agriculture, and education in Africa. With the support of international investors, development agencies and an ever-increasing local talent, Nigeria has been touted as the African tech frontier.

However, behind the triumphant headlines and splashy funding rounds, the situation is more complicated and exceedingly ugly. The ecosystem is also getting progressively tainted under the surface with systematic governance issues, financial dealings obscurity, and the absence of resolute accountability frameworks. There are concerns about the distribution of funds, the level of transparency within startups, and the degree to which investors are demanding performance and impact accountability on the part of the founders. These questions have come into intense focus due to a few high-profile scandals and blow-ups that have shown cracks in the usually brightly-colored picture of a healthy ecosystem.

This discussion attempts to look past the hype and examine the underlying concerns that jeopardize the sustainability of the tech boom in the long term in Nigeria. It looks critically at the administration of funding and its surveillance, the unaddressed gaps in company regulation and questions the growing disparity between the rhetoric of investment and verifiable real-life results. With the proximity of these structural vulnerabilities, this report will promote a more candid discussion about what it will actually take to see the development of a strong, ethical, and meaningful technology sector in Nigeria.

 

The Funding Landscape: Big Numbers, Questionable Returns

Mastercard Foundation's Strategic Shift

The current trends in the African venture capital market show remarkable changes in the significant funding patterns. On April 30, 2025, the relationship between the Mastercard Foundation and 54 Collective, the most prolific African tech investor of 2024, came to an end, indicating a possible ROI and strategic fit crisis in the African tech ecosystem.

The Mastercard Foundation has also been considerably active in funding the development in Nigeria, including a US$126 million Fund for Resilience and Prosperity to aid Small and medium-sized Enterprises in Sub-Saharan Africa. Yet, a recent strategic shift at the foundation, which consists of abandoning the classic venture capital partnerships, puts the efficiency of the existing funding schemes into question.

 

CcHUB's Investment Track Record

The first open living lab in Nigeria and one of the most well-known tech incubators, Co-Creation Hub (CcHUB), offers a case study of the gap between the promises of investments and quantifiable results. CcHUB declared the creation of the Edtech Fellowship Program to support edtech startups in Nigeria and Kenya with 15 million dollars, but the actual outcomes of this kind of investment are not very transparent to society.

Riby Finance, Delivery Bros, Proteach, Termii Webtech, Slidesafe, Cameraman, Nicademia, 360 Creative Hub and Edusko are some of the startups that have passed through CcHUB accelerator programs. The long-term success rates and present operating status of these firms are, however, not easily visible, bringing into question the effectiveness of the incubation model.

 

Governance Failures: The Root of the Problem

Weak Corporate Governance Structures

Among the numerous risks that Nigerian tech startups have to deal with, poor corporate governance and the lack of business management experience lead the pack. In the absence of robust governance frameworks, startups become vulnerable to abuse, litigation and inefficiencies.

The crisis of governance is not limited to the level of individual startups but the ecosystem as well. It was noted in a 2024 Startup Graveyard Report that governance gaps are one of the reasons why startups fail at high rates in Africa, with the report concluding that "as funding becomes scarcer and regulatory scrutiny increases, governance is no longer a nice-to-have; it is a matter of survival".

 

Make-up of Boards and Nepotism Issues

The allegations in the transcript concerning the dominated board compositions by the diaspora Nigerians and personal networks bring forth bigger issues concerning transparency and meritocracy within the ecosystem. Such a tendency of insider networks occupying strategic positions generates several issues:

1. Poor Local Accountability: Decision-makers being physically distant from the local setup can be less accountable for the issues on the ground and local needs.

2. Network Bias: When recruitment and funding decisions are made out of personal relations, as opposed to merit, it may result in poor recruitment and funding choices and opportunities.

3. Diminished Stakeholder Trust: The governance practices should not lean towards insiders, as this will reduce trust among the local entrepreneurs, investors, and the entire tech ecosystem.

 

The Failure Pattern: From Hype to Shutdown

Recent Startup Failures

Financial mismanagement has been outlined as one of the main culprits that can kill an otherwise promising startup, with some founders hiring irresponsibly, spending too much on branding and office rent, or simply not keeping a close enough eye on their runway because of poor financial discipline and improper bookkeeping.

Eight Nigerian tech startups closed their shop in 2024 alone, having raised a total of large funds, showing the disconnect between raising funds and building a viable business. Prominent closures also saw the Nigerian crypto payment gateway Lazerpay shutter because it could not "complete a successful fundraising round" and because of an "unclear regulatory environment in Nigeria regarding crypto".

 

Systemic Challenges

Unreliable infrastructure, lack of access to capital, and fragmentation caused by many regulations are some of the challenges African startups are still struggling to overcome to become attractive and retain investment. But these external problems are added to by internal governance and management problems.

The statistic of startup failures shows the following alarming trends:

1. Too much dependence on Outside Financing: Most start-ups concentrate on financing as opposed to creating viable business models.

2. Absence of Financial Discipline: The immediate availability of money is a source of financial irresponsibility in most cases, and they end up spending it recklessly without any plans for growth.

3. Poor Due Diligence: Investors could not undertake proper evaluations of management capacities and corporate governance systems.

 

Case Study: The Disconnect Between Investment and Impact

The Numbers Game

Nigeria's tech ecosystem boasts of many funding announcement celebrations with little or no transparency on the outcome. At a time when the sector is playing a major role in the economy of Nigeria, and foreign investors are expressing interest in it, the real figures of job creation and impact on the economy are still a secret, or rather, unsubstantiated.

 

Accountability Gaps

The absence of disclosure of portfolio company performance in public makes it possible to conceal failure behind closed doors. In the case of a startup's failure, the causes are usually explained by extrinsic reasons instead of a lack of governance and management, and the ecosystem cannot learn and get better.

 

Proposals to Change

Enhanced Transparency Requirements

1. Mandatory Reporting: Investment firms and accelerators must be obligated to release periodic reports on the performance of portfolio companies, in terms of job creation, increase in revenues and operational status.

2. Board Composition Disclosure: Board compositions are publicly disclosed, such as residency status or professional qualification of the directors.

3. Fund Utilization Reports: Clear reporting on the way development funds are used and the results they achieve.

 

Governance Reforms

1. Independent Board Requirements: Requiring independent directors on the board of startups to offer oversight and accountability.

2. Professional Management Training: Making founders and senior executives undergo a governance and financial management training as a prerequisite to funding.

3. Regular Audits: Making obligatory the financial and operational audit of the companies receiving a substantial amount of public or development funds.

 

Ecosystem-Level Changes

1. Local Participation: Promoting the involvement of locally-based professionals in section of leadership and government.

2. Performance-Based Funding: Replacing the old models of funding with performance-based investments where subsequent funding depends on the proven results.

3. Community Accountability: Establishing a system where the local communities and stakeholders offer feedback and monitoring power to the funded projects.

 

Conclusion

The Nigerian technology ecosystem is at an inflexion point. Although the prospects of technology in stimulating economic growth and creating employment opportunities are high, the present trend of anonymous funding, poor governance and lack of accountability is not tenable. The accusations voiced in the transcript are an indication of the systemic problems that should be addressed immediately by all parties.

Recent changes in the strategies of some of the largest funders, such as the Mastercard Foundation, imply that the global development community might start doubting the efficiency of the existing methods. Nigeria can become a major African technology center, but without systemic changes to governance, transparency, and accountability, it will be unable to maintain its status.

The way ahead must be based upon transparency, meritocracy and impact which can be measured. It is only after overcoming these governance issues that the Nigerian tech ecosystem can deliver on its potential as a force of inclusive economic growth and a generator of relevant opportunities to the youth of Nigeria.

The stakes are high, and the opportunities too great, to keep the ecosystem functioning the way it has been functioning, with a limited sense of accountability and governance that is now questionable. It is time to reform.