Nigeria’s startup ecosystem recorded another difficult year in 2025, with total funding falling 17 percent year-on-year to $343 million, as a sharp pullback in equity investment combined with currency volatility and macroeconomic uncertainty dampen investor appetite, BusinessDay findings revealed.
The decline pushed Nigeria’s share of Africa’s venture capital inflows down to 11 percent, its lowest level since 2019, even as funding rebounded strongly in other major African markets.
Equity funding accounted for 83 percent of capital raised in Nigeria in 2025 but declined 22 percent year-on-year, reflecting fewer large-ticket deals and rising caution among global investors, according to the latest report by Africa: The Big Deal.
The report revealed that Nigeria was the only member of Africa’s “Big Four” startup markets, alongside Kenya, Egypt and South Africa, to post a year-on-year funding decline during the period, despite the group collectively capturing 82 percent of all startup funding on the continent.
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Currency shock, reset expectations
For Lola Masha, partner at Antler Africa, Nigeria’s funding slowdown is the product of overlapping global and domestic shocks that followed the exuberance of the post-pandemic boom.
She said the 2021–2022 surge in venture capital, fuelled by ultra-low global interest rates and optimism around emerging markets, masked structural risks that have since surfaced.
As interest rates rose and liquidity tightened globally, startups that expanded aggressively during the boom years began shutting down or scaling back, forcing investors to reset expectations.
“The downturn was compounded in Nigeria by foreign exchange volatility. When investors put in dollars and revenues are in naira, and the currency depreciates sharply, returns become almost impossible to justify,” Masha told BusinessDay.
She noted that the naira’s depreciation, from around N400 to over N1,600 at its peak, wiped out value for many early investors, significantly dampening appetite for pre-seed and early-stage bets. While recent macroeconomic reforms suggest early signs of stabilisation, she cautioned that confidence remains fragile.
Masha said investor behaviour at the pre-seed stage has fundamentally changed. “Four years ago, you could raise with just a pitch deck. Today, investors want validation, a minimum viable product, early traction, and proof that the idea works,” she said, adding that discipline, governance and founder presence on the ground have become non-negotiable.
Capital sources shrinking, risk rising
For Uche Aniche, general partner at Rebel Seed Capital, Nigeria’s funding decline reflects not a lack of innovation, but a mismatch between the ecosystem’s maturity and the availability of risk capital.
“The ecosystem is maturing, but the sources of capital are not growing at the same pace,” Aniche told BusinessDay, noting that much of Africa’s historical pre-seed and seed funding has come from foreign and diaspora investors, who are now more cautious as global interest rates rise and economic volatility persists.
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“When U.S. interest rates were low, people could borrow cheaply and invest in startups. Now, with higher rates, the risk-reward balance has changed, especially for early-stage deals in volatile currencies,” he said.
Aniche added that currency risk has become a major deterrent for dollar-denominated investments into naira-earning startups, making outcomes difficult to predict even when businesses show operational progress. As a result, he said, there is a growing opportunity and necessity for local angel investors and structured angel networks to step in and fill the funding gap.
“The dynamics have changed. Nobody will give you money just by liking your idea anymore. Founders must be disciplined, defend their models, and show seriousness. The era of casual fundraising is over,” Aniche said.
Cumulative risk and a credibility gap
For Joy Mabia, a venture capital support and startup visibility strategist, the risk facing Nigeria’s startup ecosystem, particularly at the pre-seed stage, is now cumulative rather than singular.
Mabia told BusinessDay that global interest rate resets have made capital more expensive and patience scarcer, while local challenges, including currency volatility, inflation and regulatory uncertainty, add layers of country risk to venture risk.
“Currency devaluation alone can wipe out years of growth on paper. Without strong, visible exit pathways, investors naturally gravitate toward seed and later stages where uncertainty has already been reduced,” Mabia said.
Mabia also pointed to the exit of global accelerators such as Techstars and Y Combinator as contributing to a growing validation gap. She said these institutions once served as credibility filters, helping investors justify small cheques.
“In their absence, investors must do deeper due diligence for small cheques, which often feels inefficient,” she said.
She argued that recovery will require micro-equity vehicles, faster deployment of small cheques, and greater participation from local high-net-worth individuals, warning that Nigeria’s startup ecosystem will struggle to rebound if it remains dependent on increasingly risk-averse foreign capital.
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Activity remains high, capital shrinks
Despite shrinking capital inflows, Nigeria remained Africa’s most active startup market by deal count in 2025. A total of 86 Nigerian startups raised at least $100,000, the highest number on the continent, even though this represented a 14 percent year-on-year decline.
The data underscore a widening gap between deal activity and deal size, as Nigeria continues to generate startups and early-stage rounds but struggles to attract the larger equity cheques increasingly flowing to other Big Four markets.
As capital concentrates around fewer mega-deals elsewhere, analysts say Nigeria’s challenge in 2026 will be translating its deal-making momentum into scalable, currency-resilient growth stories, capable of restoring investor confidence and reversing its multi-year funding decline.
