Nigeria, a dynamic center of innovation and entrepreneurship in Africa, is leading the way in a rapidly growing tech ecosystem. As global interest in technology mergers and acquisitions (M&A) rises, Nigerian tech companies are presented with unprecedented strategic options. These companies have been at the forefront of revolutionizing various industries, serving as powerful vehicles for locally relevant solutions, financial inclusion, and innovative partnerships between financial institutions, governments, merchants, and small and medium-sized enterprises (SMEs), both globally and locally.
This transformative role is underscored by the sustained investment in the industry, with the Nigerian fintech sector witnessing a remarkable surge, receiving over $1 billion in the last two years alone – more than triple the industry’s total figure and accounting for more than one-third of the $2.7 billion invested in African fintech since July 2021(ICIR). To capitalize on this momentum, Nigerian startups and tech firms must adopt strategic and operational measures that not only attract global investors but also ensure sustainable growth. Here are ten steps Nigerian tech companies must take to tap into the growing global interest in tech M&A.
Embrace Disruptive Innovation
Nigerian tech companies must focus on developing cutting-edge solutions that address local and global challenges. Innovations in sectors such as financial technology (FinTech), agriculture (AgriTech), and healthcare (HealthTech) are particularly promising. By leveraging technology to solve real-world problems, Nigerian startups can position themselves as attractive prospects for global investors. Flutterwave is a prime example of a Nigerian payment processing company has distinguished itself and made significant strides by addressing the complexities of payment systems across Africa. Its innovative solutions have not only garnered substantial investments but also established it as a key player in the global FinTech space.
Strengthen Digital Infrastructure
For sustainable growth and to attract international investors, Nigerian tech companies need to operate within a robust digital infrastructure framework, including reliable internet connectivity, data centers, and cybersecurity measures. Companies should advocate for and invest in improving Nigeria’s digital infrastructure to foster tech innovation and operations. Collaboration between the government and private sector is essential for developing digital infrastructure through initiatives like building tech hubs, enhancing broadband access, and ensuring data security. Paystack exemplified successful navigation of the tech landscape by providing online payment solutions and strategically involving potential acquirers like Stripe, Visa, and Tencent in their Series A round. Stripe’s $200 million acquisition of Paystack boosted the African startup community by yielding high returns for angel investors and fostering new startups by former employees. This deal underscored Nigerian tech’s global competitiveness, with strategic early exit planning and acquirer involvement, as championed by investors like Olumide Soyombo, playing a crucial role in advancing Africa’s tech ecosystem.
Develop and Retain Talent
A highly skilled and adaptable workforce is the cornerstone of any successful tech company. Nigerian tech firms must invest in education and continuous training programs to cultivate local talent. Partnerships with educational institutions to offer specialized courses in software development, data science, and cybersecurity can help bridge the skill gap.Creating a supportive work environment with competitive compensation packages, opportunities for career advancement, and a culture of innovation can help retain top talent. Providing stock options and other incentives can also align employees’ interests with the company’s long-term goals.
Focus on Regulatory Compliance
Regulatory compliance is critical for building investor confidence. Nigerian tech companies must stay abreast of local and international regulations concerning data privacy, cybersecurity, and financial transactions. Establishing a dedicated compliance team can ensure that the company adheres to all regulatory requirements, thereby reducing the risk of legal issues and enhancing credibility.Engaging proactively with regulators to understand and influence policy development can also be beneficial. By participating in policy discussions, tech companies can help shape regulations that are conducive to growth and innovation.
Leverage Data Analytics
Utilizing data analytics can provide valuable insights into customer behavior, market trends, and operational efficiencies. Nigerian tech companies, in collaboration with the Nigerian Communications Commission (NCC), Central Bank of Nigeria (CBN), and National Identity Management Commission (NIMC), can work towards creating a centralized database similar to the US Social Security Number system. Such a centralized database can reduce redundancies, streamline financial and credit application and management processes, and drive financial inclusion and accountability. By harnessing the power of big data, companies can make informed decisions that enhance user experience, optimize operations, and drive growth. Advanced data analytics capabilities, including developing proprietary algorithms and machine learning models, can create unique value propositions that attract global investors looking for innovative and scalable solutions.
Foster Strategic Partnerships
Building partnerships with other tech companies, financial institutions, and global corporations can open up new avenues for growth. Strategic alliances can provide access to new markets, share technological expertise, and offer financial backing. Additionally, participating in global tech conferences, joining international business networks, and collaborating with diaspora communities can enhance visibility and create opportunities for strategic partnerships.
Prioritize Customer Experience
A focus on delivering exceptional customer experiences can differentiate a tech company in a competitive market. Nigerian tech firms should invest in user research, design thinking, and customer feedback mechanisms to continuously improve their products and services.Transparency, reliability, and responsive customer service build trust and loyalty. Satisfied customers can become brand advocates, enhancing the company’s reputation and attracting global interest.
Pursue Global Expansion
Nigerian tech companies should not limit themselves to local markets. Innovating with a global mindset and exploring international markets can diversify revenue streams and increase the company’s valuation. Strategies for global expansion include setting up offices in strategic locations, forming strategic partnerships with international firms – exemplified by LemFi and Visa’s 2024 partnership – and tailoring products to meet diverse market needs.Thorough market research is crucial to grasp the regulatory environment, consumer preferences, and competitive dynamics in target markets for successful expansion.
Enhance Financial Management
Sound, transparent, and robust financial and governance practices are crucial for attracting investors. Regardless of a company’s size or stage, employing effective corporate governance principles is essential. This involves ensuring transparency and accountability in decision-making,ethical resource management, regulatory compliance, and fostering a culture of integrity within the organization.Implementing accurate financial reporting systems is vital to providing a clear depiction of the company’s financial health. Effective cash flow and working capital management ensure the company has sufficient liquidity to meet obligations and invest in growth opportunities.
Explore various funding options, including venture capital, private equity, and strategic investments, to secure the necessary capital for growth. Diversifying funding sources can reduce financial risk and provide a stable financial foundation. Preparing for due diligence by maintaining organized and up-to-date financial records can streamline the investment process, making it easier for investors to assess the company’s value. It also demonstrates a commitment to transparency and good governance, further enhancing attractiveness to investors. Strategic investment of resources should focus on driving innovation and competitive advantage, such as investing in new technologies, expanding into new markets, or enhancing product offerings. By adopting these financial and governance principles, companies can foster sustainable growth, mitigate risks, and position themselves competitively in the global market.
Cultivate a Resilient Business Model
Companies should develop flexible business models that can quickly respond to market changes, technological advancements, and economic fluctuations.Engaging in scenario planning and risk management can help companies anticipate and mitigate potential challenges. A resilient business model not only ensures stability but also positions the company as a reliable partner for investors.
In conclusion, as global interest in tech M&A continues to grow, Nigerian tech companies are presented with a golden opportunity to shine on the international stage. By taking the aforementioned steps, Nigerian tech firms can attract global investors and achieve sustainable growth. While the road ahead is promising, with strategic actions, Nigerian tech companies can unlock their full potential and play a pivotal role in the global tech ecosystem.
Author: Stanley Umeorah, MBA, ACCA
Stanley is a chartered certified accountant and seasoned finance professional with a decade of experience in accounting, banking, and corporate finance. Currently, he is an Investment Banking Associate at Bank of America. His career includes significant roles at PwC Nigeria, United Bank for Africa PLC, and BDO (UK) LLP, where he consulted for numerous blue-chip financial services firms. Stanley holds an MBA from the Ross School of Business at the University of Michigan, an M.Sc. in Accountancy from the University of London, and a B.Sc. in Geology from the University of Nigeria.
