Government negligence, finance impeding growth of tech startups
by KELVIN UMWENI
March 7, 2018 | 5:06 pm| | | Start Conversation
Just like the steam engine which brought about the industrial revolution, technological advancement, already causing massive proliferation of tech hubs and start-ups, has gradually altered and enhanced human interactions, consequently turning the world into a global village.
Tech start-ups and hubs are the small but mighty heroes of this global digital innovative revolution. Tech is the new boom in the world today and Nigeria is gradually cashing in on the prospects to accelerate growth and enhance development. Tech start-ups and the various hubs scattered around the country are the change agent catalysing these technological innovations in Nigeria.
No matter the angle we look at it, the tech ecosystem in Nigeria is assuming a dimension that will revolutionize the entire landscape of the country’s finance, commerce, health, and even justice delivery. From Lagos to Jos, Kaduna to Port Harcourt, Calabar to Enugu, technology hubs (or you can call it clusters) and start-ups are rising rapidly and keying in on emerging problems in the society to create disrupting solutions.
Lagos is the tech nerve of Nigeria with a massive valuation of about $2billion which has made it the largest on the African continent.
Despite the huge potential the sector holds, buoyed by juicy indices such as a large population base, high internet penetration rate at about 51 per cent and proliferation of smart phones, government support is still minimal.
Much of the transformation the tech ecosystem has witnessed is attributed to private individuals who have taken the bull by the horn to push through with ideas they believe will spur positive change in their immediate environment in particular and the world in general.
A recent BRIU survey conducted to ascertain the challenges and prospects in the tech sector reveals that government are not doing enough to boost development in the tech ecosystem while the constraint of funding remains a hard nut to crack.
Respondents were divergent on their views about their major sources of fund. Local source of fund seems to have been the major avenue by which tech hubs derive their capital for up scaling and other operational necessities as 30% of respondents affirmed to this fact.
Closely following local sources are those that supplement bootstrapping and local sources (20 per cent) on one hand with those that combine both local and foreign sources (20 per cent). 10 per cent of respondents said that their major funding comes purely from foreign sources.
When the sources of funding are disaggregated by geography, BRIU found that about 40 per cent of hubs in the Northern part of Nigeria basically get their funding mostly from local sources with no foreign source as against 20 per cent of hubs in Lagos which stated that their major source of funding is foreign-based.
Respondents were equally saddened by the lack of mentorship scheme in the sector. Mentorship scheme creates a platform in which a more experienced or more knowledgeable person in a particular field helps to guide a less experienced or less knowledgeable person.
Source: BRIU Survey
With the visit of Facebook founder, Mark Zuckerberg to Lagos, and the promise to build a tech hub in the country, investors are gradually developing interest in the tech space. Google and Meltwater are equally not left out of the race to explore the virgin opportunities tech has to offer in Africa’s largest economy.
“Nigeria tech space is increasingly becoming attractive to foreign and local investors because almost about 80 percent of most entrepreneurs and businesses are tech dependent for the success of their products or services”, Franklyn, operations manager at Seedspace, a tech hub in Ikoyi, Lagos told BRIU.
The development of Nigeria tech ecosystem started with the founding of the Co-Creation hub in Yaba in Lagos. The geographical location of Yaba which is further enhanced by its proximity to major academic institutions and the Lagos Island, the relatively low rent fees serve as factors that have attracted tech enthusiasts to form a cluster in that part of the state.
Other regions of the country are equally making efforts to develop an ecosystem that retains the best brains. Overtime, there has been a proliferation of hubs in the northern, south-south, south western and south eastern parts of the country.
For instance, the opening of nHub in Jos which happens to be the first tech hub in the northern region has served as a catalyst to tech development in that part of the country despite the turmoil the region in recent years. Port-Harcourt, Akwa Ibom, Enugu, Abia etc. are among states leading the trail in evolving an innovative way of mobilizing tech in developing home grown solutions to local problems.
The Lagos State Government recognizes the challenges of paucity of funds as a stumbling block to harnessing the opportunities in tech start-ups. The creation of the Lagos Innovates by the Lagos State Government via the Lagos State Employment Trust Fund (LETF) no doubt serves as an avenue for obtaining cheap funds for promising tech start-ups without the unnecessary encumbrances associated with the modern financial system. It provides interest free loans repayable after four years to tech hubs, incubators and co-working spaces operating in the state.
Internet cost and connectivity is another area that needs government attention. The Federal government in a bid to increase the usage of internet and broadband particularly for start-ups development has put in place proper mechanism to ensure that Nigerians enjoy the best of internet services.
With the liberalization of the telecom industry, there has been intense competition among major telecom players – MTN, Globacom, Airtel and 9mobile; rivalry that has led to a drop in the cost of data for browsing, call rates among others. However, the poor quality of internet services offered by the country’s telecoms outfits further points to the need to reposition the sector for optimum service delivery.
The ICT Policy 2012 and the Five Year National Broadband Plan (2013 – 2018) are two major policy plans designed by the Federal Government which articulated in clear terms how Nigeria can advance in adopting technology for national benefit.
Specifically, the ICT Policy 2012 spelt out the modalities the country can adopt to leverage ICT and transit to a knowledge-based economic system. The National Broadband Plan on the other hand aims to further build on the ICT Policy 2012 and seeks, among other things, to increase broadband penetration from 6 per cent in 2013 to 30 per cent by end of 2018.
Though these initiatives seem laudable, the need for effective executions of the enshrined strategies embedded in the plan has more than ever being the bane of Nigeria: we have all the plans but implementation is what seems to be stalling them.
Enogieru Osasenaga, a program manager with Enspire Incubation Hub posited that in curbing the challenges of the sector, the government could utilize the hubs in implementing its several intervention programs and focus more on providing the enabling environment.
“The ease of doing business should be addressed as well as with constant reviews of government policies,” he said.
Adeyinka Adekeye, chief executive officer of Founders’ Hub said “Government’s level of involvement in the tech ecosystem is very low and much needs to be done”. He maintained that government needed to have a dedicated focus on engaging hubs to develop the start-up ecosystem.
It is hoped that with the on-going diversification of the economy, the tech subsector as a vital amalgam of the non-oil sector will be given the necessary attention it truly deserves by the government due to the immerse potential it holds. The tech sector can create massive employment opportunities; enhance revenue generation which will ultimately drive inclusive growth.
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