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Will Nigeria Produce More Fintech Unicorns?


On Wednesday, March 10, Nigerians awoke to positive news from their country’s vibrant tech sector. Flutterwave, a fintech startup that’s been around for just under five years, had secured investor backing worth $170 million in its Series C Funding Round.

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This deal, led by a New York-based private equity firm, valued Flutterwave at over $1 billion. The Nigerian payments company had become a unicorn.

Reaching unicorn status is no small feat. Doing so in half a decade is doubly impressive. It’s the sort of accomplishment that lifts the spirit of founders in Nigeria’s tough business environment and puts the country’s tech ecosystem under the global spotlight.

Flutterwave’s win was a big coup for Africa’s rising fintech industry.

Are there other Nigerian fintech companies close to achieving the coveted billion-dollar valuation? Is there another Flutterwave-like success story waiting in the wings?

The answer depends in part on how we value these companies in the first place. But valuation is not a straightforward process; certainly not for privately owned startups.

How Startups Are Valued

There are several ways to value a startup.

There’s the cost-to-duplicate method, which looks at what it’ll cost to recreate the startup from scratch. It involves weighing the value of the company’s assets. Then there are the Market Multiple approaches, which estimates a startup’s value based on recent acquisitions of similar companies.

Other methods include Discounted Cash Flow (DCF), which measures the value of the company’s future cash flow; and valuation by stage—basically placing a value on the startup based on the stage they’re in.

Each approach may turn up a different valuation. So it’s not always easy to predict how much investors will say the startup is worth.

But we can at least compare the volume of business these companies are taking on, and the current worth of similar ventures for which we do have a valuation. This could allow us to make a few informed guesses about who’s likely to follow in Flutterwave’s steps.

Nigeria Has Already Cradled Billion-Dollar Tech Companies

Flutterwave is not Nigeria’s first fintech unicorn. That title belongs to Interswitch, which attained the status after Visa took a 20% stake in it for $200 million in 2019. But it did take Interswitch much longer to reach this milestone (it was founded in 2001).

If we extend the discussion to include foreign-owned concerns founded in Nigeria, we’ll have to mention Jumia. Launched in Lagos in 2012, the e-commerce giant was listed by CB Insights as one of only three unicorns in Africa back in 2018.

But it’s worth noting how these two cases differ from Flutterwave. Interswitch has enjoyed a first-mover advantage for almost two decades. Their clientele has included Nigeria’s biggest banks, corporate entities, and government agencies. Jumia has enjoyed significant backing from large global financers.

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Flutterwave has pulled off something exceptional by Nigerian standards. Replicating it will be a big challenge, given the country’s tough operating environment. But are there companies already close to doing just this?

Nigeria’s Next Fintech Unicorns?

Who’s the next conqueror of the $1 billion valuation barrier in Nigerian fintech?

The obvious candidates are the larger companies playing in Nigeria’s payments space. They’re operating in a market that’s grown a lot in the past few years. According to the Nigeria Inter-Bank Settlement System (NIBSS), electronic transactions worth $428 billion were carried out in 2020. That’s a whopping 42% increase from the previous year.

Mobile payments in particular have seen significant growth. Mobile app transfers made between January and August 2020 were worth over $50 billion. Within the same period, Mobile Money Operators processed transactions valued at $24.8 billion. That was 86% more than what was recorded for all of 2019.

Perhaps a new unicorn lurks around this neighbourhood. Since its launch in 2016, Flutterwave has processed transactions worth $9 billion. OPay, a mobile payments startup, handled payments totalling $2 billion in 2020 alone. Paga’s numbers exceeded $2.3 billion the year before.

But Opay isn’t indigenous to Nigeria. Their parent company, Opera, is Norwegian and is backed by Chinese capital. If they’re eventually named a unicorn, they’ll get the same sort of treatment as Jumia did.

For companies like Paga, gross transaction values are not enough to determine the overall worth. They could expand a lot over the coming years, and there’s plenty of African market space left for them to explore. But while investors have put some money into Paga, it hasn’t attracted the sort of sums we’ve seen with Interswitch and Flutterwave in the past two years.

We might also consider large e-payment businesses that haven’t been listed on the Nigerian Stock Exchange. An obvious example would be Remita. They’ve been around for a while, and their parent company, SystemSpecs, is one of the oldest players on Nigeria’s tech scene. In 2019 alone, they processed over $50 billion worth of transactions.

However, eTranzact, another pioneer fintech company with transaction numbers that rival Remita’s, currently has a market capitalization of ₦19.95 billion (just over $52 million) on the NSE. We could argue that they’re grossly undervalued, but this illustrates the difficulty with making valuations.

What Really Matters?

Regardless of how hard it is to determine a company’s true worth, a lot of people are willing to speculate about these things. It an interesting exercise; in some instances, it’s even an important activity.

But maybe we should be more concerned about the impact that emerging startups are having on the economy. They’re building a future very different from the one we’re currently in—and hopefully, one that’s better off. This is what matters in the end.

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Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.

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