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  The year 2022 proved to be an interesting one for Nigeria’s tech ecosystem as a whole and FinTechs in particular. In many ways, it offered up more of what we witnessed in 2021—new players coming on the scene, significant funding from investors, and increased use of the products that startups in the space provided. But there were also a number of unfortunate developments, including shrinking financial support towards the end of the year, and a resulting move to trim costs.
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Here we’ll have a look at the FinTech space at the macro level. We’ll zero in on funding, as well as mergers and acquisitions related to FinTech in the past year. But first, let’s walk through the situation with funding for startups across Africa.

Funding for Africa Startups in 2022

According to Africa the Deal Book, startups in Africa raised a total of $4.84 billion in 2022. This amounted to a 7.62% increase on the $4.46 billion they raised the year before. There was a rise in the number of actual deals as well, particularly those worth $100,000 or more; there were over a thousand of these deals announced in 2022, 11% greater than what was recorded for 2021. There were more individuals and institutions investing in African startups too—over 1,000 of them, 15% more than the 800 noted for 2021.

Nigeria Continues to Lead the Way

As was the case in 2021, the majority of the funding lapped up by startups in 2022 went to ventures in four countries: Nigeria, South Africa, Kenya, and Egypt. Nigeria contributed the most to the total value of deals, with $1.2 billion going to its startups. However, Kenya overtook Egypt and South Africa in terms of investor funding, securing $1.1 billion in the year under review. Taken together, the ‘big four’ countries accounted for 75% of all the startup funding recorded for the continent. But this was lower than the 81% that came to them in 2021.

FinTech Remains the Most Attractive Sector for Investors

FinTech startups received the most funding by value, contributing 37% of the financial support secured by startups in Africa. However, this was less than 53% of the total funding that they got in the previous year. Recall that FinTechs had taken 63% of the $1.37 billion that Nigerian startups had raised in 2021.
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Nigerian FinTechs snapped up some of the most valuable deals; Flutterwave raised $250 million in its Series D round (which valued it at $3 billion), and Interswitch secured a $110 million deal to take its digital payment solutions to markets it hadn’t previously covered.

There Were Fewer ‘Mega Deals’ in 2022

According to the Africa FinTech State of the Industry Report for 2022 (published by the Africa FinTech Summit), there was a reduction in the number of so-called ‘mega deals’ last year compared to 2021. While 9 African FinTechs were involved in funding rounds worth $100 million or more, only 3 did so in 2022 (Nigeria’s Flutterwave, Algeria’s Yassir, and South Africa’s MFS Africa). The ‘mega deals’ from 2021 featured Flutterwave, OPay, and TradeDepot (all three are Nigerian), among others. This slow-down is indicative of a slump in the number and value of deals recorded globally last year. Although funding for Africa’s tech ventures continued on an upward trajectory, its biggest startup ecosystems—Nigeria and South Africa – saw their overall fundraising shrink. There was a conspicuous fall in the amounts raised by Nigerian startups in Q3 2022, as global fears of a looming recession caused would-be investors to hold on to their purses.

Mergers and Acquisitions Are Becoming More Common

One activity type that did pick up in the previous year was Mergers and Acquisitions. Larger startups looking to expand into new markets have purchased smaller players in those markets. This has allowed them to establish a presence in those locations without having to build from scratch.
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Nigerian startups involved in acquisitions in 2022 include TradeDepot (which acquired Ghana’s Green Lion), PayHippo (which acquired Maritime Microfinance Bank), and Account (acquired by Ghana’s Float).

Final Words

Despite the bumps in their paths, Nigeria’s FinTechs have largely continued to thrive. And although there are concerns about 2023 being a potentially challenging one for the ecosystem, there’s hope that many of the big players in the space, as well as the emerging ones, will weather the storm and come out of it alive and kicking. Featured Image Source: Daily Trust
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This article was first published on 13th January 2023


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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