Social media crackdown and Nigeria’s tech fundraising

Social media crackdown and Nigeria’s tech fundraising

In the aftermath of the ban on Twitter in Nigeria, Nigeria’s Minister of Information, Lai Mohammed announced Twitter is not the only platform the federal government is trying to regulate as the government also hinted at licensing social media and OTT operations in Nigeria.

“The Federal Government has also directed the National Broadcasting Commission (NBC) to immediately commence the process of licensing all OTT and social media operations in Nigeria,” Lai Mohammed said.

This move, if successful, would force foreign social media firms and internet firms with operations in Nigeria to be registered in Nigeria.

Also, with media reports of talks between the Federal Government and China’s Cyberspace Administration on building an internet firewall in Nigeria, (a move that the FG has denied), it is fair to say Nigeria may well be on its way to becoming a Police State and this would affect not only user privacy, but also, investor confidence in Nigeria’s tech sector.

Anakle Founder, Editi Effiong hinted this week in a tweet that tech founders raising funding from outside Nigeria have had a “chaotic week” after the announcement on investment, citing that status of most funding deals are uncertain.

“Checked in the folks currently raising money for their tech businesses in Nigeria – this morning is chaotic. Nobody knows the status of their deals anymore.

But I don’t think Buhari cares about FDI anymore” he says.

Checked in the folks currently raising money for their tech businesses in Nigeria – this morning is chaotic. Nobody knows the status of their deals anymore.

But I don’t think Buhari cares about FDI anymore. https://t.co/q1nUvqBsFc

— Editi Effiòng (@EditiEffiong) June 7, 2021

Tech Funding

Nairametrics reported earlier this year that despite the Covid-19 outbreak, African tech startups raised a record $701.5 million from investors in 2020, as cited in a report by Disrupt Africa.

Kenya, Nigeria, South Africa, and Egypt remain emphatically Africa’s “big four” from a funding perspective, accounting for 77% of funded startups and 89.2% of total investment, as Nigeria (85), Egypt (82) and South Africa (81) lead the way from the perspective of the number of ventures.

Nigeria recorded significant growth in the number of startups securing funding in 2020, as the country saw a 77% increase compared to 2019. It is no surprise, that two tech founders among many others, expressed their displeasure with the social media crackdown to Nairametrics, citing fears that the ban on Twitter will reduce investor confidence in Nigeria, with tech startups taking a hard hit.

Celestine Ezeogwu, founder of Wemove warned:

“The crackdown on Twitter will mean that channels for businesses to access potential funding have been drastically reduced, considering that a lot of tech startups meet their investors and close deals on Twitter.

My own business, WeMove Technologies met our first angel investor on Twitter. Cowrywise met their Series A investors and closed the deal all on Twitter.

This is a major blow on investor confidence, as many will now rather take their business away from Nigeria due to the perceived volatility of the policymaking process. Further hurting our already battered FDI.”

Another tech founder who preferred anonymity also told Nairametrics that Twitter has been very helpful in aiding founders to close deals, due to the community built by Nigerian founders on Twitter.

“I have personally seen a lot of VCs and Syndicates invest in companies they heard of on Twitter. I would say the Twitter buzz and community has also done a lot in the growth and trajectory of many companies,” he said.

“The ability to build in public, get funded through the community we have in the Nigerian Twitter is something that cannot be replicated,” he urged.

Bottomline

Basically, both founders confirmed that Twitter is not just a social media platform for Nigerians, but a bridge between Nigerian founders and foreign VCs. The ban, therefore, constitutes a roadblock between the founders and funders.

The threatened regulation of the social media space and OTT operations would also severely weaken the progress that Nigeria has made so far in tech, which has seen startups like PayStack record $200 million exits from the ecosystem.

Venture Capitalists who value data privacy in their investments may opt to scale back investing into Nigeria’s tech space if the plan to regulate goes through, in favour of more accomodating societies such as Kenya, Ghana and South Africa, an own goal for Nigeria.

 

 

 

Source: Nairametrics

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