Nigeria launches $672mil tech fund to cushion its start-ups after US bank collapse
The closure of three key banks in the United States has taught Nigeria tough lessons, prompting Africa’s biggest economy to launch a $672 million fund to support its tech startups.
Nigeria wants to cushion its startups against the kind of situation that Chipper Cash, a victim of the fall of SVB and the bankruptcy of cryptocurrency exchange FTX, finds itself in. The battered fintech firm is now considering selling itself out. Amid the upheaval caused by the recent collapse of SVB, Silvergate, and Signature banks in the US, Nigeria launched the fund this week, being thus the quickest in the continent to react to the crisis.
Africa’s largest economy largely aims to reduce the dependence on startup funding from the US, whose three now-defunct US-based lenders had been supporting tech-focused venture capitalism in Africa.
Nigeria’s new fund is designed to support creative and tech sectors from the young entrepreneurs aged between 15 to 35 years who have faced difficulty in raising capital. The country has the most significant number of startups in Africa — mostly revolving around the tech and fintech industries. They have depended on fundings from overseas capital and venture capital firms.
However, the initiative comes off with a shortcoming because the governmental fund would require collateral, and many startups do not have it. According to industry experts, SVB’s collapse will significantly impact the industry. Y Combinator recently stated that one-third of the startups in its community used SVB as their sole bank account.