October 6, 2020
COVID-19 and the Nigerian Entrepreneurial Ecosystem: Impact and Recommendations

In 2019, the West African entrepreneurial ecosystem experienced major development, with the rise of tech hubs and impact investing activities. There was particularly an increase in direct and indirect investment funds from Development Finance Institutions (DFIs), as indicated in ANDE’s recent State of the Small and Growing Business Sector report.

Nigeria in particular dominated the entrepreneurial activity in West Africa, with substantial growth in investment deal flow. According to the Impact Investors Foundation (IIF), Nigeria received 29% of impact investing capital in the West African region and represents a $4.7 billion market.

However, the current situation under COVID-19 is deeply unsettling. The pandemic threatens to unwind all the progress made in the last few years. A global survey of ANDE members, organizations that support small and growing businesses (SGBs) in emerging markets, highlights a disheartening statistic — nearly 50% of SGBs supported by ANDE members have either already failed or are at significant risk of failing.

The Nigerian economy has been adversely affected by twin forces of the COVID-19 pandemic and a collapse in oil prices leading to an increase in unemployment, poverty and disruption of economic activities across all sectors. This Dalberg report from April 2020 predicted a reduction in Nigeria’s Gross Domestic Product (GDP) by 4% in a moderate scenario or by 23% in a downside scenario. Report from the National Bureau of Statistics for Q2 2020 reveals a 6.1% decline in Nigeria’s GDP which is attributed to lower levels of economic activity as a result of the lockdown necessitated by the pandemic.

Considering the significance of the SGB sector in economic stability and job creation, it is necessary for entrepreneurial ecosystem actors and intermediaries to tailor their programs and activities to address the key needs of the sector. We thus believe the following support is crucial for SGBs:

● Access to finance: Flexible and accessible funding tops the list of survival requirements for SGBs. As a Fate Foundation report notes, entrepreneurial ecosystem stakeholders who are able to provide financing opportunities should develop financial support packages such as grants, interest-free loans, and bridge financing to meet critical business needs such as salaries and working capital. There is a need for investors and funders to provide more patient capital and move forward with investments and funding despite the current limitations and uncertainties.

● Technical assistance and non-financial support for SGBs: SGBs also face non-financial challenges including training, access to networks, lack of proper representation in policy discussions, access to information, and more. Many ANDE Members focus on providing this important support to SGBs -for instance, the TrustLaw Program via Thomson Reuters Foundation provides pro-bono legal support to nonprofits and social enterprises. The Acumen Academy provides challenge-based courses designed to help social enterprises build practical skills, among others. There is however a need for collaborations across the public and private sector to provide essential non-financial support to SGBs.

● Digital literacy: Technology and adaptation of tech resources has become key for businesses’ survival in light of the pandemic. It is therefore important for SGBs to increase their technological knowledge, including establishing an online presence; becoming familiar with tech tools and applications for teleworking, project/team management, and communication; using online payment platforms; managing digital files; and more. Several ANDE Members have ongoing programs that provide digital literacy such as the Fate Foundation Aspiring Entrepreneur Program, Mind the Gap Digital Skills Program , among others, and we hope that many more intermediary organizations can develop programs to address this critical need in West Africa.

● Affordable high-speed internet: SGBs need to be able to adapt their programming and use their improved digital literacy — therefore, high-speed, available, and affordable internet is crucial to the future of work. This article from TechPoint Africa reveals that the cost of internet data in Nigeria in 2020 when considered against the backdrop of inflation and the subsequent naira devaluation has actually increased by 38% compared to the cost in 2014. The Fate Foundation report advocates for key stakeholders, particularly federal and state governments to explore policies and regulatory considerations that will enable penetration of high speed and affordable Internet across the country.

● Quality and timely data: Current and relevant data and information is needed for strategic planning and decision making in any business sector. For the SGB sector, understanding trends and best practices can be a matter of pure survival. Intermediary organizations should continue to provide reports on market trends and updates on the sector as a whole.

Focusing on the areas above would help move the needle and get SGBs through these tumultuous times. However, it’s not an exhaustive list! We celebrate ANDE members and other ecosystem actors who are working tirelessly to push for progress, despite the many challenges facing the SGB sector, figuring out how to navigate through new realities created by the current pandemic. We are all in this together!