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December 14, 2012

Nigeria Online Start-ups See a Future 'Silicon Lagoon'

by Nicholas Ibekwe

Nigeria may soon purge its reputation as a center for Internet criminals and gain fame as an innovator of online businesses and tech start-ups.

Since 2010, there have been more than 50 tech startups in the country.  Although still in their infancy, many of them have shown great promise attracting investment from financial heavyweights like Google and JP Morgan.

These young tech savvy entrepreneurs say they have been inspired by popular online platforms such as eBay, YouTube and Craigslist.  They say they are fashioning their enterprises for tech-savvy Nigerians seeking a break from traditional ways of doing things.

Jumia.com.ng provides online retail; Wakanow showcases travel deals; Ibakatv and Irokotv take movies and Afrobeat music online.

Others are uniquely created as solutions for local problems.  Pagatech offers mobile money transfers; Jobberman.com is a job search website; Co-Creation Hub Nigeria develops local software and mobile phone apps. CC-Hub, as it is also called, recently developed Wayopedia - a repository of scam keywords and phrases that intelligently identifies scam e-mail. They have also developed a mobile social quiz platform, based on the high school curriculum, designed to enhance learning through self-assessment and to fight the high rate of dropping out from high schools.

With 45 million Internet users and 100 million mobile phones, Tayo Oviosu, the CEO of Pagatech says the potential for growth is huge.

“I tell people who look at Africa, generally, the consumer opportunity of Africa is Nigeria. It is the largest market by far. I think the entire size of Kenya is [the size of] Lagos state," said Oviosu. "The engine of growth in any economy is really start-ups.”

Oviosu says Nigeria is in the same position as China and India were 15 years ago. He says, in another 15 years, Nigerian startups could grow into global conglomerates like Tata.

After only six months, one of the movies on Ibakatv, “Sexy Criminals”, a Nollywood flick about a female robbery gang, has attracted four million views.

Irokotv already has a million subscribers.

In just six months of business, Jumia.com.ng, a subsidiary of Rocket Internet, a Berlin-based incubator has already built a 12,000 square foot warehouse close to the Lagos airport. According to a website rating company, Alexa, it is the eighth most-visited local content website in Nigeria.

Ayodeji Adewunmi, CEO of Jobberman.com, says his job platform has 500,000 users and 4,000 registered companies on its portal.

Pagatech already has more than 300,000 users.

Lagos Angel Network, a consortium of 15 technology investors, is already talking of the creation of a Silicon Lagoon modeled after Silicon Valley in California.

But Femi Longe, Co-Founder at CC-Hub, says copying success stories elsewhere may not be the way to go in Nigeria.

“We’re very obsessed with cloning successful technology products from different parts of the world and trying to force them to work here. Until we get to a stage we start looking at what is the reality and the need here in Nigeria and then creating technology solutions that can address those needs and doing it such a way that we can capture a huge chunk of the Nigerian market, which is sizeable on its own, and then capturing maybe West Africa, then Africa, until then we wouldn’t be able to create solutions that can conquer the world," Longe. "You cannot create a clone here in Nigeria and expect it to be among the top-valued technology brands in the world. Until we can get to that stage where we can look inward and from there look outward, I think the whole idea of Silicon Lagoon is a joke.”

Perhaps the strongest sign of the viability of these startups is their ability to endear themselves to notable global investors, says Tayo Kehinde, the co-managing director of Jumia.com.ng.

“If you can get someone like JP Morgan to commit a significant amount to invest not just in Africa but in a Nigerian start-up, to me, that is to say Nigeria is open for business and in particular e-commerce in Nigeria is open for business and investment,” Kehinde.

Global investment bank, JP Morgan, has invested in Jumia.com.ng. Irokotv got $10 million from American and Swedish investors. Pagatech has a string of foreign investors and Google is partnering with Ibakatv and CC-Hub.

Although there is no clear policy thrust from government on how to support these tech startups, there are some signs that this might not be the case for long.

The Lagos state government launched the Innovation Advisory Council in 2011 to help promote innovations in the state. Nigeria’s government says it has provided $3.5 million to build two tech incubation centers in Lagos and Calabar.

Part of the reason that government involvement may be necessary is that doing business in Nigeria is very challenging. The World Bank ranks Nigeria at 131 out of 185 countries for the ease of doing business. This hostile business environment is even more suffocating for tech startups.

After years of global notoriety as a center for Internet fraud, Ayodeji Adewunmi says correcting the negative perception is the biggest challenge the tech startups in Nigeria grapple with.

There is also the challenge posed by decaying infrastructure. Tayo Kehinde says heavy traffic in places like Lagos severely hampers the delivery of items bought online.

Erratic power supply is also exerting huge financial pressure on startups. Bosun Tijani, Co-Founder at CC-Hub, says the company spends more than $2,000 a month to power its own generators.

Despite the obstacles, these young Nigerian tech entrepreneurs say they remain optimistic and still say a day is ahead when Nigeria will have its own Silicon Lagoon.