LAGOS/Nigeria: In a stark revelation at The Catalyst startup program in Lagos, Mr. Ina Alogwu, Group Director of Digital Transformation at ARM HoldCo, emphasized how the volatile Foreign Exchange (FX) rate is crippling investment opportunities for Nigerian startups. Speaking at the event themed “Adapting Fintech Business Models to Economic Climes: Flexibility, Agility, and Customer-Centricity,” hosted by Hydrogen and CcHub, Alogwu highlighted the profound impact of the naira’s depreciation against the dollar on startup funding.
Alogwu elucidated on the dire situation, stating, “The depreciation of the naira against the dollar has rendered Nigerian startup businesses unattractive for investors.” He described a looming “funding winter,” where investment sources are dwindling, necessitating startups to present more compelling cases to attract funding.
Explaining the intricacies, Alogwu pointed out, “The African factor, where the naira has steadily depreciated against the dollar, poses a significant challenge. Venture Capitals (VCs) offshore invest and expect returns in dollars. The naira’s depreciation adversely affects startup valuations, deterring investors from funding.” He emphasized that startup valuations, calculated in dollars, suffer as the naira weakens against the dollar.
To combat this challenge, Alogwu proposed expansion beyond Nigeria’s borders as a strategic move to alter valuation dynamics. He advocated for startups to establish Advisory Boards to guide their decisions effectively.
Echoing similar sentiments, Mr. Emeka Awagu, Chief Technology Officer at Hydrogen, urged startups to forge partnerships with larger firms to foster learning and sustainability. Awagu cautioned against frivolous spending post-funding, emphasizing the importance of prudent financial management.
Furthermore, Awagu emphasized the criticality of market research for startups to tailor products to meet consumers’ needs. “Your value proposition must be unique, addressing compelling problems, to succeed and attract investors,” he asserted.
In the face of mounting challenges, industry leaders call for strategic maneuvers and prudent financial practices to navigate the turbulent investment landscape, ensuring the sustenance and growth of Nigerian startups.
