The Nigerian banking sector is one of the viable destinations for foreign investors in the country, as it has attracted over $15.7 billion in foreign investment in the last 5 years, representing one of the sectors most attractive in the Nigerian economy.
This is based on an analysis carried out by Nairalytics, the research arm of Nairametrics using data obtained from the Central Bank of Nigeria (CBN).
According to the data, Nigeria recorded $68.87 billion in foreign inflows between 2017 and 2021, with the banking sector accounting for over 22.8% of total capital imported, which was only surpassed by the local market. actions.
The Nigerian banking industry has grown by leaps and bounds over the years, with several tech startups springing up in the space. A number of these companies have raised significant sums since launching their operations in the country, while some have achieved unicorn status (valued in excess of $1 billion).
The emergence of fintech companies in the country, all competing for market share while disrupting conventional banking methods, has increased the level of business as investors have come to identify the sector as profitable. .
A closer look at the distribution of Nigeria’s gross domestic product shows that the financial sector has also grown throughout the five-year period under review. Notably, the sector grew by 10.53% in real terms in 2020, which is lower than the annual growth of 13.34% recorded the previous year.
However, the growth recorded in the last two years outweighs the previous years. For example, the banking sector recorded real GDP growth of 2.4%, 1.41% and 1.92% in 2019, 2018 and 2017 respectively. This shows that the traction of the sector has increased significantly over the past two years.
Fintech startups with notable fundraising
A quick look at the Nairametrics deal book tracker, which collates deals made by Nigerian companies across various sectors, shows some interesting deals by Nigerian fintech companies.
- In August 2021, Nigerian fintech Opay raised $400 million in a funding round led by SoftBank Vision Fund 2, which valued the company at $2 billion. The fund raised in 2021 follows a $120 million Series B fund raised in 2019.
- Earlier in the year, Africa-focused payments company Flutterwave announced the closing of a $170m Series C funding round, which took the company’s valuation to $1bn. dollars and allowed him to achieve unicorn status.
- In the same year, Nigerian fintech startup FairMoney also paid $42 million in a Series B round led by US hedge funds and investment firm, Tiger Global.
- Others on the list of fintechs that have raised notable funds from overseas companies and investors over the past five years include Chipper Cash, Mono, Joovlin, Sendbox, TeamApt, and more.
Top 10 sectors with the highest foreign entries
Over the past five years, between 2017 and 2021, Nigeria received a sum of $68.87 billion in the form of capital inflows (FDI, REITs and loans). However, the equity sector accounts for a large portion of these inflows, with $23.37 billion, or 33.9% of the total fund.
This is not unusual as foreign investors often turn to the Nigerian stock market and other mutual funds for investing.
According to NGX’s Domestic and Foreign Portfolio Investment Report as of February 2022, foreign investment in the local equity market accounted for 24.75% of total transactions, with N38.96 billion recorded as foreign inflows. between January and February 2022.
The banking sector followed on the list with $15.74 billion, financing with $11.09 billion, while the manufacturing sector received $4.52 billion in foreign inflows during the reporting period.
- Maintenance – $3.37 billion
- Hotels – $3.36 billion
- Telecommunications – $2.69 billion
- Trade – $1.59 billion
- Agriculture – $1.36 billion
- Oil and Gas – $668.7 million