Africa has seen its fair share of investors, and Nigerian businesses are not left out despite the rate of failed startups in the country. According to a Statista report published in 2022, up to 23% of businesses were fully shuttered, with just 1.4% remaining closed since the COVID-19 pandemic. Also, between June and December 2020, up to 13% of closed businesses were locked for at least one month, while the remainder opened in December but closed again in January 2021.
Although the Nigerian market has different opportunities and potentials, only a few new businesses can develop past the initial stages. As a result, they are compelled to move or even close down if a third party does not buy them. Here is a list of Nigerian businesses that failed within 5 years.
It was founded in 2015 as a classified advertisement website by the Swedish company Saltside Technologies. However, it was unable to scale beyond its second year due to various factors such as mismanagement of funds and high data costs.
In 2016, Efritin’s previous MD, Zakaria Hersi, was accused of embezzling thousands of dollars while disregarding internal issues that contributed to the company’s failure, such as lack of capital to scale up. Nils Hammar, the CEO, said that the absence of superior internet penetration and adoption had harmed Efritin tremendously. Also, the adverse economic climate and the expensive cost of data had a detrimental influence on the company.
He said, “We have a long list of KPIs to evaluate how things are performing. Compared to other markets, we didn’t see the same progress in Nigeria. I think the data cost in Nigeria is very high. Compared to other parts of West Africa, Africa and the rest of the world, it is costly to use the internet for the vast majority of the people. It is very difficult for e-commerce and classifieds because they are quite late in the evolution of the internet industry”. The company officially shut down in 2017.
GoMyWay, a Nigerian ride-sharing service, began its operation in mid-2015. It, however, shut down in 2017 through an email circulation sent to its customers. The startup was born out of Co-creation Hub (CcHub), a well-known Nigerian incubator in Yaba, Lagos. The ride-sharing was backed by Konga’s creator, Sim Shagaya, Bill Paladino, a former Amazon executive, and CcHub herself.
Lack of funds is one of the contributing factors why small businesses fail in Nigeria. According to the CEO of GoMyWay, Damilola, Teidi, “it does take a lot of resources to run this business, and the initial plan was no longer sustainable. The shareholders/investors concluded to shut down operations and close the business as there were no funds to invest further”.
OLX is a classified advertising platform launched in 2012. It allows individuals to buy, sell, and trade used products and services using their phones or the internet. Naspers, a South African media behemoth, owns the startup. However, the startup was shut down in 2018 due to challenging operating conditions.
According to OLX CEO in Asia, the Middle East and Africa, Mr Sjoerd Nikkelen, “We made a difficult but important decision in Nigeria to consolidate our operations between some of our offices internationally. Our marketplace will continue to operate here uninterrupted as it has since 2010, and we remain committed to the many people here who use our platform to buy and sell every month. We continue to be focused on constantly innovating to make sure that OLX remains the top classifieds platform in the country”. Although the startup shut down, it promises to continue to work remotely.
Konga entered the Nigerian industry in 2012 and quickly became one of the country’s largest e-commerce businesses. The e-commerce platform revealed in 2018 that Zinox has bought it, a local IT business that builds and sells computers and controls data centre infrastructure.
The ride-hailing company started in Brazil in 2011 and expanded into Africa. It was launched in 2013 in Nigeria, becoming one of the first Rocket Internet armies to arrive in Africa. The platform links taxi drivers and clients. Notwithstanding the investment of over $10 million from Rocket International for its development into Asia and Africa, the announcement of its pullout from the African market shocked many.
It was surprising due to its high profile shareholders such as Rocket Internet, MTN, Millicom, among others.
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