The Nigerian startup ecosystem has long been a source of optimism in Africa’s economic narrative. From fintech unicorns to energy startups with global ambitions, the country has produced a steady stream of innovation. Yet in 2025, a troubling trend has emerged: local venture capital (VCs) participation, while visible, is rarely leading — and even more rarely decisive.

Despite Nigeria’s status as Africa’s largest economy and most populous country, foreign investors continue to anchor the lion’s share of venture deals — even in startups based within Nigeria’s borders. The question echoing through Lagos’s co-working spaces, boardrooms, and WhatsApp investor groups is increasingly hard to ignore: Where did all the Nigerian VCs go?

Key Observations: The State of Nigerian VC in 2025

1. Nigerian Investors Are Active, But Not Leading

A review of major 2025 deals shows Nigerian VCs participating — but seldom anchoring — funding rounds.

• Arnergy ($15M, Cleantech): Nigerian firms CardinalStone Capital Advisers and All On co-invested, but the round was led by Breakthrough Energy Ventures (US), British International Investment (UK), and Norway’s Norfund.
• OmniRetail ($20M, Retailtech): Nigerian investors (Timon Capital, Ventures Platform, Aruwa Capital, Alitheia Capital, Flour Mills of Nigeria) played a significant role, but Sweden’s Norfund was still a key backer.
• Raenest ($11M, Fintech): Ventures Platform was a major investor, but US-based QED Investors, Sweden’s Norrsken22, and Egypt’s P1 Ventures took substantial stakes.
• LemFi ($53M, Fintech): The Series B round was led by UK-based Highland Europe, with significant participation from US investors Left Lane Capital, Palm Drive Capital, Endeavor Catalyst, and Y Combinator. Nigerian investors were notably absent from the round, highlighting continued foreign dominance in late-stage fintech funding.

Why it matters: In 2025, Nigerian VCs are writing checks but lack the capital to lead large rounds independently. This leaves startups reliant on foreign investors for growth-stage funding.

“Nigeria is full of ideas, but still light on capital,” says a Lagos-based fintech founder who preferred not to be named. “We pitch locally, but most of the real money is still coming from outside.”

2. Foreign Investors Still Dominate Big Rounds

No Nigerian-led $50M+ rounds have been recorded in 2025. Even in Nigeria’s strongest sectors — fintech and cleantech — global investors and DFIs control the biggest deals.

• Examples: Norfund (Sweden), BII (UK), and Breakthrough Energy Ventures (US) have been the most active in Nigerian cleantech.
• Implication: Without local heavyweights, Nigerian founders must still look abroad for major funding.

3. Corporate Investment is Underdeveloped

Some Nigerian corporates are stepping up:

• Flour Mills of Nigeria backed OmniRetail.
• All On (an off-grid energy investor funded by Shell) invested in Arnergy and Rivy.

However, most Nigerian banks, telcos, and conglomerates remain absent from venture investing. In South Africa, Naspers (via Prosus) and Standard Bank actively invest in startups. In Egypt, CIB and Telecom Egypt have venture arms. Nigeria lags behind.

4. Local Fund Managers Are Growing, But Remain Small

Nigerian VC firms like Ventures Platform, LoftyInc, Ingressive Capital are gaining traction. However, their fund sizes (typically between USD10M−−50M) limit their ability to compete with global players like Norrsken22 or QED, which can deploy $20M+ in a single deal.

Result: Nigerian VCs often syndicate with foreign investors rather than leading rounds outright.

5. Cross-Border Deals Are Rising

Nigerian investors are increasingly backing startups outside Nigeria, signaling cross-border ambitions amid uncertain economic climate back home. In 2025, notable cross-border investments had been recorded for Nigerian VCs: 

• Lori Systems (Kenya, Logistics): Backed by Future Africa and FP Capital (Nigeria).
• Widebot (Egypt, AI): LoftyInc (Nigeria) co-invested with Saudi, US, and Kenyan funds.
• Cauridor (Guinea, Fintech): Oui Capital (Nigeria) participated.

This trend suggests that, in 2025, Nigerian VCs are diversifying but may also reflect limited local opportunities.

Why Is Local VC Participation Still Weak?

1. Limited Domestic LP Support

Most Nigerian VC funds rely on foreign limited partners (LPs), such as DFIs and international family offices. Local pension funds, insurers, and high-net-worth individuals (HNWIs) prefer real estate and fixed income over venture capital.

2. Currency and Macroeconomic Risks

• Naira volatility makes dollar-denominated fundraising difficult.
• High inflation and interest rates push investors toward safer assets.

3. Few Exit Opportunities

• Nigeria has fewer IPO and M&A exits than South Africa.
• Foreign investors often have access to global exit opportunities, such as acquisitions by international companies — illustrated by Paystack’s sale to Stripe. In contrast, local VCs face more limited exit routes, especially in secondary sales, which are often influenced by privileged networks and insider access.

4. Regulatory and Tax Hurdles

• No major tax incentives for VC investments. In practice, the recently passed Startup Act is more or less dormant and ineffective. 
• Cumbersome fund structures deter local asset managers from launching VC funds.

What Needs to Change?

1. More Institutional Capital Must Flow Into VC

• Pension funds should allocate 1–5% to venture capital (as permitted by PENCOM regulations).
• Banks and insurers should launch venture arms. Egyptian banks have Nclude, Morocco’s Attijariwafa Bank has Attijariwafa Ventures. There are many VC arms run by South African banks. 

2. Corporate Venture Capital (CVC) Must Expand

• Firms like Dangote, MTN, UBA, and Zenith Bank should invest directly in startups.
• Flour Mills’ bet on OmniRetail is a positive sign — more corporates should follow.

3. Government Intervention is Needed

• Tax breaks for local startup investors. The Startup Act, in practice, is not effective. 
• Sovereign-backed VC fund-of-funds. Numerous innovation funds have been launched in the past, but their operations have often been shrouded in opacity, with their ambitions undermined by systemic corruption and a lack of transparency.
• Easier forex access for startups and investors.

4. Stronger Secondary Markets for Liquidity

• More acquisitions (like Paystack’s exit) would boost confidence. Recent acquisitions — such as those of Bankly and Brass — appear to be more indicative of distress sales than strategic buyouts.
• The NGX (Nigerian Exchange) should incentivize tech listings with relaxed rules.

The Bottom Line

Nigerian investors are active but not dominant. Without stronger local LP support, corporate VC participation, and policy reforms, Nigeria risks remaining a startup hub dependent on foreign capital.

The opportunity is clear: If Nigeria’s institutional investors and corporates step up, the local VC ecosystem could rival South Africa’s. But 2025’s funding drought so far shows that progress remains slow.

For Nigerian startups seeking funding in 2025, it’s crucial to approach fundraising with both realism and strategy. Given the dominance of foreign capital in large rounds and the limited firepower of local VCs, founders should prioritize building investor-ready operations that appeal to global standards — while still leveraging local networks for early traction and regional insight. Expect most Nigerian VCs to participate in syndicates rather than lead rounds, and be prepared for extended timelines, especially for growth-stage funding. To stand out, startups must demonstrate clear paths to revenue, efficient capital use, and scalable models — while also cultivating relationships that can unlock foreign investor confidence and potential exit pathways.