Nigerian Startups Eye Debt as Equity Funding Slows: A Critical Look

Equity funding for Nigerian tech startups took a hit in 2025, dropping considerably compared to the previous year. Numbers tell part of the story: a reported $191 million versus $300 million. That’s a significant fall. Seeing this, Andersen’s affiliate, The New Practice (TNP), hosted a discussion about tapping into debt markets. The theme? “Scaling Smarter: Debt Markets as a Growth Catalyst for Startups.” It’s a conversation worth having.

The shift makes sense. When easy money tightens, you explore other avenues. Commercial papers, once the domain of established giants, are now a viable option for smaller businesses. Over N1 trillion in commercial papers issued this year alone signals a change. Much of the credit, apparently, goes to the Securities and Exchange Commission (SEC) for its supportive stance.

Still, accessibility doesn’t equal simplicity. The capital market demands seriousness, as one expert pointed out. Startups need to understand the credit rating process before diving in. This involves a look at the operating environment (Nigeria itself), the specific sector (agribusiness and telecoms are favored, I noticed), the business profile (governance is crucial here), and the financial outlook. Even strong financials can be undermined by governance weaknesses.

One interesting angle raised was the importance of banking relationships. Long-term stability sends a positive message. Frequent lender changes? That raises red flags. It’s the kind of detail that highlights the holistic nature of credit assessments.

Payaza CEO Seyi Ebenezer’s story stood out. They deliberately chose debt over readily available VC funding, raising a substantial amount through commercial paper programs. It underscores a different philosophy: that discipline, not just brilliance, drives success. Ebenezer made a clear point: debt enforces structure and accountability. Interest accrues daily, demanding consistent attention and financial prudence. Some might view this pressure negatively; others, like Ebenezer, see it as a catalyst for responsible growth.

Debt certainly isn’t a magic bullet. Not every startup is ready for the obligation. The pressure can crush undisciplined teams. But for those seeking structure and sustainable scaling, the debt market presents a real alternative as the equity well appears to be drying up. I’ve seen similar cycles before, and the companies that adapt intelligently are the ones that survive.

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