Nigeria leads as Africa raises $5.2bn venture capital investments in 2022

By Cynthia Ezekwe 

Nigeria has emerged as the most active country for venture capital (VC)  investments in Africa in  2022 as Africa raised $5.2bn in venture capital across 786 deals during the year.

This was disclosed in a recent report by the African Private Equity & Venture Capital Association (AVCA),a pan-African industry body championing private investment into Africa.

Venture capital (VC) is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.

The AVCA  annual report titled “2022 AVCA Venture Capital in Africa Report”,noted that  Nigeria outperformed four other countries that made the top list to account for 22 percent of the 853 investment deals worth about $6.5 billion on the continent.

The report stated that  regionally, West Africa maintained the top spot for the second consecutive year, with Nigeria as the most active country both in the region and on the continent.

“West Africa attracted the largest proportion of venture capital deal volume, driven by Nigeria which was the most active country by volume at 22 per cent,” the report highlighted.

It added that  dealmaking on the continent was concentrated in the financial sector, which assumed 31 per cent of deal volume and 42 per cent of deal value.

Also, 77 per cent of investors active in Africa’s venture landscape in 2022 were international investors while 23 per cent were African investors.

According to the report,  Africa raised $5.2bn in venture capital across 786 deals, representing three per cent of the total volume and 1.2 per cent of the total value of global venture funding in 2022.

With the inclusion of venture debt, venture inflows to Africa  rose to $6.5 bn raised across 853 deals in 2022.

The report also noted that startups raising their first round of venture financing only accounted for 37 per cent of VC deal volume in 2022 and startups with a gender-diverse founding team raised a cumulative total of close to $950 million.

While the global venture market experienced significant contractions in startup funding to varying regional degrees, Africa’s venture ecosystem was relatively
stable and only experienced a funding drop of less than US$50 million compared to 2021.

Comparatively, Latin America saw the biggest year-on-year declines in startup funding to the tune of 59 per cent followed by Asia which saw contractions of 35 per cent. Consequently, the funding gap between Africa’s closest socio-economic comparator, Latin America, saw a near-fivefold decrease from US$14.8 billion in 2021 to US$3.1 billion in 2022.

AVCA’s annual report further emphasised that despite the  volume and value of venture capital in Africa being relatively small compared to other regions such as North America and Asia, it has been growing steadily in recent years and shows potential for further growth in the future.