While it seems that MTN has an uncanny ability for strolling from a frying pan ($5B fine), into the fire ($8B refund), and then amble into a lava pit ($2B tax arguments), one thing that caught my eyes was the sheer magnitude of the $8b dividend that MTN has remitted to the mothership since 2001.
How many black $billionaires do we even have that MTN alone could have minted 8 of them? As funny as this is, the tragedy is that when the opportunity to build the telecoms business in Nigeria showed up in 2001 the Nigerian big men and smart elites, save a few, looked away and weren’t impressed with the potentials.
Unfortunately, even though it’s now established that there is a lot to be made in telecoms, the barrier to entry has been raised so high that nobody can tap into the market for a reasonable investment anymore. Yes, MTN wants to do an IPO, but the cream of the business has always been sucked away by the visionary South African and other foreign investors.
We could talk about big names like Dangote, Otedola, and others, but their wealth is mostly paper money which is why their Forbes rankings always go in the other direction of Naira to Dollar exchange rate. $8B sitting in your account, chilling and sipping champagne, will still be $8B unless Aso Rock rats eat them.
Nigerian elites are losers.
But there is something to life; history has a way of repeating itself.
Without a doubt, everyone agrees that Nigeria is a frontier economy – where things are challenging, but there are growth potentials. Nevertheless, we are seeing the proliferation of world-class technology companies rising to meet our challenges.
But who is funding them? Nigerians? Fat chance!
Recently, a number of local players, regular everyday guys like you, have raised significant capital to fund their next stage of growth: Kwikcash/Mines.io ($13m), Flutterwave ($10m), Cellulant ($47m), Venture Garden Group ($20m), Paystack ($8m), Andela ($40m), Tizeti ($3m) etc. The majority of these funds came from international Venture Capitals (VCs).
And for the few local VCs that participated, most of their LPs (the investors who put money in funds) are foreigners.
All things being equal, we expect these companies to succeed, and when the time comes for dividends and exits (when VCs sell shares to give the money back to their LPs), the gains will take a flight and go abroad.
Raising local funds is like raising hell, for yourself
The founders raising funds from foreign VCs didn’t just jump on the plane to hunt for dollars in Silicon Valley but started talking to local money bags, but it didn’t end well. I was privileged to have mentored a few startups, and their tales of local fundraising is at best, amusing.
Despite the dubious claims of global experience, many Nigerian elites don’t understand venture capitalism. In pitching to them, they waste your time; ask for everything in return for a pittance; many want to treat you as an employee. They demand unreasonable control; and force you to employ their relatives. The business connections and introductions they promise never materialized. When they sit on your boards, their contributions are asinine. As advisors, you are better off talking to a door post.
Founders quickly grew wise and stopped pitching local money bags and executives. The same projections that our rich men made fun of are the ones that Silicon Valley lapped up. Even when startups fail, the VCs know failures are an integral part of success. In fact, some VCs won’t fund you if you have never failed before.
It got so bad that many local startups won’t even allow local investors to participate on their rounds. It can be that bad!
Local players with African aspirations
It would be disingenuous to tar everyone with the same brush, even if the brush is as wide as Lake Chad. A few forward thinkers have put a portion of their wealth aside to fund startups such as Itanna, Trium (disclosure: I work here), Quantum Capital, Pave, etc. But the total smart capital committed is insignificant to the potentials within the country.
Maybe a few won’t be losers after all.
We shall serve our dollar overlords
What scares me though and keeps me up at night is that we could enter into a generation of technology colonialism. A situation where foreigners bring in a few hundred million dollars, invest in our fintechs and other sectors. Their investee companies then use Nigerian workers, Nigerian business ideas and then take all the benefits, in multiples, back to their country.
When the time comes, our big boys would have become irrelevant; their oil companies, banks and businesses way smaller and less important than the new technological overlords.