FX reforms, exit challenges slow venture capital investments in Nigeria — Report

Foreign exchange (FX) reforms and persistent exit challenges have dampened venture capital (VC) and private equity (PE) investments in Nigeria over the last four years, according to a new report by the Impact Investors Foundation (IIF).

The report, titled: “Nigerian Impact Investment Landscape 2025,” was unveiled on recently at the 8th Annual Convening on Impact Investing (ACII) in Lagos. It revealed that total VC and PE inflows fell sharply from $1.14 billion in 2022 to $939.5 million in 2023, and further to $211.4 million and $207.5 million in 2024 and 2025 respectively.

The number of deals also declined drastically — from 292 in 2022 to just 78 by 2025, underscoring the mounting investment headwinds facing Nigeria’s startup and impact ecosystem.

“Private Equity (PE) and Venture Capital (VC) activity in Nigeria has slowed sharply since 2022, mirroring global market corrections and compounded by domestic macroeconomic headwinds,” the report said.

It identified several key factors behind the downturn, including the global VC funding slump, FX volatility, and weak exit opportunities. Following record highs in 2021 and 2022, global tech funding contracted by 54 percent year-on-year in 2023, while Africa recorded a 32 per cent drop in deal count.

In Nigeria, the Central Bank’s foreign exchange reforms, which began in June 2023 with the unification of exchange rate windows, have introduced new valuation risks.

The report noted that multiple naira devaluations caused pricing uncertainty, translation losses, and raised the cost of dollar-denominated capital — discouraging foreign investors.

It added that exit constraints such as limited initial public offering (IPO) and merger & acquisition (M&A) activity have weakened investor confidence and delayed capital recycling.

Meanwhile, domestic macroeconomic pressures — including high inflation, tight liquidity, and policy reforms such as fuel subsidy removal — further eroded local co-investment appetite.

Etemore Glover, CEO of IIF, said the report provides critical evidence-based data to guide policymakers, Development Finance Institutions (DFIs), and investors.

“This data will help guide capital to where it is needed most, translating availability into impact-aligned growth and a more resilient investment ecosystem,” Glover said.

The ACII conference, themed “Strengthening and Scaling the Nigerian Impact Economy,” brought together policymakers, investors, and entrepreneurs to chart a path for inclusive growth and sustainable finance in Africa’s largest economy.