Some unique deals still happen. LemFi, for example, raised $53 million in Series B early in 2025, its biggest round so far. But they are exceptions. Most startups in Nigeria do not manage to clear this gap, and I believe this lack of late-stage funding is one of the biggest risks to our tech sector’s sustainability.

What We Mean by the “Series B Cliff”

Series B is not about “more money.” It is a change in expectations. A startup at Series A is proving its product works, acquiring customers and showing early traction. By Series B, investors expect evidence of scale: solid unit economics, growth across markets, usually profitability or a clear path to it.

In Nigeria, many startups do prove traction. But moving to that next level, expanding nationally or regionally, improving margins, handling regulatory and foreign exchange risks, is much harder. The cliff appears when the risk of scale is too great, when external factors stack up, and when investors become sceptical.

Structural Challenges Holding Us Back

There are multiple structural problems. Some are external. Some within our control. Together, they make the Series B stage difficult to cross.

• Risk Aversion & Global Investor Doubt
  Many foreign investors now demand stronger proof of stability before committing late-stage capital. Macroeconomic instability (inflation, currency fluctuations) makes projections unreliable. Investors see higher risk in Nigerian startups compared to similar ones elsewhere in Africa or globally, and they price that risk either by demanding more control or by withdrawing entirely.
• Weak Exit Opportunities
  For Series B to make sense, there must be credible exit routes such as acquisitions, IPOs, or secondary markets. In Nigeria, large exits are still rare. When exits don’t happen, investors find it hard to justify taking big risks with late-stage funding.
• Corporate Governance and Transparency
  Many startups at seed or Series A have minimal structures: sometimes weak financial reporting, limited board oversight, and loose cost controls. Late-stage investors demand maturity: audited accounts, clear governance, accountability. When those aren’t in place, deals stall or valuations suffer.
• Capital Scarcity for Growth Rounds
  While seed and A-round funding have grown thanks to angel investors, incubators, and early-stage funds, there are comparatively few growth funds in Nigeria willing to lead or participate in large B rounds. Local LPs (pension funds, mutual funds) are careful; regulatory friction around foreign capital complicates large inflows.
• Macro Instability & Currency Risk
  The naira’s instability, difficulty obtaining foreign exchange, and inflation make cost structures unpredictable. For businesses that depend on imported inputs, software subscriptions in foreign currency, or paying overseas partners, this risk can incapacitate margins when scaling.
• Market and Infrastructure Barriers
  Scaling requires infrastructure: reliable power, logistics, and internet latency. In many parts of Nigeria, local infrastructure is weak. Operational costs rise, and unpredictable outages happen. These extra burdens make scaling beyond Lagos expensive and risky.

The Cost of Hitting the Cliff

When startups cannot secure Series B or late-stage backing:

• Growth slows. They may lay off staff, reduce marketing spend, or halt plans to expand into new regions or countries.
• Innovation is stunted. Features, talent hires, R&D often are deferred or dropped.
• Talent may leave. When funding is uncertain, senior hires often prefer safer roles or move abroad.
• Ecosystem morale suffers. When founders and VCs see many good companies stagnate, fewer entrepreneurs attempt ambitious scale-ups.

Examples:

• LemFi’s success is the positive side. 
• Arnergy, in the renewables sector, raised $18 million Series B in 2025, but employees pointed out how difficult it was to get liquidity until after that round. The gap in cash between rounds creates real hardship.

How We Can Fix This: Mitigation & Path Forward

I believe there are concrete, actionable ways the ecosystem can reduce the gap. Some require policy changes. Others are internal to startups or investors. All must happen together.

• Grow Local Growth Funds
  We need more funds based in Nigeria (or managed by Africans) that understand the risk profile here. These growth-stage funds must have patience, take larger checks, and bear risk that foreign investors avoid.
• Policy Stability & Regulatory Certainty
  Clear rules for foreign investment, stable regulation, easier repatriation of profits, sensible taxation on startups. When policies flip frequently, investors pull back. Government must show it understands growth-stage needs.
• Strengthen Corporate Governance
  Startups must prepare earlier: audited financial reports, boards that include independent members, clearer financial controls. That builds trust for late-stage backers.
• Encourage Exit Market Development
  Stock exchanges need to streamline IPOs for tech companies. Secondary markets for private shares would allow founders and early investors liquidity without waiting for acquisition or IPO.
• Leverage Alternative Financing Structures
  Hybrid structures (debt + equity), revenue-based financing, and convertible notes could help bridge rounds. These structures distribute risk differently and may attract investors unwilling to lead a pure equity round.
• Manage Cost & Efficiency Early
  Founders should build for profitability early: unit economics must be straightforward, margins tracked, and customer retention high. Scaling quickly without sustainable cost base is dangerous.
• Matchmake Corporate Partnerships
  Strategic corporate investors (local or multinational) can provide revenue contracts, distribution channels, and infrastructure support. Working relationships with corporates reduce risk and may be stepping stones to larger funding.

Looking Beyond the Cliff

The Series B cliff is not inevitable for startups. I don’t believe we’re stuck. We have proof of concept in LemFi, Arnergy and a few others that some Nigerian startups can break through. But to shift from a handful of wins to widespread scale, we need maturation in investment behaviour, stronger governance, more stable macro conditions, and growth-stage financing infrastructure.

If I were advising policymakers, I’d push for reforms now. If I were advising founders, I’d urge planning for the scale hurdle from day one. Crossing the cliff will demand discipline, transparency, and patience. But once we do, Nigeria’s startup ecosystem will compete globally.

However, in the midst of this booming digital tide, the country’s tech sector is still challenged with infrastructure gaps and the perennial search for investment, an irony not lost on participants at the inaugural GITEX NIGERIA.

Held from September 1 to 4, 2025 across Abuja and Lagos, GITEX NIGERIA brought together global tech giants, startups, and investors from 78 countries under the patronage of President Bola Ahmed Tinubu. 

Organised by KAOUN International and backed by the Federal Ministry of Communications, Innovation and Digital Economy and NITDA, the event was pitched as a platform for Nigeria to assert itself as Africa’s digital hub.

“In three short days, GITEX NIGERIA has already had a meaningful impact on our nation, from startups seeking funds and exposure with global investors to international organisations discovering the vast growth opportunities within our digital economy,” Olatunbosun Alake, commissioner for Innovation, Science & Technology, Lagos State, stated.

“This annual event will continue to grow, have a long-term contribution to Nigerian digitalisation, and show the world the power of international collaboration.”

Abdelaziz Saidu, country leader at Cisco Nigeria & Ghana, said “The crowd has been overwhelming, not just in size but in the quality of people coming to our stand, including the Lagos State Governor and the Minister, who were impressed with our AI and cyber security showcases.”

“From day one we’ve generated strong leads, some already converting into opportunities, and engaged with organisations like the African Union. The brand reputation of GITEX has pulled in the right crowd locally, regionally and internationally, making this inaugural edition truly impactful.”

The event ran on dual platforms, the Tech Expo & Future Economy Conference at the Eko Hotel Convention Centre, and the Startup Festival at the Landmark Centre. These hubs provided startups, investors, and corporates a chance to forge partnerships, explore Nigeria’s digital market, and pitch ideas to decision-makers. 

International tech giants such as IBM, Meta, Microsoft, NVIDIA, AWS, and Kaspersky showcased innovations ranging from AI solutions to cybersecurity frameworks, emphasising the strategic relevance of the Nigerian market.

The surge of Nigeria’s digital economy has been largely powered by the Information & Communications sector, contributing 10.59% of GDP, and the Finance Institutions sector, adding 3.60%. With projections indicating the ICT sector could account for up to 21% of GDP by 2027, Nigeria’s goal to become Africa’s leading digital hub is a roadmap, not just a talking point.

GITEX NIGERIA provided more visibility for West Africa. Its investor programme facilitated cross-border collaborations, bringing in deals and partnerships that could boost Nigeria’s digital growth.

For a country where digital access still battles infrastructural bottlenecks, the event stressed both the promise and the challenge: Nigeria is ready to lead, but the path is complex and demands sustained investment and governance support.