Why Nigerian startups are turning to debt over equity

Debt financing is now accounting for a record 41% of capital raised by African tech startups, a significant increase from 17% just a few years ago, according to Partech Africa's annual report. Nigerian founders are among those experiencing this shift, though their market share remains smaller compared to regional leaders Kenya and Egypt.

Three founders with firsthand experience in the funding market have shared their perspectives on Nairametrics regarding the reasons behind this trend. As businesses reach a level of revenue predictability that lenders can assess, equity financing has become more challenging, time-consuming, and demanding. Local channels are now providing capital access to borrowers who previously could not obtain it.

Babatunde Akin-Moses, founder of digital lender Sycamore, attributes the shift to businesses attaining the discipline required by institutional lenders. He also warns about the potential downsides of relying on debt for companies that have not yet established their footing. Temitope Ekundayo, co-founder of GetEquity, suggests that equity is evolving and taking on debt-like characteristics, particularly for earlier-stage companies.

Oluwaseyi Ayodeji, AI infrastructure program leader and founder of Regal Stack, agrees that maturity is the key driver behind the shift, but remains skeptical about applying this conclusion specifically to Nigeria. A structural change in the availability and origin of lending capital is another crucial factor, according to Ekundayo.

Debt financing in African tech funding has grown from 17% in 2019 to 41% in 2025, with Western Africa contributing the smallest share. Nigeria specifically saw a 132% year-on-year increase in debt funding, rising to $160 million in 2025, although its equity funding declined by 21%.