Nigeria is Africa’s biggest startup economy. Findings show that five of the seven unicorns in Africa have Nigerian roots.
In 2021, Nigerian startups raised $1.5bn out of the $4.3bn that was channelled to the continent, according to ‘Africa: The Big Deal’, a database and insights firm which focuses on startup funding above $100,000 on the continent. Since the turn of 2019, Nigerian startups have raised more than $3.5bn, with 36 per cent of the total amount raised in Africa.
In terms of number, Nigeria has the most startups on the continent, estimated between 500 and 700 based on reports. This growth is responsible for the nation’s burgeoning tech ecosystem, ushering in the boom of young entrepreneurs, intrapreneurs, developers, designers, product designers, and more.
Also, this growth has led to the emergence of a new crop of chief executive officers in the nation. Many consider tech workspaces to offer more in terms of workers’ welfare than traditional workspaces since one of its key ingredients is disruption.
However, tech CEOs have been falling short and some have been forced to step down as a result of reports exposing their deeds. While a lot has been said about startup regulation, little has been discussed regarding corporate governance in the space.
In March 2022, TechCabal, did a report on Bento Africa accusing its Chief Executive Officer, Ebun Okubanjo, of tyranny and toxicity in the workspace.
According to the report, one employee, Pascal, said his time at Bento was the darkest period of his life. He stated that employees would weep during the sales team’s check-in call at 8 AM every week day while Okubanjo criticised their work and threatened to fire them all during these meetings.
He said, “There was no free day from Ebun’s verbal abuse. If he wasn’t calling me a useless person, he was threatening to beat me up.”
The report contained the accounts of various employees, prompting the CEO to step down from “all people-related decisions” in the company.
One board member and CEO at Zedcrest, Adedayo Hamza, said, “We’re not in support of the way Ebun handled the situation, and we’re currently running an internal investigation to quantify the scale of the damage his actions have brought to employees and the business.
“We’re open to speaking to anyone about this process.”
The report by TechCabal birthed the hashtag #HorribleBosses on Twitter Nigeria, as more tech workers alleged toxic work culture, sexual harassment, and bullying at startups.
The dust had not settled when a report about Flutterwave’s CEO, Olugbenga Agboola, revealed an alleged culture of bullying and mismanagement.
One former employee, Clara Odero, had, on April 4, posted an article on Medium alleging bullying and harassment by Agboola and negligence on the part of the company which had resulted in her being investigated by the Kenyan police.
A story by David Hundeyin on West Africa Weekly, a Substack newsletter, detailing allegations ranging from Agboola’s creation of a phantom co-founder identity to amass more company shares for himself, to employee stock manipulation and more, was published in April too.
This set a dark cloud over the ecosystem. Agboola soon addressed the allegations in a letter sent to staff of the company describing them as false.
He wrote, “I’m writing today because I want you to know how concerned I am about the impact that reading the false allegations against our company has had on you.
“It is my responsibility to address the concerns you may have, and this will be a priority for me moving forward.”
The letter touched on certain parts of the allegations and glossed over the rest. Flutterwave’s scandal put a negative spotlight on the ecosystem with players tweeting and raising concerns.
Numerous startups have also been called out on Twitter, and questions have been raised about how lack of proper corporate governance might derail the growth of the ecosystem.
Chief executives of this emerging sector are constantly under the spotlight due to investors’ interest and burgeoning returns. According to experts in the industry, the strong growth of startups in the nation could be derailed by lack of corporate governance in the space.
The founder of Lendsqr and a trustee of Open Banking Nigeria, Adedeji Olowe, said the role of corporate governance in the startup space was very important as it touched on how people were treated in the sector.
He said, “Corporate governance is very important to the ecosystem. Its role is an understatement. It is like a code of conduct and a good behaviour rating. The question is, is good behaviour okay for everyone, the answer is yes.
“It is one of those things that, if missing, even though you have early traction, a startup is likely going to be in trouble down the line. It is like washing your hands. There are no immediate consequences for not washing one’s hands, but there are long-term consequences.
“Corporate governance is still in its infancy in Nigeria, as most people do not even know what it is.”
He stated that it was not a matter of regulation by best practices. “It should be something that happens at the board if you want to implement it well. In fact, corporate governance actually exists, there are basic principles that exist even with CAC. There is no need for new regulations, the only challenge is that we do not have anyone enforcing any rules in Nigeria.
“We do not need to create any new thing, the rules exist. It is like insider trading, which is a problem in Nigeria today. There are rules against insider trading, but no one is enforcing them,” he added.
According to Olowe, lack of corporate governance would not necessarily affect investor confidence. He clarified that once the corporate governance gap started showing, the ecosystem would mature and new investors would start making demands for it.
The Chief Digital Officer, Wema Bank PLC, Olusegun Adeniyi, defined corporate governance as a set of rules, practices and processes used to direct and manage a company, driven by accountability, transparency, fairness, and responsibility.
He said, “There’s a need to drastically move from just ‘valuation card’ to real value and performance. There’s a current bubble that requires all the players to aim for the long-term benefit, instead of the sudden rise and drop buzz.
“African founders should learn more about the benefits of corporate governance. Company structuring is very important, and if well implemented, well-informed key decisions will be the order of the day. A high level of scrutiny should be performed by the founder regarding the kind of investors they partner with, and the kind of people they offer a board seat to.
“Close to that is the make-up of the board and maybe the advisory board. Whilst it may be tricky to pull in direct investors into the board, there’s a need to ensure external expertise is brought in for guidance and alignment with regulatory practices and processes.”
He added that there was a need to not only have founders, co-founders, chief technology officers, and other management positions but to also have regulatory and compliance managers. He stated that people in those positions would ensure that the growth of the start-up was tactically managed within a stipulated governance structure.
Adeniyi further said, “There’s a need to properly manage investor-related challenges through the right legal and structural metrics. How is equity given? Who are the investors? What are their motives beyond reaping off the possible boom?
“Just because of the boom and rush, there’s a need to hire the appropriate people, who are fit to build scalable businesses and resilient organisations. Guess what? Something is always after the ecosystem. As a best practice, companies should look for at least one or two members who have experience with related industries and customers.
“It is also extremely beneficial to bring outside perspectives to the board, often achieved by naming independent directors with no material stake or interest in the company, while fostering a company culture built on high standards of integrity, accountability, transparency, fairness, and responsibility.”
Paraphrasing a former Judge of the Supreme Court of South Africa, Mervyn King, good corporate governance is about ‘intellectual honesty’ and not just about sticking to rules and regulations.
Corporate governance gaps are not only rampant in Nigeria, but also across the globe. Many global companies such as Sequoia Capital, WeWork, and Uber have been rocked by corporate governance crises leading to changes in their management structures or resignations of affected individuals.
A healthy tech ecosystem is one that can hold management staff accountable, according to the experts. It is one that focuses on intellectual honesty and best practices, which are hallmarks of corporate governance.