Why most fintech in Nigeria may never become profitable – Mitchell Elegbe 

The founder/Group CEO of Interswitch, Mr. Mitchell Elegbe, has said that most fintech in Nigeria may only become profitable if they start on the right footing by providing some services for free. 

Elegbe stated this on Saturday during Lagos’s 4th edition of the Doing Business in Nigeria Conference (DNBC). According to him, using free services to win market share will be the bane of many fintechs because they will not be able to monetise the same services later.   

“You don’t give a poor man something for free, and then the next day, you want to come charging for it. He will insult you. 

“He will tell you you should have left me where I was before. So this idea that I can win market share by giving you something to use for free, then one day, I can monetise it, you had better be sure your unit economics is correct because you may never be able to monetise it.  

“And that is why many fintechs today will never become profitable,” he said.  

Profitability is key 

Highlighting the peculiarities of running a business in Nigeria during his keynote presentation at the Conference, the Interswitch MD said getting to profitability should be the most important thing for every business. Addressing the gathering of young businessmen and women from across Nigeria, Elegbe said: 

“Getting profitable is what you must love to do, and what that means is that you must get your unit economics right from the onset.  

“If you miss that, it’s better to do something small, become profitable with it, and begin to scale sustainably.” 

He also advised business owners to go beyond formal education and learn from the ‘streets.’ According to him, the study of the streets would help business owners understand the behaviours of their customers.  

“The MBAs are important, and they’re necessary but not sufficient. What kills most businesses are the things you did not learn in school that you have to deal with, especially if you went to school abroad because most of the examples or cases you did have no relevance to your local environment,” he said. 

Why startups are failing 

Elegbe said many Nigerian startups are failing because they rely heavily on fundraising without considering the peculiarities of their operating environment. According to him, startups in Nigeria are in the Tropical Savanah and should not compare themselves with those in Silicon Valley.  

While noting that the current funding slowdown is affecting many companies that had hoped to continue raising funds, Elegbe said he got wind of what would come two years ago when he was travelling around the world looking for investors.  

“Two years ago, I went around the world to talk to investors, and everyone told me they were not investing in Nigeria. Many of my fintech partners did not know because they were not on that journey. But I knew two years before that money was not going to come. 

“Many companies have failed because they depended on raising money. They hoped to raise one fund after another fund. That works very well in Silicon Valley. But we are in Tropical Savannah, so you only have one chance. Don’t waste it. 

“You may raise your funds once or not be able to raise the second one. But if you just raised money two years ago, you should have known that this money may be the last one you will get in the next five years. So how you use it is important,” he said. 

This year’s Doing Business in Nigeria Conference (DNBC) edition was themed, ‘Sustainable Transformations: Innovating for Growth.’

According to the conference convener, Linda Uneze, the managing partner of Maurice Xandra Solutions, the platform was created to promote experience sharing among business professionals and equip potential investors and entrepreneurs.