One of the biggest challenges to starting a business in Nigeria is securing adequate funding.
Whether youโre currently in Nigeria planning to launch your business or youโre a Nigerian in the diaspora looking to establish a business in Nigeria, this article outlines six proven strategies that successful Nigerian entrepreneurs worldwide use to fund their ventures.
1. Understanding Your Funding Landscape
Your location significantly influences the funding options available to you. Nigerian diaspora entrepreneurs often have access to opportunities that local entrepreneurs do not, including international grant programmes and cross-border investment networks.
As a diaspora entrepreneur, you possess unique advantages that can work in your favour. You have access to multiple financial systems, often maintain higher credit scores in developed countries, and benefit from international business networks that domestic entrepreneurs may find challenging to reach.
Furthermore, currency arbitrage opportunities allow you to maximise the impact of funding raised in stronger currencies when applied to ventures in the Nigerian market.
However, challenges exist as well. Many traditional lenders consider diaspora businesses to be higher risk, especially those targeting Nigerian markets.
Understanding this landscape will help you position your applications strategically and choose the right funding mix for your specific circumstances.
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2. Preparing Your Funding Strategy
Success in raising funds requires systematic preparation rather than ad-hoc applications.
Most funded entrepreneurs follow established frameworks that maximise their chances across multiple funding sources while minimising time investment and application fatigue.
Start by defining your funding strategy strategically rather than relying on a single source.
Successful ventures typically combine personal and family funding to cover 40% of initial needs, debt financing to provide 30% of capital requirements, investor funding to contribute 20% of total needs, and grants or alternative sources to fill the remaining 10%.
This diversification reduces risk while providing multiple pathways to secure necessary capital.
Other tips that have proved useful in this regard include:
- Creating a funding timeline with realistic expectations about application and approval processes.
- Developing a professional, detailed, and realistic business plan that demonstrates thorough market understanding and operational competence.
- Additionally, building networks by regularly attending diaspora business events and contributing value to community discussions.
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3. Traditional Bank Loans
Once you have a funding strategy, a good start is with banks in your host country (if that is part of your strategy). As they often provide the most straightforward funding route for established residents with good credit. The key is understanding what banks look for beyond the standard requirements.
Most successful applicants maintain good credit scores. Banks want to see at least two years of residence history to demonstrate stability and commitment to the local market.
Beyond these basics, steady employment or documented income streams can show your ability to service debt, while comprehensive business plans with realistic financial projections convey your serious intent.
To maximise your chances of approval, focus on building relationships with community banks that understand diaspora businesses rather than approaching large institutional lenders.
Consider collateral-backed loans for better interest rates, especially if you own property or have significant assets. Many successful entrepreneurs start with smaller loan amounts to build a lending history before seeking larger funding rounds.
Additionally, Nigerian-owned banks operating abroad, such as Access Bank UK, often offer specialised programmes designed specifically for diaspora entrepreneurs, as these institutions understand the cultural context and business models that traditional banks may view skeptically.
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4. Angel Investors And Venture Capital Networks
The Nigerian startup ecosystem has experienced significant growth, with $976 million raised in 2022 alone. Nigerian diaspora entrepreneurs are uniquely positioned to capitalise on this growth since they offer investors something that domestic entrepreneurs cannot โ a bridge between markets.
Finding the right investors requires understanding the landscape.
African-focused venture capital firms like TLcom Capital and Future Africa actively seek diaspora founders who bring global perspectives to local challenges.
Additionally, diaspora angel networks, such as Golden Palm Investments, specifically connect Nigerian investors worldwide, creating funding opportunities that leverage cultural understanding and shared experiences.
When crafting your pitch, remember that your status as a diaspora entrepreneur is an asset, not a limitation. Investors want to hear about your market knowledge and insights.
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5. Alternative Funding Sources
It is critical to explore non-traditional options for funding.
Most Nigerian diaspora entrepreneurs often overlook accessible funding sources that do not require formal applications or extensive documentation. These alternative sources can provide essential early-stage capital or bridge financing between larger funding rounds.
Some good sources that have proven helpful over time include:
- Community and religious organisations. These are powerful funding sources within diaspora communities that can help with your funding needs. You can join reputable Esusu groups, reach out to Nigerian religious bodies abroad that provide business grants or low-interest loans or even professional associations for Nigerians.
- Family and friends funding. A good alternative source to leverage is family and friends. To do this successfully, present formal business plans instead of casual requests, offer transparent repayment terms or equity partnerships, and document everything through proper legal channels. This way you safeguard relationships while securing the necessary capital.
- Crowdfunding platforms have become invaluable for diaspora entrepreneurs with compelling stories that resonate across cultural boundaries.
- Revenue-based financing is an emerging funding alternative particularly suitable for businesses with predictable cash flows.
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6. Building Strategic Partnerships
Strategic alliances can provide resources, market access, and credibility that money alone cannot buy. For diaspora entrepreneurs, partnerships leverage your unique role as cultural bridges between different business environments.
Corporate partnerships with large companies seeking to enter African markets can offer mutual benefits. Your cultural knowledge and local networks are valuable assets for multinational corporations, while their resources and market presence can help accelerate your business growth.
Developing strategic partnerships requires a systematic approach. Identify organisations where there is genuine alignment rather than pursuing partnerships solely for funding. Prepare compelling partnership proposals that clearly articulate mutual benefits and specific collaboration opportunities. Negotiate terms that provide real value to both parties and structure legal agreements that protect everyoneโs interests while offering flexibility for growth.
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Action Steps
Securing funding as a Nigerian in the diaspora requires strategy, persistence, and the ability to leverage your unique advantages.
Your global perspective and cultural bridge-building skills are valuable assets that investors and partners seek in todayโs interconnected business environment.
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