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The Powerlessness Of Nigeria's Tech Startups

An employee walks past a power plant's electricity pylons in Lagos, Nigeria. Power shortages are particularly a problem for Nigeria's booming tech industry, which accounts for nearly 14% of the country's GDP.
Georgie Osodi
Bloomberg/Getty Images
An employee walks past a power plant's electricity pylons in Lagos, Nigeria. Power shortages are particularly a problem for Nigeria's booming tech industry, which accounts for nearly 14% of the country's GDP.

Chris Oyeniyi runs a small tech startup in Lagos, Nigeria. It's a smartphone app called KariGO that he says is "like Uber but for trucks." Businesses or factories can use it to hire big semitrucks to move their products around the country. He started it in 2016 and now has 11 office staff members, and he owns a few dozen trucks.

But unlike Uber, which operates 24/7, Oyeniyi says the app is limited to normal business hours. He wants to keep it open around the clock but faces what has so far been an insurmountable obstacle. It's not a staff shortages, government regulations or software glitches.

"One thing will not allow us to do that," he says. "Electricity."

Oyeniyi says he pays about $800 every month to keep the lights and computers on in his small office. The reason for the high cost? Power from the government-run electrical grid is cheap but goes out so often — multiple times a day, every day — that he is forced to rely on a loud, fume-belching, diesel-sucking generator. It's too expensive to fuel and maintain beyond the bare minimum number of hours.

If the government power grid worked all the time, he says, his electrical bill would be closer to $100.

Power shortages are common in many low- and middle-income countries. A United Nations report this fall found that 840 million people live without access to reliable electricity. Most of them are in Africa, and most live in rural areas, beyond the reach of the grid.

But the problem of power outages strikes cities as well — and can take an especially harsh toll on the economy, cutting off the productivity of businesses and government agencies alike, and forcing entrepreneurs like Oyeniyi to pour capital into backup generators instead of investing in staff or equipment. In Lagos, the grid is so unreliable that most homes and businesses have a generator, and the city is constantly filled with the noise and pollution from millions of people creating their own power.

Power shortages are particularly a problem for Nigeria's booming tech industry, which is the biggest on the continent and accounts for nearly 14% of the country's GDP, according to a survey of 93 Nigerian tech startups released this month by the . The survey found that 57% of startups, most with fewer than 10 employees, find electricity problems to be a "major" or "very severe" obstacle to their business, beating out other challenges such as corruption, taxes and government red tape. (Access to finance and political instability were also top-ranking obstacles.)

Vijaya Ramachandran, the center's research manager and lead author of the report, says the electricity problem is kneecapping a sector that offers perhaps the most promising opportunity to create skilled, high-paying jobs for young people and diversify the country's volatile economy away from its traditional reliance on oil and gas.

"This is a very significant burden for the local tech sector," she says. "It's a very basic business environment problem that needs to be fixed."

It's not just the cost: Many startups face the constant risk of a blackout suddenly wiping out important digital work, interrupting critical software updates, simply wasting employees' time or forcing them to work without air conditioning in the sweltering Lagos heat.

"If there's no power, you can't do work," says Tomiwa Aladekomo, editor of the Nigerian industry journal TechCabal. "Even if you have a backup system, it's a demoralizer for employees and a pretty big productivity tax."

Jonathan Phillips, director of the Energy Access Project at Duke University, who was not involved in the survey, says Nigeria's power problems date back decades to the country's early days of independence, when the government set up a heavily subsidized electrical grid. The energy system was often a prime target for corruption, he says, and has never been able to generate enough profit to offset the massive cost needed to build enough new power plants and distribution lines to keep up with the country's rapidly growing population. As a result, he says, Nigeria has one-fifth the total power supply of North Carolina, with a population of 200 million people, 20 times the state's — and blows through up to $8 billion per year on diesel fuel for generators.

"Nigeria is the poster child on how power access, especially in the business area, is just such a mega-constraint to growth," he says. Especially for startups, he says, "they've got 99 problems and they just don't need electricity to be one of them."

For some startups, one solution is WeWork-style co-working spaces that allow them to pool their energy bills. Tunde McIver runs a tech co-working space in Lagos and says many of his clients come to him because they need to pass off the headache of dealing with electricity to someone else. But even a co-working space can't fully surmount the generator cost.

"Tech is an around-the-clock business," he says. "But [because of the high cost of power] you can't keep the office open 24 hours. You just can't. So it's an inhibition [for business growth], definitely."

Solar power is another potential solution and is increasingly common on residential rooftops in the city. But McIver says it can't provide enough juice to power a whole office of computers, lights and air conditioners. So ultimately, the problem comes down to money: Either pay the generator bill or collapse.

But the struggle for power is worth it, he says. About 122 million of Nigeria's 200 million people have access to the Internet, accounting for one-fifth of all Internet users in Africa. That's a lot of potential customers for Web-based services.

"Nigeria is the land of opportunity," he says. "Once you master the energy challenge, there's a very large market, and you'll be able to make money."

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