Nigerian startups increasingly turned to debt financing to stay afloat in May 2026, as venture capital funding across Africa remained subdued in a tighter investment environment, according to the latest data from Africa: The Big Deal tracking platform.
The report showed African startups raised 135 million dollars in May through 37 deals, an improvement from April’s 110 million dollars but still well below the trailing 12-month monthly average of 255 million dollars. Four transactions, including Nala’s 50 million dollar credit facility and LemFi’s 30 million dollar Series B extension, accounted for nearly three-quarters of the month’s total funding.
Nigeria Dominates Equity Raised
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Nigeria accounted for roughly 64 per cent of all equity raised across the continent in May, reaffirming its position as Africa’s leading startup hub despite the broader funding slowdown. However, the composition of capital has shifted dramatically, with debt financing now representing nearly half of all funding compared to less than a quarter just two years ago.
Analysts at Launch Base Africa said the shift reflects investors becoming more selective, favouring startups with predictable revenue streams and tangible assets over early-stage ventures relying purely on growth projections. Gulf and US venture funds that drove significant equity investment in 2025 were largely absent from May’s deal log, replaced by European development finance institutions and domestic capital providers.
Government Steps in With Local Funding Vehicles
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Furthermore, the Nigerian government has moved to fill part of the gap through vehicles such as iDICE, which committed capital to Ventures Platform’s pan-African fund, and the iDICE Startup Bridge programme offering grants and equity to early-stage founders. Consequently, while traditional venture capital remains constrained, a more diverse mix of debt, development finance, and state-backed funding is helping sustain Nigeria’s startup ecosystem through 2026.
