Nigeria’s AI Industry Grows To Over 120 Startups As Funding Gap Threatens Progress

Nigeria’s artificial Intelligence (AI) ecosystem has grown to over 120 active startups, spanning healthtech, fintech, agritech, and language technology, according to a recent report, the Artificial Intelligence AI Outlook 2026 Shifts, trends & prediction, which outlined the most significant shifts that shaped AI in 2025.

The AI Outlook 2026 is a report produced by AI CoLab Africa and AI in Nigeria, in collaboration with leading African industry experts, which warns of a severe funding gap, infrastructure deficits, and fragmented adoption across sectors that threaten to slow the nation’s momentum.

The report surveyed 504 professionals and interviewed dozens of ecosystem leaders, presenting a nation at a crossroads with pioneering innovations emerging alongside persistent structural challenges.

The launch of the Nigeria National AI Strategy (NAIS) in August 2024 and the subsequent establishment of the Nigeria National AI Trust in February 2025 signal the government’s commitment to coordinated development.

The director general of the National Information Technology Development Agency (NITDA), Kashifu Inuwa Abdullahi, in his remarks, framed regulation as an enabler rather than a barrier.

“Regulating AI is not about slowing down technological advancement; it is about governing it responsibly. It is about ensuring that the benefits of AI do not come at the cost of human rights, democratic values, or social cohesion, he said.

He, however, outlines NITDA’s Regulatory Intelligence Framework and the draft National Guideline for the Ethical Adoption and Use of AI, emphasising seven key requirements, including human agency, transparency, and accountability.

Meanwhile, the indigenous innovation is on a steady rise, with the report identifying 122 operational AI startups as of 2025, heavily concentrated in Lagos but with emerging clusters in Abuja and other states.

Notable innovations include Awarri, which is developing Nigeria’s first indigenous multilingual large language model supporting five major Nigerian languages, and CDIAL AI, focused on natural language processing for low-resource African languages.

In the healthtech sector, Ubenwa Health uses AI to analyse infant cries for early diagnosis of neurological conditions, while BetaLife Health leverages AI to optimise the blood donation supply chain, attracting international funding and recognition.

In autonomous systems, Abuja-based Terra Industries, founded by engineers Maxwell Maduka (23) and Nathan Nwachukwu (22), builds AI-powered drones capable of producing 30,000 units annually, exporting to eight African countries while keeping its software ecosystem entirely African, the report notes.

Despite these successes, the report’s survey data reveals a precarious financial foundation 79 per cent of respondents cited limited access to capital as a critical issue, with 40 per cent of AI startups bootstrapping using personal savings.

Meanwhile, only 20 per cent have secured international funding, while 16 per cent have accessed venture capital and a mere six per cent have benefited from government grants.

The report noted that this funding gap indicates that Nigeria’s AI innovation economy remains fragile. “Without strong local investment networks or government support, many founders are forced to grow their companies with limited resources, often putting long-term survival at risk.”

The report also paints a picture of uneven adoption across industries. Even as Financial services and technology are leading the pack, with fintechs and digital banks deploying AI for credit scoring, fraud detection, and customer service automation.

Growth Executive, Sterling Bank, Obinna Ukachukwu affirmed, “Gone are the days when banking meant long queues, stacks of paperwork, and one-size-fits-all services. Today, AI is moving financial services from a place of privilege to something more personal and accessible.”

On his part, Dr Stanley Jacob highlights that electronic payments hit N1.07 quadrillion in 2024, about three times the 2022 figure, driven partly by AI integration.

He notes that stakeholders must work together in the development of AI strategies, deliberately considering shared services to support adoption for smaller players.”

However, manufacturing, agriculture, and healthcare remain in nascent stages. The report finds adoption in these sectors is slow due to limited funding, weak infrastructure, and poor access to quality data.

Agriculture specialist Prof Gabriel Dedeke from FUNAAB notes promising pilots like the Ogun SmartFarm Initiative, which “integrated drone-based crop surveillance, IoT soil sensors, and AI-based yield forecasting, scaling up yield by 35% while input costs dropped by 20% within a season.” Yet he warns of the wide digital divide existing in rural areas and low data literacy among smallholder farmers.

However, the report dedicates significant attention to human capital development. Prof. Olayinka David-West asserts that prioritising investment in AI education and training is essential to achieving Nigeria’s goal of a $1 trillion economy by 2030, calling for the integration of AI literacy from primary through tertiary levels.

Global HR leader and executive Coach, Lara Yeku offers five strategic recommendations for building an AI-ready workforce, emphasising, “The real promise of AI does not lie in the tools themselves, but in the people empowered to use them effectively will not replace people, but people who embrace AI will certainly outperform those who do not.” she stated.

Similarly, a distinctive finding is the critical role of grassroots communities. Volunteer Lead at AI in Nigeria, Florence Nwadinso, noted, “Transformation is happening in WhatsApp groups, in late-night Google Meet calls, in university classrooms without projectors, and in coworking spaces,” she said.

She, however, warns that communities are often working with little or no funding. They depend on volunteers, inconsistent internet, low-end laptops, and sheer willpower.

She recommends that the government introduce a national fund to support grassroots AI and tech learning hubs, particularly in underserved regions.

Ashley Immanuel cautioned about financial inclusion. “If we are not careful, the proliferation of AI-driven solutions may expose customers to data protection risks and consumer data misuse. Achieving the full potential of AI for financial inclusion in Nigeria will not be automatic; we must be deliberate,” she said.

Meanwhile, the experts chart the path forward with seven strategic levers, including creating a unified national AI framework, prioritising AI in education reform, investing in funding and infrastructure, and strengthening regulatory capacity.

Consequently, co-founder of AI in Nigeria, Ehia Erhaboh, summarises the national trajectory: “Progress has been made, but the journey has just begun. As AI progresses from innovation to scale and governance, ecosystem stakeholders need to further domesticate the National AI Strategy, expand public digital infrastructure, adopt AI use in public service, focus on inclusion, and promote indigenous knowledge of AI systems.”