The increasing rate of technological adoption in Nigeria has opened the economy to a vista of limitless opportunities in exploring the benefits of technology. Technology has brought with it, Startups - small-scale firms that leverage technology to disrupt the modus operandi of existing industries by efficiently proffering new solutions to old problems. In Nigeria, Startups cut across various industries including but not limited to Finance, Agriculture, Hospitality, Real Estate, Fashion, Retail Food etc.

Despite the poor ease of doing business in Nigeria (at 131 of 190 in 2020 ), Startups are gaining momentum propelled by the digitization of the domestic and global economy, increasing rate of internet penetration (currently at 65.3%) and the seamlessness of its solutions. While Startups have been commended for reducing the level of unemployment in Nigeria by employing fresh graduates either as Interns or as Full-time Staff, its contribution to the growth of underemployment in Nigeria is mostly overlooked. The level of underemployment in Nigeria has grown from 18.3% as at Q2’2015 to 28.6% as at Q2’2020 and the number of Startups in Nigeria has recorded growth within the same period. While we can’t totally attribute the increase in underemployment to only start-ups, they have a role to play in reducing the level of underemployment in Nigeria.

Recent discussions with employees of some young Startups in Nigeria reveal that most startups set the remuneration of entry level employees (degree holders) between N50,000 to N80,000 monthly compared to other industries in Nigeria which is mostly a minimum of N100,000 in addition to other benefits (Pension, provision for Transportation, HMOs and others) which are usually not provided by Startups. This increases the rate of underemployment with negative multiplier effects on the lifestyle of the Startup employees and their dependents, as low-income levels coupled with the nation’s high inflation rate of 15.75% (December 2020) and its devalued currency, will drastically reduce their purchasing power. Despite the uncompetitive pay, the rate of unemployment in Nigeria leaves most employees at the whims and caprices of their employers, hence, they are compelled to accept the offer. The rate of career growth is also slow, the employees may remain on that salary scale for more than 18 months hoping for the next seed funding from new investors.

While Startups may not be entirely blamed for the poor salary structure (as they create employment), more can be done to improve their value-add not only to their external stakeholders (customers and investors), but also, to their internal stakeholders (mostly employees).


What is the way forward?

It is common knowledge that Start-ups usually have slim bottomlines which relatively justifies their poor remuneration, more efforts should be made by founders and co-founders of Start-ups to ensure that they have “a clear vision” for commensurately rewarding their employees for their efforts. 61% of Start-ups fail in Nigeria and if their employees are not efficiently rewarded during their period of existence, they are plunged back into unemployment, a fair-enough salary should provide them with savings which they can fall back to during the period of unemployment.
Is it fair to have a “Union of Start-Up Employees?”, while this may be argued against, the level of underemployment in the Tech space may lead to the creation of a Union to protect their rights.

In addition, idea-creators (founders and co-founders) can come together to aggregate their ideas to create a bigger and more rewarding Start-up as against the usual practice of the establishment of pocket firms with good ideas and little or no resources to scale or reward their employees.

Thank you.
Chinonso Osuji
An Investment Analyst in Lagos.