US Bank Collapse May Affect Financial Inflows, Jobs In Nigeria

About $1.2 billion funding for Nigerian technology startups may be threatened and job losses are imminent as the ripple effects of the collapse of Silicon Valley Bank (SVB), the 16th largest bank in the United States of America (USA), begins to unfold.

The technology world was in panic mode at the weekend following the folding up of the bank, making some tech startups in Nigeria begin to weigh the option of laying off staff as operating funds get stuck.

The Nigerian IT ecosystem is vibrant and had about 3,340 startups as of December 2022, which is almost five times than the second largest adult ecosystem in Africa, Kenya. Nigeria is home to five out of seven unicorns in Africa, making it the optimal talent development spot in Africa, which has been pivotal to Nigeria’s digital economy drive.

Regulators in the US last Friday closed the bank with the Federal Deposit Insurance Corporation (FDIC) taking over its assets and planning to settle insured depositors from today, Monday March 13, 2023.

SVB is a specialised bank that serves tech industries and startups, which in turn depend on Venture Capitals (VCs) for funding. However, a turn in the global economy had reduced cash flow from VCs.

Also, the bank had invested in treasury bonds, and as the Federal Reserve raised rates the bank announced that it made a $1.8 billion loss on the sale of a portfolio of securities and sought to raise a further $2.25 billion from capital markets to shore up its balance sheet; however, its shares cratered.