Following the successful Detty December experience, which saw the influx of foreigners into the country boost economic growth, the Nigerian government is looking to explore innovative funding solutions to boost its tourism sector.
At the inaugural National Tourism Summit, hosted by the Federal Ministry of Art, Culture, Tourism, and Creative Economy in partnership with Koko Beach Lagos, industry leaders outlined bold strategies to address funding challenges in Nigeria’s tourism sector.
According to reports, hotels generated $44 million, Short-Let apartments generated $13 million from bookings, and the tourism and entertainment sectors brought in $71.6 million (N111.5 billion) during Detty December in Lagos State in December 2024. The Nigerian government has awakened to the possibilities that the tourism and creative sectors can bring to Nigeria during festive seasons.
Richard Shittu, founder of Koko Beach Hotels and Resorts, identifies significant challenges facing Nigeria’s tourism industry. He emphasises the necessity of collaboration among the government, banking sector, and private sector for the industry’s success, advocating for a service industry intervention fund similar to agriculture’s.
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Shittu also highlights three key issues: lack of funding, inadequate infrastructure (including electricity, security, and transportation), and insufficient incentives for private businesses like cheap funding or tax breaks, all of which hinder the sector’s growth.
In a panel session titled “Enhancing Financial Access for Hospitality & Tourism Businesses,” experts Labi Williams of Kuramo Capital and Sonnie Babatunde Ayere of DLM Capital Group proposed innovative financing models, including government-backed funds and blended finance, to unlock the sector’s potential and drive economic growth.
Long gestation periods demand Creative Financing
Labi Williams, Partner at Kuramo Capital, spoke on the unique financial demands of tourism projects, which often require significant time and capital before yielding returns. To bridge this gap, he advocated for a blend of equity and debt financing.
Williams highlighted the growing role of blended finance, which combines low-cost debt or equity with traditional investments to attract further funding. This approach, he argued, reduces risk for investors who might otherwise shy away.
Williams also showcased Kuramo Capital’s contributions to the sector, citing investments in companies like Green Africa Airways, Filmhouse, Wakanow, and Interswitch. These ventures, spanning airlines, cinema, travel, and fintech, illustrate the firm’s commitment to bolstering tourism-related infrastructure.
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A Government-backed fund to unlock potential
Sonnie Babatunde Ayere, CEO of DLM Capital Group, framed tourism as a vital avenue for attracting foreign currency. “The reason why the UK and all these countries focus so much on tourism is to create demand for their currency.”
However, Ayere pointed to Nigeria’s high interest rates—currently at 27.50 percent under monetary policy, with financing costs around 30 percent—as a major barrier. To address this, he proposed a government-backed tourism fund. “If the Ministry of Creative Economy has a handshake with the Ministry of Finance, the Ministry of Finance would probably provide a guarantee to a tourist fund,” he suggested.
“Investors in Nigeria don’t like risk, but they like returns,” Ayere noted. “If you did that, I can assure you that investors in Nigeria will pump money into it, principally because it’s covered by the government.” He cited the success of Chapel Hill’s infrastructure fund as a model, suggesting that a profitable tourism fund could outweigh losses from failed projects and drive sustained investment.
Ayere also addressed high interest rates by detailing DLM’s efforts to create innovative financial products. “We’ve tried to create products that allow you to combine FGN cash flows and corporate cash flows,” he said. “What that does is that the amount you have to pay as a corporation is actually significantly reduced, which reduces your cost economy.”
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Currency instability
Both experts identified Nigeria’s volatile currency as a significant impediment. Williams noted that despite progress, such as the proliferation of hotels in Lagos since 2006, currency fluctuations deter investors. “The FX being volatile and falling away has literally just scared people away,” he said. Ayere echoed this, explaining the challenge for foreign investors: “If I was investing $100 into Nigeria, hoping to come out with $110, $120, but by the time I’m coming out, the Naira has tanked 30-40%, there’s no way I can come out profitably.”
Progress Amid Challenges
Despite these hurdles, the experts acknowledged strides in the sector. Williams highlighted Lagos’s transformation, with Ikoyi and Victoria Island now boasting numerous hotels and attractions. Ayere pointed to events like the Africa Venture Capital and Private Equity Association conference, which drew 700 delegates to Lagos, as evidence of growing appeal.
