According to a statement by First Bank Holdings on Monday, the capital raise can be issued via a public offering, private placement or rights issue in the Nigerian or international capital markets or a combination of the listed methods.
The move to shore up additional capital can be attributed to a directive by the banking regulator to all banks— commercial, merchant and non-interest banks—to increase their minimum capital requirements within 24 months, to enhance the stability of the financial system.
Commercial banks with international spread will increase their capital by as much ₦500 billion to be licensed to operate in the country. While national and regional banks will raise ₦200 billion and ₦50 billion respectively.
Many banks have recently had to consider raising additional capital to meet the CBN requirements, especially with a deadline at the end of April 2024 looming on their backs. Access Holdings, the parent company of Nigeria’s biggest bank by assets, previously planned to raise as much as ₦365 billion ($257 million) by selling shares to existing investors. Investors believe their capital raise is in response to this directed by the apex bank.
]]>Many of these investors have shown interest in Open Market Operations (OMO) and treasury bills auctions.
Sources in the Nigerian Exchange Limited (NGX) said there was an uptick of foreign portfolio investors in the market which domestic investors dominated for the past seven years. Foreign Portfolio Investments on the NGX in February 2024 rose by 23% from ₦53.11billion ($39.13 million) to ₦65.81 billion ($42.61 million) compared to January 2024.
This uptick reflects investor confidence in the market, according to analysts.
“High-interest rates attract foreign investor participation, which could stabilise the currency woes,” Ayodeji Ebo, Chief Business Officer, Optimus by Afrinvest told TechCabal over the telephone.
The Central Bank has consecutively raised interest rates sharply to a 10-year high of 24.75%, in an aggressive move to contain stubborn inflation. At the last rate hike meeting, Cardoso hinted that the MPC would keep raising the rates in hopes that inflation moderates below 30%. The continuous rate hike has attracted more investors while hurting lending to smaller businesses.
Analysts told TechCabal that they want the trend to continue. Last week, the CBN directed all banks on a recapitalisation drive, to increase their minimum capital requirements within 24 months, to ensure stability of the financial system. Ebo believes that the entrant of foreign investors will provide the needed capital for the banks’ recapitalisation. He explained that even if the entry of foreign investors is for a short while, their inflow is important for stabilising the economy.
Foreign investors provide the liquidity needed in the market, said Ayooluwade Ogunwale, a portfolio manager. Therefore, making carry trade opportunities in Nigeria attractive again.
]]>The three-year-old startup said it closed shop after realising its exceptional technology alone wasn’t sufficient. “Our unique service had its challenges, the first being compliance issues. Additionally, the overall acceptance of wallets as a viable payment option didn’t grow as rapidly as we had hoped,” it said.
Thepeer used its APIs to provide an alternative network where fintechs and businesses can embed different sets of products into their applications and websites for easy money movement by their customers. It hoped to connect wallets across over 400 fintechs across the continent to enable payments.
Thepeer is the second startup to return remaining capital to investors in 2024 after Cova, a wealthtech startup, closed down in like manner, demonstrating the challenges in building fintech businesses on the continent.
Launched in April 2021 by co-founders Kosisochukwu Chike Ononye and Michael “Trojan” Okoh, the business hoped to power infrastructure for mainly fintech businesses, from small to medium-sized. According to Crunchbase, it raised a pre-seed round of $220,000 from investors including Ezra Olubi, Paystack Co-founder, and Prosper Otemuyiwa, Edenlife CTO.
A year later, it raised a $2.1 million seed round led by the Raba Partnership. Other investors included RaliCap, Timon Capital, BYLD Ventures, Musha Ventures, Sunu, and Uncovered Fund.
In 2022, the startup claimed its monthly transaction volume had reached millions in dollars, with an average month-on-month (MoM) transaction growth of 161%. The company also had plans to expand to other African countries, including Kenya, South Africa, and Egypt. Thepeer has now admitted that despite all that growth; it failed to align its product with the market’s needs.
To realign and focus on what matters, both founders have decided to place the product in maintenance mode for the interim. “We’ll work to maintain the platform for as long as possible until we discover a new home for it,” the statement added.
]]>First Published 31 March, 2024
For nearly a decade, mobile data has been in a race to dominate traditional voice calls. It began demonstrating this potential in 2013 when Nigerian telcos saw a 30% decline in revenue from international calls between October 2013 and December 2013, thanks to Skype.
In the coming years, MTN Nigeria, with nearly 80 million subscribers, would admit that it was witnessing a drop in voice-call traffic in the mass market. By the end of 2023, data would become a significant revenue earner for MTN Nigeria and other telco providers on the continent, like Airtel Africa and Kenya-based Safaricom. MTN Nigeria admitted in its full year 2023 report that data services grew its revenue by 39.8% and voice calls by only 9.7%. Airtel Africa was no different: 11.2% of its revenue came from voice calls and 28.5% from data. In Safaricom’s half-year results ending September 2023, it was observed that more customers were opting for data over voice; voice revenue declined by 3% while mobile data revenue grew by 12.5%.
43% of MTN Nigeria’s revenues were driven by data in 2023. Chart by Stephen Agwaibor, TC Insights
All that said, the success of data over voice doesn’t mean telecom firms will lose. Rather, it means that they would have to shift revenue sources from voice to data and invest more infrastructure in enhancing data and internet access.
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To gain the upper hand in this new drive to provide more data services, some telcos are selling off or outsourcing their tower infrastructure to independent management firms so operators can focus on improving their services rather than managing the infrastructure. African operators are dealing with an increased need for data, inspired by low-cost smartphones. Therefore, in order to serve customers and roll out new technologies, outsourcing towers are becoming very attractive.
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Data has its huge benefits, especially as it pertains to cost. Knowing that one can call anyone via instant messaging apps across the world is a very valuable feature. In the past, people needed to roam with their network providers, or change devices when they travelled abroad, to keep in touch with family, friends and business colleagues across continents.
In a world of data, everyone can win, as it enables people to perform more functions on the networks, beyond just phone calls. It is a major use case for streaming services.
Still, while data has enough advantages to make it scale, phones and internet access are not cheap. Even with a 51% smartphone penetration, most people in Africa still use 2G and 3G networks. In Nigeria, smartphones have become a luxury lately, with prices surging by as much as 86% between 2022 and 2023.
It is imperative, then, that smartphone companies think about cheaper phones that can carry 4G capacities. This is key to sustaining the growth of data. Also, telcos need to iterate on data tariffs that average Africans can afford. Data is here to stay.
Joseph Olaoluwa
Senior Reporter, TechCabal
Thank you for reading this far. Feel free to email joseph.olaoluwa[at]bigcabal.com, with your thoughts about this edition of NextWave. Or just click reply to share your thoughts and feedback.
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The two-year-old payments company closed December 2023 with an operating income of ₦2.08 billion. This “reflects the culmination of our strategic investments and diligent efforts in building a sustainable and resilient business model,” a company spokesperson from Hydrogen told TechCabal via email.
Launched in 2022, the company fully commenced operations in 2023.
Hydrogen has big ambitions: it wants to build Africa’s most powerful payment business network. It competes with other fintech players such as GTCO’s Squad, Flutterwave, Moniepoint, Stanbic IBTC’s Zest, and Paystack. While it acknowledges the saturated payments market, Hydrogen believes that its approach is different, relying on “a combination of strategic partnerships, technological prowess, and a deep understanding of the market dynamics”.
Hydrogen offers products and services that include InstantPay, Payment Gateway, POS, Card, and Switch services. The fintech hopes to serve a clientele that cuts across the private and public sectors.
The company claims to have processed approximately ₦15 trillion in transactions across its different channels in 2023. It also launched eight payments products in the same year.
]]>The rate hike was expected as the body language in the last meeting signalled a reluctance to reduce borrowing costs until inflation moderates below 30%. Authorities have devalued the naira twice since June and closed the gap with the unofficial market rate, as part of reforms to attract investors. Last week, the bank claimed to have cleared a backlog of unmet foreign exchange obligations.
At least four policy experts who spoke to TechCabal expected a 100 basis point hike today. Cardoso hopes that consecutive rate hikes will address Nigeria’s inflation issues at nearly a three-decade high. However, analysts are unsure whether more hikes are needed.
Explaining the motive for the hawkish stance, Cardoso said MPC members needed to control inflation to ensure that ordinary Nigerians’ purchasing power is restored in the short to medium term.
“Members noted the continued rise in headline inflation was driven largely by food prices because of supply shortages and high cost of logistics distribution,” Cardoso said. According to him, addressing food insecurity is key to containing current inflationary pressures.
Experts told TechCabal that the CBN should hold the rates in the coming months, instead of further tightening interest rates. “The full effect of the last MPC meeting is yet to be felt on the economy. The practice is not to meet monthly, but once every two months. They need to weigh and measure,” said Johnson Chukwu, the CEO of Cowry Asset Management.
The CBN must find a balance amid the massive expectations ahead of the meeting. The bank has to be wary of the impact of too-high interest rates on the economy and the sustainability of the banking sector, Samuel Oyekanmi, another financial analyst warned.
Cardoso said it was a tough decision to make but there was a consensus by the committee to progress with the tightening circle. “Key drivers of inflation remain the strong exchange rate pass through to domestic prices, rising costs of transportation, high costs of energy and other production inputs, lingering insecurity and legacy infrastructure deficit,” he added.
President Bola Tinubu’s reforms, while painful for consumers, have led the currency to gain in recent days and improved investment flows. Foreign inflows rose to $2.3 billion in February, driven by renewed interest from foreign investors and a rise in overseas remittances. This figure in the first quarter of 2024 outperformed the $3.9 billion received for 2023. While foreign-investor portfolio trade on the Nigerian bourse increased by 18% in February 2024 from roughly half of that figure at the beginning of the year.
]]>A spokesperson for the telco confirmed the sale of the business segments but declined to comment on how much the sale would cost.
Further, in the aforementioned report, MTN shared that its Guinea-Bissau and Guinea-Conakry businesses have been classified as held for sale as of December 31, 2023.
“Telecel, an established telecoms operator with a significant presence in Africa, is well positioned to drive the growth and further development of these operations and contribute to technological and economic progress in these markets,” a note in its financials said.
This move will allow MTN to focus on Ghana, Cameroon, and Cote d’Ivoire, stronger markets in the West and Central Africa region which collectively contribute 18.6% to the group’s revenue, over other West and Central African (WECA) countries that contribute 7.3% to the firm.
MTN Guinea-Bissau recorded some poor performances after it breached a loan covenant as result of its negative EBITDA performance. (EBITDA means Earnings Before Interest, Taxes, Depreciation, and Amortisation.)
The process of converting MTN Guinea-Bissau’s financial results into its primary currency resulted in a loss of R1.69 billion ($89,392,809), per its annual report.
]]>As part of ride-hailing regulations introduced in 2020, the Lagos State government asked for backend access to user trips and location data for planning, revenue, and security.
But two weeks ago, the government began asking ride-hailing companies to share real-time trip details, threatening to sanction defaulters.
A person close to the situation was bothered that the commissioner of transport requested for real-time data sharing as the ride-hailing startup already shares the data daily.
The government’s argument has remained the same: it wants to be able to identify both drivers and riders and protect users in cases of emergency.
However, the source argued that giving the government this kind of access to data opens users up to surveillance and can open the company up to being sued.
Uber did not respond to a request for comments.
“The goal should be achieving a responsible data sharing framework that leverages data for the public good, such as improving transportation services, without compromising individual privacy,” said Kehinde Adegboyega, the founder and team lead at Human Rights Journalists Network.
While Uber remains hesitant to share real-time details with the Lagos state government, Bolt and an unidentified ride-hailing company already comply with the new rule.
]]>First Published 17 March, 2024
Policy and regulation have the potential to significantly impact the operations and growth of innovative businesses, if applied wrongly. Technological advancements do not have to suffer clampdowns at every turn; a collaborative approach to regulation is what’s needed.
The biggest crackdowns on tech by most African governments tend to happen with fintech. In 2021, the Central Bank of Nigeria (CBN) secured a court order to freeze the bank accounts of stock trading platforms Risevest, Bamboo, Trove and Chaka for six months. According to the CBN, the firms were responsible for the weakness of the nation’s currency and operated without licences. One of the affected companies lost users and deposits after the announcement.
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In 2022, Flutterwave had its assets frozen in Kenya, which put a pause to its expansion plans and dragged its reputation in the mud. Last year, the Central Bank of Kenya cautioned residents against dealing with individuals and entities offering payment services without licence. It warned that these services were unregulated and a criminal offence. As at 2023, a total of 23 African countries have banned or restricted the use of cryptocurrencies within their economies, stifling innovation in the area.
Number of African countries that placed restrictions on crypto. Chart by Stephen Agwaibor, TC Insights
The major problem governments face when it comes to regulating tech is striking the right balance between safeguarding their economy from the consequences of badly-adopted technology and resisting the urge to over-regulate or under-regulate.
Before fintech can be effectively regulated, we need to understand its peculiarities, as distinct from those of traditional finance institutions. Regulators must understand the infrastructure fintechs operate on. One CEO said that more knowledge sharing between fintechs and governments could be the difference between profiling, poor regulation and high licensing fees.
In a fintech company, innovation moves faster than regulations can keep up with, so it’s important that regulation is flexible enough to accommodate, or even preempt, these changes.
A middle-ground approach to regulation can be considered instead of issuing outright bans or restrictions that hurt the fintech sector.
Regulators in Africa could have applied the sandbox model to cryptocurrencies, before taking any big decisions. Sandboxes can serve as a safe space to test innovative services, products and models without immediately applying all the normal regulatory consequences of engaging in the activity in question. This is particularly helpful for regulators who are seeking to understand new technologies and collaborate with industry players to establish rules for managing services, products, and business models that stem from emerging technologies. It also helps to lower the costs and regulatory barriers for testing disruptive, innovative technologies without negatively affecting consumers.
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Another model governments should consider is the segregation model. This model regulates fintech companies by introducing a specific regulator for the industry, instead of using central banks who are more attuned to traditional banking methods. The United Kingdom has a body, the Financial Conduct Authority (FCA), which regulates all financial markets and services in the UK. There is also a Payment System Regulator (PSR) that regulates payments in the UK.
All that said, the future of fintech regulation is collaboration and information sharing. Regulators must remember that they have a duty to create an enabling environment for innovation to thrive.
Joseph Olaoluwa
Senior Reporter, TechCabal
Thank you for reading this far. Feel free to email joseph.olaoluwa[at]bigcabal.com, with your thoughts about this edition of NextWave. Or just click reply to share your thoughts and feedback.
Psst! Down here!
Thanks for reading today’s Next Wave. Please share. Or subscribe if someone shared it to you here for free to get fresh perspectives on the progress of digital innovation in Africa every Sunday.
As always feel free to email a reply or response to this essay. I enjoy reading those emails a lot.
TC Daily newsletter is out daily (Mon – Fri) brief of all the technology and business stories you need to know. Get it in your inbox each weekday at 7 AM (WAT).
Follow TechCabal on Twitter, Instagram, Facebook, and LinkedIn to stay engaged in our real-time conversations on tech and innovation in Africa.
Headline inflation for February rose to 31.70%, matching audit firm KPMG’s predictions in 2023.
Food inflation also rose sharply to 37.92%, with staples like bread and yam becoming even more expensive for shoppers.
“One carton of instant noodles retails at ₦10,000 at wholesale price, over 30% higher than what it began the year with,” said Bethel Ibeh, who runs a small cooking business in Ojodu Berger.
“Only the people that appreciate the value of instant noodles buy it now,” she added.
On February 27, the Central Bank raised interest rates to 22.75% in its first meeting since 2023. It was seen as many as a sign of seriousness by the bank, and difficult but necessary decisions like this are beginning to bear fruit.
Last week, the regulator said foreign inflows rose to $2.3 billion in February, driven by renewed interest from foreign investors and a rise in overseas remittances. This figure in the first quarter of 2024 outperformed $3.9 billion received for 2023.
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