Nigerian banks are in power, literally

AUGUST 30, 2020
This newsletter is a weekly in-depth analysis of tech and innovation in Africa that will serve as a post-pandemic guide. Subscribe here to get it directly in your inbox every Sunday at 3 pm WAT.


I went to the barber yesterday, for the first time
in a long time since the lockdowns began. The shop in Lagos maintained the utmost safety measures but like I suspected, there is a great easing of pandemic-induced anxiety here, and around the world.

Being cooped up is not a sustainable way to be, but as we return to living ‘normally’, it is our collective responsibility to maintain the highest standards of safety measures; masks, clean hands, and social distances. This is the only way we are not forced back inside by another wave of this virus.

Speaking of waves,
M&A exits are a positive wave currently sweeping the continent and this is what informed the
mini theme that started last week on How to make money from building startups in Africa.

For today’s analysis I had a brainstorming session with Luke Kyohere.

Kyohere, who is founder and executive chairman of the recently acquired Beyonic, offered plenty of useful insights in our conversation, and I will be sharing them.

Before we dive in, check out older episodes of The Next Wave newsletter, and do subscribe if you are not already on.

Let’s do this!


Building corporate accelerators
“There is an information gap, most founders are not aware that these things exist, and that M&As are a viable exit option for them. Big businesses are not aware how much these acquisitions can fix their immediate problems. There is a lot more happening than is being celebrated. Plugging this information gap will go a long way in ensuring a more proactive approach from startups.” – Luke Kyohere, Founder and Executive Chairman of Beyonic Inc.

Africa is seeing a lot more M&As in recent years and especially in the tech startups ecosystem, but a lot of people do not know about this. Kyohere thinks there is not enough attention on the subject.

Last week I posited that these successful exits are necessary for building founders that have diverse funds that can take on more skin in the game.

[READ: The Next Wave: We need more exits]

Kyohere agrees strongly with this thesis. And he also points out that apart from these individuals, startups, even the growth stage, and especially corporates, have a huge role to play.

In February 2020, Nigerian fintech startup, Carbon announced a $100,000 fund. Called the Disrupt Fund, the fund will “invest up to $10,000 per startup, in return for 5% equity.” Reports say it will give these startups access to Carbon’s API, the investees will also get sponsorship, work spaces, and other forms of support.

There is no follow up news to that announcement, but it is indeed a laudable move that should be emulated. And it is not uncommon for startups across the continent to participate in the seed rounds of other startups, unofficially most of the time.

However, on the corporate end where this will make a world of difference for both parties involved; startups and companies, corporates are not pulling their weights enough. Some of the prominent ones that come to mind are ABSA, Orange.

Source: The Major Telcos Funding Startups In West Africa

Kyohere believes this will change, very soon. And that government has a huge role to play in enabling this.

“On the corporate end, most of these support and acquisitions will definitely happen. Because when disruptions start happening on a massive scale, they’ll be forced to look at the smaller and more nimble startups that can solve their problems.”

This is especially true, and Nigeria’s financial sector is one of the biggest indicators. In the corporate-startup partnership and support landscape in Africa, Nigerian banks are very much ahead of the curve.

This is most likely because fintechs in the country have greatly disrupted them.

Since 2015, the disruptive impact of fintech in the country has been undeniable, from payments to remittances and infrastructure.

A PwC survey from 2017 found:

“…that Nigerian Financial Services players see changing customer needs as the top impact FinTechs have on their business, with up to 60% of respondents indicating that up to 40% of financial services business will be at risk of standalone FinTechs by 2020.”

To combat this redundancy, Nigerian banks became proactive in innovating by supporting the startup, and especially fintech ecosystem. Most of the efforts were centred around funding, acceleration programs, partnerships and credibility systems.

For example, First City Monument Bank (FCMB) has an active acceleration program in partnership with Passion Incubator, and the bank frequently holds hackathons and pitch competitions.

[READ: Nigerian banks want fintech
collaborations, but for specific and unique needs

Every Nigerian bank has at least one of these.

This collaboration is obviously one born of necessity and a long term view of the future.

The question becomes, what is the hindrance to these innovative collaborations for these corporate companies?

Regulations are some of the biggest.

In the last one year, there has been a flood of regulatory barricades across the continent:

Motorcycles , content, ownership in Kenya, etc

Indeed, once again, the government has a much bigger role to play than we realise.


Nigerian banks are in power, literally.
Recently, a director of banking supervision at the Central
Bank of Nigeria signed a circular that states that all electricity collections for services provided by power distribution companies in the country should be domiciled in deposit money banks.

This has not always been the case, and has left a lot of people baffled. This explainer gives detailed insight into how this directive, if properly implemented, is a net positive for Nigeria’s power sector.

How 9Mobile’s new CEO is pinning the company’s future on digital services
From its heyday as Etisalat, 9Mobile one of Nigeria’s major telcos has seen a lot of turbulence rock its ships.

New CEO, Alan Sinfield believes that although Nigeria already has a large number of mobile subscribers, the market is still underserved. Sinfield also has very interesting ideas for reviving the company and keeping it ahead of the competition.


“In the Africa tech VC space, we expect COVID-19 to have a differentiated impact. On one side, it is accelerating the migration of the economy to its digital version, therefore favouring business models that are using technology to enable the transformation of several verticals, from education to logistics and commerce.

On the other side, it is limiting consumer and business expenditures in
sectors such as travel, hospitality and high-end items, penalising companies addressing this demand. But what will count most it will be how entrepreneurs react, even more than the sector they are in. Having gone through high volatility cycles before (internet bubble, financial crisis, Zika, Ebola etc), these challenging times offer entrepreneurs the opportunity to rethink their business model and priorities, and prepare their companies as strong springboards for when the market will inevitably rebound. We expect VC investments not to decrease at all, and more innovative business models looking for funding.”

Maurizio Caio, Founder and Managing Partner, TLcom.

Every week, we will ask our readers, stakeholders, and operators in Africa’s tech ecosystem what they think the new normal will look like, and will share their thoughts here. You can share yours with with ‘The Crystal Ball’ in the subject line.

TC Insights

African giant?
“Tell ’em Africa we don tire
So here comes the African Giant
Many, many people don’t try ah
But you can’t test the African Giant.”

Burna Boy, African Giant, July 2019

The opening words of Burna Boy’s African giant are somewhat prophetic for African startups.

There’s been a quest for exits and unicorns that made a few founders and stakeholders weary. But the past year has been a silver lining of some sorts for the community especially in the midst of a pandemic.

Jumia’s IPO in April 2019 was a watershed moment for African tech although it was heavily criticized (understandably so). It is no longer a unicorn. But it did try. It’s market cap is now well below $1 billion.

When it comes to IPOs & unicorns, not all of them are created equal. One of the key criticisms of Jumia is that it never contributed to growing startups as much as it could have. For example, there’s no known startup acquisition by Jumia. Compare that to Interswitch which has made about 3 well-known acquisitions, 2 of them being startups.

Interswitch attained its unicorn status without an IPO unlike Egypt’s Fawry. It is planning to list
on the London Stock Exchange in 2021 and its valuation could almost double when that finally happens.

Also, Interswitch appears to have grown organically without a lot of VC money unlike Jumia. Their Crunchbase profiles show that Interswitch has raised $210 million to date if you include the VISA investment that launched it into unicorn status. Jumia raised almost four times the former’s before it went public. It is possible that Interswitch closed some undisclosed rounds but that’s unlikely to have closed the gap between the two.

It is no wonder why critics consider Interswitch Africa’s first, real startup unicorn although Jumia paved the way. Interswitch is truly an African giant, its first fintech unicorn.

If you are a founder in Africa, please fill our investor list here to let us know who gave you your first check. Get TechCabal’s reports and send us your custom research requests here.

Best wishes for a great week

Stay safe and please observe all guidelines provided by health experts.

You can subscribe to our TC Daily Newsletter; the most comprehensive roundup of technology news on the continent, and have it delivered to your inbox every weekday at 7 am WAT.

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– Victor Ekwealor, Managing Editor, TechCabal

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