👨🏿‍🚀TechCabal Daily – Nigerian neobanks to charge electronic levy

Since August 30, over 3 million Nigerians have been asking one question: why is Sterling Bank, a Nigerian tier-2 bank, inaccessible?

TechCabal reported that the week-long outage was caused by the bank’s switch to a new core banking application (CBA). The bank switched Temenos T24 to SEABaaS, a custom-built software. This is Sterling Bank’s third migration since 2016.

CBAs are back-end systems that handle banking transactions and financial records. And software migrations typically happen in banking. Depending on the approach taken and the complexity of the upgrade, CBA migrations take anywhere from weeks to months, or even a year to complete.

Usually, the tipping point for banks to migrate their software is often to balance the operating cost versus the effort in maintaining their software. Other times, it is intended to migrate the banking platform to a more secure base.

Sterling Bank has promoted this new development on X, calling it a “masterpiece.” However, customers have been unable to use their bank apps or access banking features.

This frustrated many Nigerian users who got stuck simply trying to use their mobile app to send money. Worse, some of them tried unsuccessfully to access salaries from employers paid during the last week of the month.

Sterling Bank will join other financial institutions like Kuda and Moniepoint that use custom-built CBAs. The overall feeling in the camp is that the new software will improve Sterling Bank’s performance, and make operations more scalable or better suited to its banking needs than what it previously had.

Read the exclusive article here.

Nigeria’s central bank (CBN), in its continuous effort to stabilise the country’s volatile exchange rate, has sold US dollars to Bureau de Changes (BDCs) at a rate of ₦1,580/$.

As part of its current strategy to increase liquidity, the CBN provided each eligible BDC with $20,000 in forex while mandating that they can only sell to end-users at a maximum 1% markup. This means BDCs must sell dollars at no more than ₦1,595.8/$1, retaining a profit of only ₦15.8 for every dollar they sell.

CBN has opted to keep a keen eye on BDCs. It banned forex sales to BDCs in 2021. Their frequent, sometimes large-volume dollar trades in the parallel market, were allegedly a conduit for illicit forex flows to happen, according to former CBN chief, Godwin Emefiele. The uncontrolled parallel market caused an uneven demand and supply of forex.

However, following the lifting of the ban on BDCs early this year, CBN has been closely monitoring BDC operations. In February 2024, it revoked the licenses of 4,173 BDCs, leaving an estimated 1,500 active operators. It has since resumed selling forex to these active operators and mandating profit margins they can sell at. 

BDCs cannot exceed these margins. With this tighter oversight, the CBN is hoping to stabilise the naira by reducing currency demand and supply imbalances that have upended it for so long.

Digital banks or Neobanks launched with a promise to make bank transfers almost instant and free (or at a lesser cost when compared to traditional banks). Kuda Bank, one of Nigeria’s top neobanks for example, offered 25 free transfers per month to its customers. This appeal allowed neobanks to rack up customers quickly. Although users still maintained accounts with traditional banks, they used the neobanks to move money around and conduct daily transactions. 

However, neobank customers might start bearing the weight of their transactions.

Starting today, fintechs will charge a ₦50 Electronic Money Transfer Levy (EMTL) for transactions between ₦10,000 ($6) and above. 

The EMTL was introduced in 2020 as part of Nigeria’s Finance Act 2019 to generate revenue for the government. The country’s tax collector, the Federal Inland Revenue Service (FIRS), first imposed the levy on deposit money banks in December 2023. In January 2024, the EMTL was charged on all foreign currency transactions.

Although the government’s delayed application of the EMTL to fintech has raised eyebrows, applying the same levy to both traditional banks and fintech follows the principle “what is good for the goose is good for the gander”. 

Given that traditional banks have been subject to this levy, it’s logical to extend it to fintech. The EMTL continues a round of increased regulation for neobanks.

Nigeria produces 1.5 million barrels of crude oil daily—the largest oil producer in Africa and the ninth largest globally. While the country will now be able to process its crude oil locally thanks to the Dangote refinery, it is also taking steps to tap into its petroleum by-products.

Nigeria has more than 209 trillion cubic feet of gas reserves. Yet, it loses about $1 billion annually due to its inability to convert these gas reserves to liquid natural gas (LNG)—a clean-burning fuel that can be used to generate electricity in power plants. 

That’s about to change Nigeria’s oil regulator approved UTM Offshore Limited to build the country’s first floating liquefied natural gas facility. 

UTM was first granted a license to build a 1.2 million tons per annum facility in 2019, but it was upgraded to 2.8 million tons due to increased demand for LNG in the market.

The UTM offshore-approved plant will produce 2.8 million metric tons of LNG yearly. The vessel will use flared gas from an ExxonMobil oil field in Akwa Ibom. The facility will produce LNG, 500,000 metric tons of liquefied petroleum gas for the domestic market, and condensate. 

The project will be funded by Afreximbank. The bank already secured $2.1 billion in financing the first phase of construction and committed $3 billion for the second phase.

The project is expected to be commissioned in 2028, with the first gas production a year later.