Leather sector players in Africa’s largest economy say the industry remains untapped despite its huge economic potential. They are calling on the government’s support.
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Nigeria's state-owned oil company NNPC Ltd on Monday tendered for operators of its Port Harcourt oil refinery in the Niger Delta, which is expected to begin production in the first quarter of this year, the company said.
The refinery, which is undergoing an upgrade, will begin by processing 60,000 barrels per day (bpd), and NNPC expects to operate at the full capacity of 210,000 bpd later this year.
NNPC said in a public notice that it wanted to engage reputable and credible operations firms "to operate and maintain one of its refineries, Port Harcourt Refining Company, to ensure reliability and sustainability towards meeting the nation's fuel supply and energy security obligations".
The oil company said prospective operators should have a turnover of at least $2 billion since 2019, evidence of their latest credit rating and experience in running refineries.
NNPC said on Jan. 4 that it would complete test runs at the Port Harcourt refinery this month before resuming production.
The refinery, which was shut five years ago, is among state-owned refineries that have been mothballed for years, but which the Nigerian government is trying to revive to end the country's reliance on imported refined products.
By MacDonald Dzirutwe, Reuters
Shell Plc agreed to sell its Nigerian onshore oil business to a consortium of local companies for more than $1.3 billion.
If approved by the government, the transaction would fulfill Shell’s long-term goal of extracting itself from a challenging operating environment in the Niger Delta region, while retaining a presence elsewhere in the country. Beyond the initial price tag, Shell said it will receive additional cash payments of as much as $1.1 billion on completion.
“This agreement marks an important milestone for Shell in Nigeria,” Zoe Yujnovich, integrated gas and upstream director, said in a statement on Tuesday. The deal is “simplifying our portfolio and focusing future disciplined investment in Nigeria on our deepwater and integrated gas positions”
The buyer of the asset, known as Renaissance, is formed of exploration and production companies ND Western, Aradel Energy, First E&P, Waltersmith and Petrolin, all of which are based in Nigeria, according to the statement.
The announcement comes after a labored sales process that had to be halted in 2022 after a court ruling ordered Shell Petroleum Development Company of Nigeria Ltd. to pause its divestment plans pending the outcome of a court case related to allegations of pollution. Earlier this month, Nigeria’s Supreme Court upheld Shell’s appeal against this ruling.
Shell has pumped oil in Nigeria for more than half a century, but almost three years ago then-Chief Executive Officer Ben van Beurden signaled the company’s intention to exit its onshore oil positions. These operations have become increasingly difficult, with accusations of environmental pollution by local communities, as well as persistent oil theft that caused damage to infrastructure.
Following the sale, Shell will continue operating in the country through its deep-water oil business, Shell Nigeria Exploration and Production Company Ltd. Another unit that provides gas to domestic industrial and commercial customers, Shell Nigeria Gas Ltd., will continue operating as will solar firm Daystar Power Group. Shell will retain its 25.6% stake in Nigeria LNG, which produces and exports liquefied natural gas.
By Laura Hurst, Bloomberg
Dubai International Chamber recently opened its seventh office in Nigeria. The wider oil-rich Gulf region is seeking to leverage its unique geography with sound investment opportunities in the region.
The Dangote Group, which counts cement and fertiliser manufacturing and sugar refining among its businesses, is owned by Africa's richest man Aliko Dangote. Dangote is also readying a 650,000 barrels per day oil refinery that cost $20 billion to build.
Under former Central Bank of Nigeria (CBN) governor Godwin Emefiele, the bank had multiple exchange rates and sold dollars cheaply to some businesses, including Dangote, to help them import raw materials.
A Dangote spokesperson did not immediately respond to requests for comment.
Two people at the Economic and Financial Crimes Commission (EFCC) said Thursday's search at Dangote offices in Lagos, was part of an investigation set to be expanded to other companies.
"We went to the head office of Dangote Group today to look into their books on the ongoing investigation on the abuse of the extant laws that govern the foreign exchange transaction during the tenure of Godwin Emefiele as CBN governor," one of the sources told Reuters.
"Here, we are talking about multiple exchange rates and others. It is an ongoing investigation and it was the turn of Dangote Group today," said the source, who declined to be named because he is not authorised to speak on the issue.
EFCC spokesperson Dele Oyewale declined to comment.
A second source confirmed the investigation, adding that at least one other listed Nigerian conglomerate would be targeted.
By Camillus Eboh, Reuters
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Nigeria is urging multinational companies to remain in the country despite the tough economic conditions that exist there. Some of the companies say inflation and a shortage of foreign exchange have made operating in the country more difficult.
“The more we focus on our physical goods business, the more we realize that there is huge potential for Jumia to grow, with a path to profitability. We must take the right decision and fully focus our management, our teams and our capital resources to go after this opportunity. In the current context, it means leaving a business line, which we believe does not offer the same upside potential - food delivery," said Francis Dufay, Chief Executive Officer of Jumia.
Despite constituting 11% of Jumia's Gross Merchandise Value (GMV) in the first nine months of 2023, Jumia Food has struggled to achieve profitability since its inception. This means the total value of food sold on Jumia Food stood at $64 million (11% of $581 million) between January and September 2023. An indicator of the massive scale Jumia Food was operating at, but it doesn't necessarily amount to revenue or profitability.
Since its inception, Jumia Food experienced fluctuating fortunes, with a significant 82% year-over-year growth in 2021, reflecting the company's strong foothold in the food delivery segment. However, in 2023, the company saw a marked decline in Quarterly Active Consumers and Orders. A consequence of its shift to drive profitability by focusing on viable categories and reducing consumer incentives.
As for employees focused on Jumia Food, the company says a number of them will transition to the core physical goods segment, suggesting that some could be laid off.
The African food delivery landscape is complex
Parallel to Jumia Food's shutdown, Bolt Food, another significant player in the African food delivery market, announced its exit from Nigeria and South Africa in December 2023. Bolt Food's departure, despite its expansion efforts in major Nigerian cities like Lagos, is attributed to economic downturns, high inflation, and stiff competition from well-entrenched rivals such as Jumia Food, Gokada, and Uber Eats.
In contrast, Barcelona-based startup, Glovo has been deepening its presence in Sub-Saharan Africa with key partnerships with restaurant chains like Chicken Republic and Shoprite.
Chowdeck, another key player in Nigeria's food delivery market, has shown impressive growth, recently celebrating a significant milestone of delivering food worth over ₦1 billion ($1.2 million) in a single month. Chowdeck's recent partnership with Shoprite for grocery delivery marks a landmark moment in its expansion strategy.
However, there's a note of caution in interpreting Chowdeck's reported success with food delivery. When placed in context, Jumia's 9-month figure of $64 million amounted to ₦5.7 billion monthly, yet profitability was still an issue. This is not unique to Jumia.
Profitability remains a challenge for many players in the global food delivery landscape.
In the US, Doordash and Uber have burned millions in venture capital to control 96% of the on-demand food delivery business while barely making any profit.
With $1 billion in funding to date, Glovo seems to be part of that mould but has differentiated itself with early diversification of revenue and already operates in 25 markets.
A key point in Chowdeck's favour seems to be a capital-efficient model, as the CEO maintained in an interview that its growth to $1.2 million monthly GMV was purely organic.
The African food delivery market, expected to grow at a CAGR of 12.2% from 2023 to 2028, reaching $1.7 billion, presents a landscape of both opportunities and challenges. While partnerships and technological integration offer growth avenues, the path to profitability remains complex. The experiences of Jumia Food and Bolt Food, contrast with the expansion of Glovo and Chowdeck. Both are relatively early in Africa's food delivery landscape and there's still time to chart a different course.
By Emmanuel Paul, Techpoint Africa
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Nigeria will boost incentives for foreign investors in an attempt to address a decline in capital coming into the country as part of the government’s plans to revive the economy.
The administration in Abuja will introduce measures to eliminate double taxation and allow speedy remittances of foreign money, Doris Uzoka-Anite, the minister of industry, trade and investment, said in an interview late Saturday in Riyadh.
“We have the free-trade zones where they can situate their businesses, export and import their raw materials without any taxes,” she said. She called it a “strong incentive” for foreign direct investment, which plunged 52% to $698 million in the six years through 2021.
Since taking office in May, President Bola Tinubu has instituted reforms to revive Africa’s biggest economy from almost a decade of decline. They include scrapping a $10 billion annual fuel subsidy and liberalizing the foreign-exchange market, which led to a more than 40% devaluation in the naira.
Nigeria has also been reviewing its bilateral agreements with countries to drum up investment. In September, it entered into several agreements with India that could see companies set up auto and steel factories in Africa’s top oil producer. A number of investors from India have begun to make their commitments tangible, Uzoka-Anite said.
Key is to show investors their money will be protected, she said. The minister was in Saudi Arabia as part of a Nigerian delegation meeting officials in the Gulf country after the two established a business council and joint chamber of commerce, industry, mines and agriculture. “We’re very keen on making sure that the investments happen very quickly,” she said.
Ruth Olurounbi, Bloomberg
The China International Import Expo continues in Shanghai. Organizers say it's an opportunity for global companies to tap into the burgeoning Chinese market. However, industry experts in Nigeria say companies there are not fully capitalizing on the opportunities the Shanghai fair is providing.
Nigeria is toughening up licensing rules for foreign mining companies to push them to boost processing and refining of metals like lithium and zinc within the country, its minister of mines said on Tuesday.
The policy announced by Dele Alake at a Nigeria Mining Week event in the capital Abuja will require mining companies to show business plans for so-called "value addition" before they are granted licences.
Alake said that the move is essential to help create jobs. "I am glad to mention that such an initiative is already on stream as some companies have already commenced operations in Nigeria," he said.
The minister referenced Ganfeng Lithium Industry Ltd, a Chinese company that is building a lithium processing plant in the central Nasarawa state, as an example of the type of investment the government is looking for.
The plant will process about 18,000 tons of lithium ore per day to manufacture batteries for electric vehicles, he said.
Nigeria is seeking to woo investors to a mining sector that has long been underdeveloped, contributing less than 1% to the country's gross domestic product.
Africa's top oil producer, which is also rich in gold, limestone and zinc, wants its mining industry to play a much bigger role in its effort to diversify the economy away from its reliance on oil.
Alake said the mining industry is been modernized and the government is investing in data collection, spending more than 15 billion naira ($19.6 million) over seven years to generate mineral data through a National Integrated Mineral Exploration Project (NIMEP).
"The preliminary reports from this project have unravelled massive discoveries which have literally put Nigeria on the world map of lithium-rich countries," he said.
Last month, Nigeria announced plans to start a state-backed company to help attract investments for the extraction of gold, coal, iron ore, baryte, lead, bitumen and limestone.
By Camillus Eboh, Reuters
Nigeria plans to set up the Nigerian Solid Minerals Corporation, a state-backed company to help attract investments into the extraction of gold, coal, iron-ore, bitumen, lead, limestone and baryte, a minister said on Sunday.
"The proposed corporation will seek and secure partnership investment agreements with big multinational companies worldwide to leverage on the attractive investment-friendly regime operating in the country to secure massive foreign direct investment for the mining sector," Solid Minerals Minister Dele Alake said in a statement.
Nigeria wants mining to play a much bigger role in its economy by expanding its mineral extraction sector to diversify away from an overreliance on oil exploration.
Alake did not give a timeframe for when the new company would be set up. Existing enterprises - the National Iron-Ore Company and the Bitumen Concessioning Programme - will be reviewed to fit into the new company while a mines police force will be active from October to detect illegal mining, he said.
President Bola Tinubu has embarked on the country's boldest reforms in decades to try to improve Nigeria's investment climate and draw foreign investors to Africa's biggest economy.
Tinubu inherited a struggling economy with record debt, shortages of foreign exchange and fuel, a weak naira currency, inflation at a near two-decade high, skeletal power supplies and falling oil production due to years of underinvestment, crude-oil theft and pipeline vandalism.
His administration has said it will seek to promote investments rather than rely on borrowing to create jobs.
Tinubu plans to attend the forthcoming G20 summit to promote foreign investment in Nigeria and mobilize global capital to develop infrastructure.
The new corporation will engage local financial institutions, which have shied away from the mining sector in the past due to a long gestation period for projects, to promote investment, Alake said.
By Camillus Eboh, Reuters
Nigeria's President Bola Tinubu has appointed a financial watchdog to investigate the central bank, weeks after he suspended its governor, a copy of a letter from the president showed on Sunday.
Tinubu on June 9 suspended Godwin Emefiele, who was then detained by state security agents for allegedly misappropriating funds and a "criminal breach of trust." Emefiele last week appeared in court to deny illegally possessing a firearm and ammunition.
In a letter dated July 28, Tinubu appointed the chief executive of Nigeria's Financial Reporting Council as special investigator of the Central Bank of Nigeria (CBN) and other government-owned entities.
The letter said the investigator should make weekly reports to the president.
"You are to investigate the CBN and related entities using a suitably experienced, competent and capable team and work with relevant security and anti-corruption agencies to deliver on this assignment," Tinubu said.
The investigator was to "provide a comprehensive report on public wealth currently in the hands of corrupt individuals and establishments."
A presidency source confirmed the authenticity of the letter.
Tinubu's spokesperson Dele Alake did not immediately comment.
Tinubu has embarked on the country's boldest reforms in decades, including removing a popular but costly fuel subsidy and lifting restrictions on foreign exchange trading, a gamble which he hopes will boost growth.
By Felix Onuah, Reuters
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One of Europe's main markets for gasoline has shrunk, threatening to squeeze European refiners, after Nigeria removed fuel subsidies, which destroyed much of the country's domestic demand and a regional market for smuggled fuel.
North America and West Africa (WAF), with Nigeria at the helm, historically have been the top two destinations for petrol exports from Europe, which produces more gasoline than it uses, meaning its refiners rely on exports to support profit margins.
A steady decline in European refining margins in recent years, as competition from the Middle East, the United States and Asia grew, was reversed when fears of fuel supply shortages boosted profits after Russia's invasion of Ukraine.
So far, benchmark profit margins for gasoline in northwestern Europe have held firm at around $27 a barrel, Refinitiv Eikon data shows.
They have been supported by demand from North America, a shortage of high quality blending materials, disruption caused by low water levels inland and local refinery outages.
But analysts say the reduction of flows following the upheaval in Nigeria will increase pressure on European refiners, and any winners are likely to be newer Middle Eastern refineries.
At the end of May, Nigeria's President Bola Tinubu scrapped a popular but expensive subsidy on the fuel, which cost the cash-strapped government $10 billion last year. Petrol demand in response fell by 28%, official data showed.
Symptomatic of the fall in demand, onshore gasoline stocks in Nigeria have climbed to 960,000 tonnes from an average 613,000 tonnes between January and June, said Jeremy Parker at the CITAC consultancy which focuses on Africa's downstream energy market.
Meanwhile, the black market for smuggled subsidised Nigerian fuel in Togo and neighbouring Benin and Cameroon has collapsed, further reducing demand for shipments via Nigeria.
There is no reliable data on how much fuel was smuggled out of Nigeria under the subsidy regime, but a comparison of estimates from official and independent sources indicate more than a third of petrol could have left state oil firm NNPC's depots every day to be sold illegally abroad.
Without the subsidy, the financial incentive for smuggling disappears.
Average monthly West African (WAF) gasoline imports fell by 56% in the second quarter compared with the first, according to Refinitiv Eikon data.
"The key point is demand from West Africa is drying up," said Refinitiv Lead Oil Analyst Raj Rajendran.
Seasonally, June loadings from the Amsterdam-Rotterdam-Antwerp (ARA) hub to West Africa fell to 629,000 tonnes this year from 895,000 tonnes last year and 1.2 million tonnes in 2021, Refinitiv data showed.
Loadings dropped to 627,000 tonnes in July so far this year from 1.5 million tonnes last year and 1.4 million tonnes at the same time in 2021.
By contrast ARA exports to the United States rose to reach 695,000 tonnes so far this year in July, compared with 449,000 tonnes last year, although they were down from 791,000 tonnes in 2021.
Gasoline stockpiles in the ARA hub are higher seasonally than they have been at least since 2003, according to Insights Global data, as U.S. exports from the region did not fully compensate for the lower WAF exports.
Nigeria, Africa's largest crude oil producer, relies heavily on imports because of its inadequate domestic refining capacity.
Imports, however, are increasingly unaffordable as Nigeria's naira has weakened to record lows since the central bank removed currency restrictions in June. At the same time, inflation is near two-decade highs.
The huge, much-delayed Dangote refinery was designed to address the domestic supply shortfall, but full 650,000 barrel per day production is unlikely before the second quarter of 2025, CITAC estimates.
Analysts said it was possible demand would not fully recover.
"Demand for barrels into WAF may be lower at the moment as the market sorts itself out again post-subsidies. There may simply be a baseline decrease in demand," said Sparta Commodities gasoline market analyst Philip Jones-Lux.
For alternative supplies that are cheaper and therefore more palatable for Nigerian buyers, Jones-Lux points to imports from the Mideast Gulf and Russia. "The volumes appear small still, but not insignificant," he said.
Sparta estimates that fuel from the Mideast Gulf is around $35-$50 per tonne cheaper than ARA imports, around triple last week's spread, which could mean increased volumes into West Africa of Middle Eastern fuel.
An increase in direct Russian gasoline flows into West Africa started in January, but cumulative volumes, while growing from virtually non-existent in recent years to around 800,000 tonnes year-to-date, are still small, according to Refinitiv Eikon data.
"It’s not like (Russia is) capturing a bigger share of that market from European refiners. The challenge is coming from the new refineries in the Middle East that are expanding from their traditional East Africa market to now include West Africa and beyond even to the Americas," Rajendran said.
By Shadia Nasralla, Reuters
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Nigeria's naira traded at a record low of 860 per dollar on the black market on Thursday, according to traders, weakening below its official rate a month after the country devalued the currency and ahead of a central bank policy meeting next week.
The bank last month allowed the naira to weaken by more than a third in a bid to unify Nigeria's multiple exchange rates and to lure foreign investment to shore up liquidity in an economy struggling with dollar shortages.
Last month's devaluation helped narrow the gap between the naira's exchange rates on the official window and the black market but pressure is gradually building up especially from individuals paying for expenses abroad.
The naira has been swinging widely on the official market since the devaluation. It touched a new low of 853 naira per dollar on Wednesday, according to OTC market regulator, FMDQ Exchange.
The currency closed at 742 naira against the dollar on the official market on Thursday, Refinitiv data showed.
Dollar shortages on the official market have seen customers turning to the black market, helping to widen the gap between the spot rate and the black market, one trader said.
Nigeria has embarked on its boldest reform agenda in decades, including the removal of a popular but costly petrol subsidy and the loosening of restrictions on foreign exchange trading, a gamble President Bola Tinubu hopes will boost sluggish economic growth.
Analysts have warned that a weaker currency and the fuel subsidy removal would likely to push inflation higher in the short term.
The central bank will meet on Monday and Tuesday to set interest rates with investors looking for measures to support the currency.
By Elisha Bala-Gbogbo and Chijioke Ohuocha, Reuters
The central banks of Ethiopia and Nigeria struck a deal to swap the revenues of two companies, Dangote Cement in Ethiopia and Ethiopian Airlines in Nigeria. The deal saw them exchange an estimated 100 million U.S. dollars in frozen funds.
Nigeria’s business community has welcomed the suspension of a set of taxes by President Bola Tinubu. The community, however, wants the government to do more to improve the ease of doing business in the country by completely doing away with the additional taxes.
Nigeria's federal revenue agency said on Monday it had partnered with a traders association to collect value added tax (VAT) from millions of informal traders, part of a push to widen the tax base by President Bola Tinubu's government.
Africa's largest economy has embarked on its boldest reform agenda in decades, including the removal of a popular petrol subsidy and restrictions on foreign exchange trading, a gamble by Tinubu to try boost sluggish growth.
Nigeria has one of the lowest tax collection rates in the world at around 10.8% of GDP, according to the Federal Inland Revenue Service (FIRS). Only 47% of this year's budget will come from revenues and the rest from borrowing.
The FIRS said in a statement that it was partnering with the Market Traders Association of Nigeria (MATAN) to collect and remit VAT from its members, especially those in the informal sector, using a digital platform.
It said the partnership would help "curb the activities of touts, miscreants and self-imposed tax collectors involved in illegal tax collection in Nigeria's market spaces."
MATAN says it has more than 40 million traders, mostly in the informal sector where a majority of Nigerians earn a living.
The revenue agency said MATAN members will receive identity cards with tax identification numbers and a digital platform would track their turnover for tax purposes.
By MacDonald Dzirutwe, Reuters
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Nigerians are feeling the brunt of President Tinubu's economic shakeup
A recent study shows that 80% of small and medium enterprises in Nigeria don't make it to their 5th birthday. Despite the sector's significant contribution to Nigeria's economy, small and medium enterprises face many challenges that slow down the country's overall potential.
Lagos, Nigeria – Comfort Oluwaseyi has a time-tested shortcut for sending money to everyone.
For the 40-year-old fruit trader at Ikeja, in the heart of Nigeria’s commercial capital Lagos, all it takes is dialling *737# on her Itel 2160, a non-smartphone which costs 7,000 Nigerian naira ($15).
Within seconds, the operation is concluded and recipients, usually her suppliers, are sorted. The fee? Only 6.98 naira per transaction, deducted directly from her bank account.
“I cannot afford a smartphone but the phone I use still serves me well,” Oluwaseyi told Al Jazeera. “This phone helps me operate this business which in turn supports my family.”
In Nigeria, feature phones, because of their relative affordability and longer battery life, are a popular choice in low-income households – 133 million people according to a 2022 report from the National Bureau of Statistics (NBS) – especially among older or illiterate citizens.
Furthermore, three things stand out: half of all phones shipped into Nigeria are still feature phones; only half of the country is connected to the internet according to the World Bank and, as per Lagos-based Enhancing Financial Innovation and Access (EFInA), only half of the adult population use formal banks.
For this reason, *737 is one of the most popular short codes on the Unstructured Supplementary Service Data (USSD) platform for millions in Nigeria.
USSD short codes – first introduced by the European Telecommunication Standards Institute (ETSI) in 1994, and in Nigeria for banking purposes in 2015 – help users with or without smartphones or internet connections perform multiple features.
Every day, millions of Nigerians use different short codes to pay for a range of services, from purchasing airtime to tracking sales from customers who prefer cash transfers and paying suppliers for new stock.
The ease of access also helps people like Oluwaseyi focus on business and avoid bank queues during business hours.
Even smartphone users rely on USSD services when their bank apps malfunction or banking services are poor – a routine complaint. A third of all consumer complaints filed in 2020 were against poor banking services, the most recent data from Nigeria’s Federal Competition and Consumer Protection Commission (FCCPC) shows.
During a cash shortage in February that halted operations of many small businesses, USSD allowed Oluwaseyi to keep hers running, she said.
Dispute over bank fees
But a dispute between telecommunication companies and banks about the appropriate pricing model for USSD-powered financial transactions could cut off access to financial services for as many as 17 million people like Oluwaseyi.
Gbenga Adebayo, chairman of the Association of Licensed Telecoms Operators of Nigeria (ALTON) traced the dispute to 2019 when bank CEOs pleaded with the state-run Financial Inclusion Steering Committee (FISC) to make USSD services free of charge to accelerate financial inclusion.
Until October 2019, banks billed users directly for the service using their airtime. To ensure that even users who had no airtime could use it, banks introduced corporate billing; they calculated the number of 20-second USSD sessions (each pegged at 3.5 naira) customers used, deducted it from their bank accounts and remitted to telcos at the end of each month.
Because telcos were also billing for failed sessions and refusing to extend the 20-second session cap, banks baulked at this arrangement and asked telcos to charge their customers directly.
At a point in the dispute, MTN, Nigeria’s largest telecom company announced plans to directly bill users 4 naira for every 20-second USSD transaction.
Central bank governor Godwin Emefiele criticised the move, saying direct user billing would hurt financial inclusion. The Nigerian Communications Commission (NCC) then suspended the new charges.
Thus began a tussle between banks and telcos over who shoulders the cost of USSD sessions for end users. The former insist that they provide the latter, who want payment for supplying infrastructure powering the USSD technology, with customers.
Today, the banks owe a cumulative 100 billion naira ($214m) to the telcos who are threatening to cut off access to the technology.
On May 12, ALTON said it had received approval from the NCC, Nigeria’s telecommunications regulator, to disconnect the banks.
And experts fear that this could have a significant impact on many Nigerians.
“If you turn off USSD the most vulnerable Nigerians will suffer because they don’t have smartphones or if they have smartphones they are using ancient and cheap smartphones that can’t work with the latest operating system,” Adedeji Olowe, CEO of Lagos-based fintech startup Lendsqr, and a trustee of Open Banking Nigeria, a nonprofit championing financial inclusion.
Even Adebayo, the telcos’ representative, believes that too.
“The average Nigerian relies on USSD, and a lot of those who use it for financial transactions will be affected. It will affect the entire financial institution … and the entire digital ecosystem,” he told Al Jazeera.
Chasing financial inclusion
Some bankers have described the USSD as a clumsy technology that cannot serve as Nigeria’s answer to its financial inclusion problems, arguing that the best path to financial inclusion is making data subscriptions more affordable.
A senior executive at a leading Nigerian bank told Al Jazeera anonymously that USSD is an overrated banking channel as bank hall walk-ins still carry the bulk of the financial transactions traffic, with intelligent banking systems such as WhatsApp banking slowly becoming more popular.
On the surface, the data seems to agree.
Data from the CBN reveals that USSD accounts for only 2.3 percent by volume and 0.29 percent of the value of all electronic transactions in Nigeria in 2022. Conversely, smartphone and internet-enabled channels make up 60 percent of such transactions. Additionally, the value of USSD transactions dropped by 13.2 percent or 685.45 billion naira ($1.47bn) in the same calendar year.
But experts like Olowe argue that even if internet subscription cost is zero, the cost of smartphones and expertise to operate them present barriers for the demographic of Nigerians who need financial inclusion the most.
“Except the economy improves a lot of people won’t be able to access smartphones and these are the exact people we are trying to expand financial services to,” he said.
In a country where only 3.7 million Nigerians spend more than $10 daily as of 2021 and most of that goes to food and transport, only a few people can afford to purchase smartphones.
“Nigeria’s economy is in a fragile place currently … another big, disruptive hit to consumer spending is the last thing that the country needs,” John Ashbourne, emerging market economist at Fitch Solutions, a London-based financial intelligence company, told Al Jazeera.
But disconnection of the service is also a difficult task because of bureaucracy surrounding approvals and resistance from the telcos, industry insiders say.
“The major source of their income, which is airtime vending, comes from these channels, if they [telcos] shut it down, they are the ones that would lose,” the bank executive said.
Two of Nigeria’s leading telcos, MTN Nigeria and Airtel made 1.25 trillion naira ($2.68bn) from airtime and data in the first 6 months of 2022, according to data from the NCC.
And that development could force innovation on the part of the telcos, Emmanuel Ido, a technology lawyer at Lagos-based law firm Aluko and Oyebode, told Al Jazeera.
“One possible outcome [of the dispute] is that telcos and banks will attempt to redefine their relationship and operate independently, with telcos providing banking functions independent of traditional banks,” he said.
For end users like Oluwaseyi, the disconnect would be detrimental to her business if the telcos went ahead with their threats to disconnect USSD services.
“All I had during this [cash shortage] period was my small phone,” she told Al Jazeera. “With it … I was able to make money transfers to my suppliers.”
For the first time in a dozen years, Aliko Dangote has fallen from his perch as Africa’s richest person. The continent’s new number one, according to Forbes’ calculations, is Johann Rupert of South Africa, who built a fortune in luxury goods and more. Rupert overtook Dangote on Thursday, June 15 and has an estimated net worth of $11.7 billion, according to Forbes’ Real-Time Billionaires ranking at 10 a.m. ET on June 21. This marks the first time that Rupert ranks as the richest person in Africa; he's been on Forbes' list of billionaires since at least 1997. Dangote, 66, stands in second place behind Rupert, 73, among African billionaires with a fortune estimated at $10.4 billion. That’s a $3.7 billion drop from the $14.1 billion net worth Dangote had on Wednesday, June 14.
The decline of Dangote’s fortune comes in the wake of the Central Bank of Nigeria’s decision to float its currency, the naira, on June 14, abandoning the fixed exchange rate with the U.S. dollar. The naira, which had been trading around 465 per U.S. dollar, plummeted about 40% against the U.S. dollar on Friday, June 16 and fell to a low of N690 to the U.S. dollar on Tuesday, June 20.
The majority of Dangote’s fortune lies in his 85% ownership of listed firm Dangote Cement, the continent’s largest cement producer, shares of which have risen about 1% since the central bank’s decision to float the currency. The plunging naira far outweighed the slight uptick in Dangote Cement’s shares in shifting Dangote’s fortune.
The continent’s new No. 1, Rupert is chairman of Compagnie Financière Richemont, a Switzerland-listed luxury goods powerhouse that boasts brands such as Cartier, Montblanc and Van Cleef & Arpels. Richemont was founded by Rupert in 1988 when he spun off the international assets from The Rembrandt Group, his father’s conglomerate formed in the 1940s. Rupert also serves as chairman of Remgro, a South African investment holding company with a diversified portfolio in banking, healthcare and media companies. He also owns part of the Saracens English rugby team and says his biggest regret was not buying half of Gucci when he had the opportunity to do so–decades ago– for just $175 million.
Rupert’s net worth has increased by nearly $3 billion since early 2022 and more than doubled since early 2020, when Forbes estimated it at $4.6 billion.
The Nigerian Central Bank’s decision to float the naira is part of newly-elected President Bola Tinubu’s larger efforts to reportedly encourage investment into Nigeria and stop black market operators profiting from the margin between official and unofficial financial markets. Tinubu took office in May and since then has led an overhaul of the Nigerian economy that also includes abolishing the country's fuel subsidies, an incentive that has been in place since the 1970s.
According to Nimi Wariboko, a former investment banker in Nigeria and former strategic consultant at Nigeria’s Central Bank, Dangote may be able to play Tinubu’s scrapping of state fuel subsidies to his advantage with his company’s launch of a new oil refinery in Lagos last month. The plant was built to combat the country’s fuel shortages–Nigeria hasn’t been able to refine the oil extracted domestically–and was built at a reported cost of $19 billion. But Wariboko says it might also provide Dangote with an opportunity to reclaim his position as Africa's wealthiest individual.
“So he’s going to have a monopoly on [refining oil in Nigeria] and also be able to sell at a higher market price,” said Wariboko. “So this fall seems temporary.”
Representatives for Rupert and Dangote did not reply to a request for comment.
By Jemima Denham, Forbes
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