Nigerian Startup

Nigerian startups raise more money in a single month than whole of 2020

In a month tech investors decided to open their investment wallets in an unusual manner, five Nigerian startups have found themselves $202 million richer. It is the most investment in a single month since 2019 and beats the whole money raised in 2020.

READ ALSO: Nigeria’s fiscal position remains precarious despite rising oil price

Flutterwave opened the month of March with a $170 million Series C funding that pushed its valuation to over $1 billion; Havenhill Nigeria Limited, a clean energy company raised $4.5 million on the same day as Flutterwave; Kuda Bank followed with $25 million; Termii and Kwik came a day later announcing raising $1.4 million $1.7 million each.

It is the most funding closed in a month since the $200 million investment by Visa in Interswitch. Although Paystack pulled in $200 in the deal with Stripe in October 2020, it is an outright acquisition and so does not count as funding.

The $202 million funding is even more impressive as it eclipses the record of the entire investment in 2020 when about 82 Nigerian startups could only haul in $170 million. According to a report compiled by StartupLists, venture capital investments in Africa took off on a high note in the first three months of 2020 only to be blindsided by the outbreak of the COVID-19 pandemic and consequent lockdowns and economic meltdown across the world.

Fear and anxiety left many investors scampering for safety with their funds put on ice until some certainty could be restored. Hence, investments in tech startups were impacted negatively in the second quarter but in the third quarters, investments began to pick up hitting more than 75 percent of the funding raised in previous quarters 2020.

2021 has been significantly different. Startups such as uLesson, an education technology company, with $7.5 million kicked off the year, indicating investors may be regaining their confidence and are willing to start writing big cheques again. March is certainly proving the investors are ready to push more money into the hands of Nigerian startups.

One reason experts say is responsible for the rise in funding is growing confidence driven by returns on investment of venture capitalists in the country. Paystack’s acquisition may have sold the idea once again that Nigeria does have the talents and solutions to tackle payment and other developmental challenges in Africa.

This could be responsible for the influx of first-time foreign investors. Quona Capital which led a $3 million investment in Cowrywise in January and the lead investor in Kuda Bank’s $2 million Series A raise, Valar Ventures – founded by Peter Thiel – were investing for the first time in Africa.

The funding in March has almost come at the back of each other. Flutterwave’s $170 million was announced the same day Havenhill Nigeria Limited said it raised $4.5 million from Chapel Hill Denham Nigeria Infrastructure Debt Fund (NIDF), the first listed infrastructure debt fund in Nigeria and Africa. The funding is for the construction of 22 mini-grids being developed by Havenhill Synergy Limited (Havenhill) under the Nigeria Electrification Project.

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oil

Nigeria’s fiscal position remains precarious despite rising oil price

Bullish crude oil price since the beginning of the year have raised hope of a better global fiscal performance after severe disruptions caused by COVID-19 pandemic that unsettled oil-dependent economies.

READ ALSO: Livestock Sector Can Add N33tn To Economy —FG

The price rise of more than 75 percent since November 2020 has been on account of major economies reopening and vaccinating their populations after the pandemic shut down factories and grounded the aviation industry in March 2020.

But with the positive sentiments associated with rise in oil price, celebration from the Nigerian economy, sadly, comes off as premature as the country’s fiscal position still remains precarious.

Analysis shows that as of today, Nigeria’s economy can attain fiscal break-even position only if oil prices climb as high as $103 per barrel.

This was attained by incorporating the current official exchange rate at N380/$1, Federal Retained Oil Revenue to Gross Oil Revenue at 37 percent, Average Daily Production of 1.7 million barrels per day (OPEC quota), the current budgeted expenditure as well as budgeted Non-Oil + Other Revenue and Unfunded Revenue at N4.6 billion and N8.9 billion, respectively.

Over the years, the Federal Government has struggled to finance its budget mainly due to low revenues, which have been susceptible to oil price volatilities.

At year-end 2020, the Federal Government’s retained revenue was N3.94 trillion, indicating 73 percent of target of the revised N10.805 trillion 2020 budget, which reflected the effects of the COVID-19 pandemic.

This has resulted in an increasing budget deficit for the country and an increased borrowing culture by the government from both domestic and international sources.

Figures from the Debt Management Office (DMO) indicate that Nigeria’s total public debt as of December 31, 2020, was N32.915 trillion, including those for Federal and State Governments, as well as, the Federal Capital Territory. Debt stock is further projected to hit N38.68 trillion by December 2021, according to Zainab Ahmed, minister of finance, budget and national planning.

The Federal Government projects overall budget deficit to stand at N5.60 trillion for the year 2021, representing 3.93 percent of GDP.

With the planned borrowing of N4.69 trillion to finance the budget deficit, total public debt is expected to rise to N36.89 trillion by December 31, 2021.

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Economy Sector

Livestock Sector Can Add N33tn To Economy —FG

Nigeria’s livestock sector has the potential to add N33tn worth of investments to the country’s economy, the Federal Government has said.

READ ALSO: Zenith Bank, GTB, Union Bank Lift NSE Banking Index By 2.09%

Minister of Agriculture and Rural Development, Sabo Nanono, who said this to the media in Abuja on Saturday evening, stated that the Federal Government was working hard to ensure the release of this huge investment into the economy.

He said, “Just this week in Kano, I inaugurated the pilot scheme of the National Livestock Breed Improvement Initiative aimed at increasing the diary potential of our indigenous dairy cows and meat yield of our national herd.
“The livestock sector has a huge economic potential netting N33tn which should be explored and harnessed.”

He said the goal of the Federal Ministry of Agriculture and Rural Development was to facilitate economic diversification from an oil based economy to an agro based economy.


Nanono stated that to achieve this, the FMARD had commenced the implementation of agricultural mechanisation aimed at massive cultivation and output.

He said, “This will ensure that we have more than enough to feed the population and export to neighboring countries. We are also deepening our extension services to grow the agricultural sector and make farming an informed profession.


“We’ve inaugurated a compact and viable livestock subsector capable of sustaining the supply of beef and dairy demands of the nation for consumption, processing industry and export.”


In another development, the Nigerian Veterinary Medical Association raised an alarm that the activities of uncertified animal care givers were slowing down the growth and development in the livestock subsector.


NVMA is regulated by the Veterinary Council of Nigeria, an agency under the Federal Ministry of Agriculture and Rural Development.

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NSE

Zenith Bank, GTB, Union Bank Lift NSE Banking Index By 2.09%

Growth in the share price of Zenith Bank Plc, Guaranty Trust Bank (GTB) and Union Bank of Nigeria Plc lifted the banking index of the Nigerian Stock Exchange (NSE) by 2.09 percent during trading for the past week.

READ ALSO: Nigerians rise against $1.5bn Port Harcourt refinery repair bill

The Banking Index which measures the performance of Nigerian banks on the NSE closed at 361.13 index point on Friday, March 19th from the 353.75 index point it commenced trading with on Monday, March 15th, surging by 7.38 index point, representing 2.09 percent appreciation. The banking index, however, fell by 8.11 per cent Year- till – Date (YTD)

The Financial Services Industry which includes the banking sector (measured by volume) led the activity chart with 1.888 billion shares valued at N12.446 billion traded in 12,019 deals, while a total turnover of 2.342 billion shares worth N19.272 billion in 20,173 deals were traded this week by investors on the floor of the Exchange, in contrast to a total of 1.675 billion shares valued at N23.541 billion that exchanged hands last week in 21,732 deals.

The NSE All-Share Index and Market Capitalization depreciated by 0.69% to close the week at 38,382.39 and N20.082 trillion respectively.

Checks by InsideBusiness shows that Zenith Bank led the gainers in the banking sector during the week in review in terms of market capitalisation.

The tier-1 financial institution rose by 6.13 percent in value of its market capitalisation and share price, rising from N665.605 billion and N21.20 Kobo per share to N706.421 billion and N22.50 Kobo per share respectively.

The appreciation saw Zenith Bank gaining N40.815 billion and its outstanding shares remain at 31,396,493,786.

GTB followed with a N30.902 billion growth in the bank’s market share, climbing from N881.463 billion to N912.366 billion, representing 3.50 percent appreciation.

The Orange brand also recorded soared share price, moving from N29.95 Kobo per share to N31 per share.

Union Bank completed the biggest gainers’ table for the week when its share price and market capitalisation jumped by 4.95 percent, indicating a N7.280 billion surge.

The first generation bank saw its market capitalisation currently standing at N154.339 billion up from N147.059 billion, while the value of its share price rose from N5.05 Kobo per share to N5.30 Kobo per share.


Ecobank Transnational Corporation (ETI) dominated the losers for the week, losing N5.504 billion representing 5.8 percent to close at N94.500 billion in market capitalisation down from N88. 995 billion.


The share price which opened at N5.15 Kobo per share on Monday, March 15th fell to N4.85 Kobo per share on Friday Friday, March 19th.

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Refinery

Nigerians rise against $1.5bn Port Harcourt refinery repair bill

Nigerians are enraged over government’s plan to spend $1.5 billion (about N570bn) on the repair of one of its derelict and unprofitable refinery.

READ ALSO: Investors: How companies can attract funding

The government’s long history of wasteful spending on turnaround maintenance on its struggling refineries triggers a feeling of bitterness in the hearts of many whenever the government says it wants to pump more money into them.

READ ALSO: Atedo calls $1.5bn refinery bill brazen adventure

They question why the government is throwing money it does not have into a venture that is entrenched in a culture of waste and has gulped far too much public funds with nothing to show for it. Its inflated payrolls also contribute to the non-competitive cost of fuels produced.

Many are in awe of how a cash-strapped government that has been knocking at the door of the World Bank for a $1.5 billion loan since last year is able to turn around and spend a similar amount on merely repair works on one dying refinery, an effort history suggests will be futile.

To put the planned repair into context, the government wants to spend $1.5 billion on a refinery that has never operated above its 200,000bpd capacity, whereas Shell sold a more efficient and profitable refinery with a capacity of 157,000bpd in California for $1.2 billion last year.

The complex nature of running refineries is why experts have called on the government to privatise them rather than seek to hold control and continue splashing cash on them.

“Refineries are one of the most complex facilities to run, they are capital, technology and management intensive operations, yet low margin,” Olagoke Balogun, former processor operator at Chevron with 13 years experience in the refining business, tweeted on Thursday.

Balogun noted, “Aside from corruption, the Nigerian state is grossly incompetent to run such complex operations even if they wanted to.”

It is not the first time the government is carrying out rehabilitation works on its cash-guzzling yet unprofitable refineries.

Over the past 12 years, Nigeria tried and failed four times to crank up its aging crude-processing plants.

The West African country of about 200 million people still imports more than 90 percent of products like petrol, diesel and kerosene, swapping crude oil for refined petrol, kerosene and aviation fuel.

Despite the repeated failure to breathe life into the refineries, the state-run energy company, NNPC, is giving it another shot, ignoring global examples on how to run a successful refinery.

Globally, most refineries are privately owned and run on razor-thin low margins in order to realise the highest returns.

Refinery managers seek to pay the lowest price for crude oil, maximise the yield of the higher value products, control operating costs and receive the highest price for its refined products on a sustained basis.

Nigeria’s refineries, which have overtime struggled to operate at 10 percent capacity utilisation, are however unable to operate on these four basic principles.

They currently pay international prices for crude oil, are unable to control operating costs, and cannot maximise the yield on the high-value product (petrol) because they receive the lowest prices for it.

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Atedo Peterside

Atedo calls $1.5bn refinery bill brazen adventure

Leading banker and outspoken campaigner, Atedo Peterside, has asked the federal government to halt the outrageous plan to spend $1.5bn to repair the Port Harcourt refinery.

READ ALSO: CBN Denies Placing New Restrictions On Cryptocurrency.

In a tweet, Atedo said “FG should halt $1.5bn approval for repair of Port Harcourt refinery and subject this brazen & expensive adventure to an informed national debate.

“Many experts prefer that this refinery is sold “as is” by BPE to core-investors with proven capacity to repair it with their own funds.”

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Investors

Investors: How companies can attract funding

As investors gear up to tap from opportunities in Nigeria through investments in the country’s estimated 41.5 million startups, small and medium scale companies in need of growth capital have to be investment-ready to attract funding, according to industry stakeholders.

READ ALSO: CBN Denies Placing New Restrictions On Cryptocurrency.

Discussing one of the most important aspects of business for most entrepreneurs in Nigeria and Africa – funding, trade and investment stakeholders in a recent webinar organised by the Nigerian-British Chamber of Commerce said businesses should be created based on ‘universal foundation’ or ‘sustainable foundation.’

“Integrity, strong governance and keeping proper records of the business and the ability to leverage on environment impactful initiative are very important,” Bisi Lamikanra, former partner and head of the advisory services, KPMG Nigeria said.

Small and medium-sized enterprises (SMEs) are described by analysts as the bedrock of the Nigerian economy as they account for over 95 percent of all businesses and contribute over 50 percent to the economy.

But hard hit by the double challenge of COVID-19 and slow economic growth, small businesses in Africa’s most populous nation are now more vulnerable as constraints in liquidity and cash flow, coupled with increased payment delays have resulted in endemic depletion of working capital.

With the high cost of accessing bank credit and lack of the much-required collateral, many Nigerian businesses are at the mercy of investors for funding to expand and increase the bottom line, but they also have to be ready to be attractive for investment.

“An investor-ready company just means that such a business is ready for marriage between itself and an investor. So an investor can partner with them and honour the agreement,” Okechukwu Enelamah, chairman, African Capital Alliance (ACA), and former minister of Industry, Trade, and Investment, said.

Meanwhile, companies like Flutterwave and Kuda are some of the startups that raised funding within the first three months of 2021. The former raised $170 million from a Series C fundraising while the latter secured $25 million in a Series A fundraising.

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Cryptocurrency

CBN Denies Placing New Restrictions On Cryptocurrency.

The Governor of the Central Bank of Nigeria, (CBN), Gowin Emefiele has denied that the apex bank place new restrictions on the use of cryptocurrency noting that the recent directive was to protect the financial system and generality of Nigeria from the risk inherent in crypto-asset transactions.

READ ALSO: CBN: Digital economy to drive growth, create jobs

CBN in a directive to financial institutions barred banks and other financial institutions in the country from facilitating cryptocurrency. The bank regulator had on February 5, 2021, sent a letter to all local financial institutions to shut down all bank accounts associated with cryptocurrency trading platforms.

This directive generated uproar some quarters and economic analysts who commended the commitment towards building a digital economy.

The CBN Governor in a keynote address at the 30th Seminar for Finance Correspondents and Business Editor over the weekend explained that the directive was not new but only amplified an earlier regulation on the subject of cryptocurrency.

“The recent directive became necessary to protect the financial system and the generality of Nigerian from the risk inherent in crypto-asset transactions, which have escalated in recent time, with consequences on financial stability and implementation of monetary policy.”

He however added, ” our policy does not preclude Nigerian from harnessing the underlying technology that supports crypto transactions, which is distributed ledger, commonly referred to as a blockchain.”

Emefiele disclosed further that there are several examples where blockchain technology has been used to facilitate and improve transparency in the settlement of trade transactions.

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CBN

CBN: Digital economy to drive growth, create jobs

CBN: Digital economy to drive growth, create jobs says Emefiele

To further expand the economic pie, Nigeria needs to build a solid digital economy, by focusing on digital infrastructure, especially internet connectivity, Godwin Emefiele, governor of the Central Bank of Nigeria (CBN) said on Saturday.

READ ALSO: These 5 Nigerian stocks control 80% market capitalisation

Other focus areas include digital literacy and skills, digital financial services, digital platforms, and digital entrepreneurship and innovation.

Represented by Adamu Lamtek, deputy governor, Corporates Services at a seminar for Finance Correspondents and Business Editors, held virtually in Lagos and Abuja, he said Nigeria, the biggest economy in Africa with one of the largest youth populations in the world, is well-positioned to develop a strong digital economy.

Consequently, he said there is a need to focus on accelerating improvements across five fundamental pillars of a digital economy, which are digital infrastructure, digital platforms, digital financial services, digital entrepreneurship, and digital skills.

In its effort to drive change and development, the CBN has over the last decade and a half worked to build an effective and efficient payment system.

The Payment System Vision 2020 strategy document was published in 2007 and the main objective of the strategy was to promote and entrench electronic payments, as the major channel for payment and settlement by all economic agents, away from the current dominance of cash-based transactions.

The robust regulatory framework put in place by the Bank opened up the payment system to innovation with several new players across the following licensing categories – Payment Service Banks, Payment Terminal Service Providers (PTSP’s), Payment Solution Service Providers (PSSP’s), Mobile Money Operators (MMO’s), Payment Terminal Application Developers (PTSA’s), and Agent Banking.

“A combination of these payment initiatives has immensely helped to create employment opportunities and to further our efforts at building a more financially inclusive economy,” Emefiele said.

Today a small or medium-sized enterprise in Ibadan is able to leverage digital channels to sell their products and services to a wider market beyond their immediate environment.

On cryptocurrency, Emefiele said, “let me use this medium to reiterate that the CBN did not place any new restrictions on the use of cryptocurrency in Nigeria.”

According to him, the recent directive only amplified an earlier regulation on the subject of cryptocurrency. The recent directive became necessary to protect the financial system and the generality of Nigerians from the risks inherent in crypto-asset transactions, which have escalated in recent times, with consequences on financial stability and implementation of monetary policy.

However, he said policy stand does not preclude Nigerians from harnessing the benefits of the underlying technology that supports crypto transactions, which is a distributed ledger, commonly referred to as the blockchain.

There are several examples where blockchain technology has been used to facilitate and improve transparency in the settlement of trade transactions.

“Our regulatory sandbox is available for fintech companies to explore the use of blockchain technology in areas that would be beneficial to the Nigerian economy,” the CBN governor said.

Speaking on ‘leveraging the digital economy to drive growth, job creation and sustainable development-the private sector perspective, Tope Fasua, CEO, Global Analytics Consulting Limited, said Nigeria should target double-digit growth powered by digitisation.

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Nigerian Stocks

These 5 Nigerian stocks control 80% market capitalisation

Investors in Nigerian stock market have always been rotating around five stocks that control 80 percent of the entire market capitalisation according to EFG Hermes, an Egypt-based investment bank.

READ ALSO: Union Bank grows full year pre-tax profit by 2.8% to N25.4bn

The major stocks in a rotating number include MTN N, Dangote Cement, Nestle, Airtel and BUA Cement.

In addition, the banks have been most active in the equities market but unfortunately, right now analysts have a neutral position on the banking sector.

Friday’s trading data on the Nigerian Bourse show that MTN closed at N157 per share, down -7.6 percent this year. MTN has 20,354,513,050 outstanding shares valued at N3.195 trillion.

Dangote Cement at N220 per share has lost 10.2 percent of its year-open value. The company has shares outstanding of 17,040,507,405 units valued at N3.748 trillion.

Nestle is valued at N1,375 per share. With outstanding shares of 792,656,252 units, Nestle Nigeria is valued at N1.089 trillion. Investors in Nestle have lost 8.6 percent of the company’s year-open value.

Airtel closed Friday, March 19, at N930, which represents an upward of 9.2 percent compared with its year-open value. Airtel has 3,758,151,504 outstanding shares valued at N3.495 trillion.

BUA Cement trades at N69.95, according to Friday’s data at the Nigerian Exchange (NGX) Limited. The stock has lost 9.6 percent of its value this year.

With a market capitalisation in excess of N2.368 trillion, investors continue to hover around BUA’s shares outstanding of 33,864,354,060 units.

“The last results show that costs of risk were quite low in an environment where the macro and the risks have been very high and so there’s concern around that. There’s concern around asset growth and quality, whether it can be sustained. There’s also concern around Return on Equity (ROEs),” Lilian Olubi, chief executive officer of EFG Hermes Nigeria Limited, said.

At a virtual meeting recently on “Shifts in investor appetite in East & West African equities – both foreign institutional and local investors”, she said a key variable that has affected the way the locals behave in the market has been the interest rate environment.

“As yields are inching back up as we have seen and expect to continue given the high inflation rate, what we are seeing now is the current rotation out of equities. The trend before now was when the rates were a bit low, a lot of the Pension Fund Administrators (PFAs) came back to the market in measure terms but they came numberless,” Olubi said.

“Now we are seeing them retreat from that action. Even though the yields are inching up, we still have a negative real return environment given how high the inflation rate is. But currently, the PFAs and most of the local Investors are keener on nominal returns,” she said.

“Part of the problem is the way that they report; they have unit price reporting on a daily basis,” she said.

Olubi said this adds a lot of pressure that the volatility of the stock market does not make friendly for their reporting. This, she said, is exacerbated by the transfer window that has just been opened to allow people to move across PFAs, and there is the pressure of returns because it has been a major barometer for investors’ decisions.

“Even with the equities, there is some lack of depth and breadth, so you have about five stocks that control 80 percent of the entire market capitalisation. Investors have always been rotating around these stocks,” Olubi said.

“A lot of them are already open and close to their internally set limit for these securities, so they are happy to exit and go back to the wider port of investing and so it is a quiet time for local sides.”

She said the retail players seem to have a more herd-mentality viewpoint and they tend to follow how the institution plays.

“So there’s some inactivity on that side as well. Right now, things are low. The local investors really need a lot more product range to go into and so we are looking actively as to how that comes out along the other macroeconomic concerns that continue to prevail on the market and the economy as well,” she said.

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