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This article was contributed by Robert Sargsian, Co-founder/CEO at Due, and Omotesele Esekhaigbe, Compliance and Risk Manager (MLRO) at Zone as part of the Emerging Trends in Cross-Border Payments: A Growth Guide for Stakeholders report authored by Aroghene Favour Ndulu and Paschal Okeke. The regulatory ecosystem in Africa has many challenges, especially for cross-border payments. While the continent is experiencing rapid growth in digital financial solutions, the regulatory environment remains challenging for businesses and payment service providers. One apparent barrier is that Africa’s regulatory environment is highly fragmented, with each country enforcing its unique compliance requirements. This fragmentation cuts across policies, licences, and anti-money laundering (AML) regulations. This lack of harmonisation complicates efforts to create unified cross-border payment solutions. For instance, what qualifies as compliant in one nation or state might fail to meet the standards of another, forcing payment providers to adapt their operations country by country, multiplying their compliance costs. Another barrier in Africa today is a lack of a clear regulatory framework for stablecoins/digital assets. Regulatory clarity creates a much more streamlined and transparent ecosystem. We see some progress in South Africa in that direction, where the regulator and banks are open to digital assets/stablecoins use cases. Capital controls and restrictive foreign exchange policies- Many African countries impose strict capital controls and FX regulations to manage currency volatility and protect local economies. However, these restrictions make it difficult to transfer funds across borders, particularly in hard currencies like the US dollar or Euro. This creates bottlenecks for businesses needing to make international payments or manage cross-border investments. For instance, Nigeria has historically imposed FX controls that limit foreign currency availability, affecting businesses’ ability to conduct international transactions smoothly. Influencing policymaking Stakeholders, including payment service providers, regulators, and regional organisations, can influence policies to streamline cross-border payments in four ways: Advocate for harmonised regulations: Stakeholders can collaborate with regional economic blocs, such as the Economic Community of West African States (ECOWAS) and the Common Market for Eastern and Southern Africa (COMESA), to advocate for standardised payment regulations. A pertinent example is the Single Euro Payments Area (SEPA) in Europe, which harmonised payment systems across 36 countries, enabling cross-border euro transactions to be as straightforward as domestic ones. Public-private partnerships for improved financial infrastructure: Public-private partnerships (PPPs) can help build real-time payment systems, such as Nigeria’s NIBSS Instant Payment (NIP) platform, which processes millions of transactions daily in seconds. These partnerships can also create policies that encourage cross-border trade and investment. For example, the collaboration between the World Bank and several African countries under the “Regional Payments Integration Initiative” aims to improve interoperability between national payment systems, making cross-border transactions faster and cheaper. Engage with central banks to ease currency controls: By collaborating with central banks, stakeholders can advocate for policies that ease restrictive currency exchange rules and improve liquidity. For example, the Monetary Authority of Singapore (MAS) has partnered with industry players to develop Project Ubin. This blockchain-based cross-border payment system simplifies multi-currency payments while ensuring compliance. Similar innovations could address currency barriers in emerging markets like Africa. Build great products: Building great products, people love and are ready to push their authorities for. For example, consider how Uber has used its user base to push politicians in San Francisco to drop the anti-ride-hailing regulations. Challenges of multiple regulatory frameworks Each jurisdiction’s different regulatory requirements demand substantial financial and human resources. This fragmentation increases operational complexity and escalates compliance costs. Non-compliance can lead to severe penalties. In July 2024, Nigeria fined Meta $220 million for violating its local data and consumer laws. Another challenge is delays. Securing multiple licenses for similar activities across different regions can be time-consuming and redundant. This duplication often delays market entry, hindering a company’s ability to capitalise on growth opportunities. In emerging markets like Africa, licensing processes are further complicated by bureaucratic inefficiencies and unclear timelines, making it challenging for businesses. Data privacy laws and cross-border payment solutions In Nigeria, there has already been a rising need for compliance professionals in Fintechs. We’re seeing tech companies hire established compliance hires from traditional banks. This move was inspired by the attempt of central banks to derisk digital transactions. Laws like the Nigeria Data Protection Act and emerging frameworks like Kenya’s Data Protection Act demand solid compliance mechanisms. Providers operating across multiple regions must develop adaptable systems that meet these requirements without compromising efficiency. Some jurisdictions now mandate that specific categories of data be stored within their borders. Nigeria’s data protection law emphasises data residency, while India has proposed similar requirements. These demands can increase operational costs as companies invest in localised data centres and infrastructure to comply. Efforts to harmonise privacy laws across regions could reduce the compliance burden on payment providers. The African Continental Free Trade Area (AfCFTA) includes discussions on aligning data protection policies to facilitate smoother digital trade. Such initiatives could spur innovation and encourage more players to provide cross-border payments. Managing FX risks in cross-border transactions Fast settlements: The biggest unlock for FX risk management is fast settlements. If you can settle fast, then the time exposure you take the FX for can be limited. Stablecoins allow for a much faster settlement, almost instant, which is going to push down the spreads a lot in all markets. Hedging strategies: Using instruments such as forward contracts, options, and swaps to hedge against currency fluctuations. These tools allow companies to lock in exchange rates, reducing their vulnerability to market volatility. Forward contracts can provide certainty in cash flow management by ensuring a fixed rate for future transactions. Real-time FX monitoring: Advanced technology, such as APls, can monitor currency movements in real-time, providing valuable insights into market trends. Online FX monitoring platforms can help businesses make timely and informed decisions, minimising the impact of unfavourable exchange rate shifts. Use derivatives: This is one strategy that is currently being underutilised. For instance perpetual, when taking FX exposure, you can simultaneously hedge it on a perps market. This is not practiced that often in
Read MoreAfter 11 years of negotiations, the Nigerian Communications Commission (NCC) approved a 50% tariff hike in telecom services like calls, SMS, and internet bundles. While the decision is a step forward in addressing the sector’s financial strains, industry players say it’s only a partial win—falling short of the 100% hike they had long lobbied for. The 50% hike will not solve the sector’s challenges, including underfunded infrastructure and rising operational costs. Under the new policy, operators can adjust prices within the established tariff bands of ₦6.40 to ₦50, as outlined in the NCC’s 2013 Cost Study. While Monday’s announcement did not state when the new rates would take effect, an MTN executive confirmed to TechCabal that the increase would be rolled out in a week. Subscribers who recharge before the new tariffs are implemented or have ongoing data plans will not experience immediate price hikes unless they make new purchases. While the adjustment helps bridge the gap between operational costs and revenues, it does not fully address the broader issues plaguing the sector. “Tariff adjustment is a step towards bridging the gap between operational costs and revenues, but it does not fully address our need for a 100% increase. However, we understand this is a move in the right direction,” said Tony Izuagbe Emoekpere, President of the Association of Telecommunications Operators of Nigeria (ATCON). “This adjustment will help operators invest in infrastructure, expand coverage, and improve service quality.” Gbenga Adebayo, President of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), said the tariff increase is just one part of a broader agenda to ensure the sector’s sustainability. “Increasing tariffs was only part of the solution. We are grateful for the progress made, but we are taking it one step at a time,” he said. Industry stakeholders like Adebayo and Emoekpere believe addressing problems like multiple taxation, the protection of telecom infrastructure, and uniformity in the right of way for infrastructure are critical to improving service quality. “The focus should not only be on tariffs,” said Adebayo. “We need a holistic approach to improve the ecosystem—starting with the protection of telecom infrastructure through proper enforcement of the Critical National Infrastructure gazette.” The tariff hike will help major operators like MTN and Airtel manage their expenses and service debts, as operational costs have surged by 120%. The additional revenue will also be directed toward capital investments to enhance service quality. NCC Executive Vice Chairman Aminu Maida has given operators a three-month window to recover losses, after which the regulator will now focus on service quality improvements. “We remain committed to supporting Nigeria’s digital transformation agenda and driving inclusive growth,” said Karl Toriola, MTN Nigeria CEO. “This tariff adjustment will help us maintain the critical investments required to deliver high-quality services to Nigerians.” Nigeria’s broader economic challenges, including multiple currency devaluations, inflation, and the removal of fuel subsidies, have exacerbated the telecom industry’s financial pressures. In the last two decades, Nigeria has experienced four currency devaluations and two economic recessions, all of which have significantly impacted telecom operators’ operational costs.. At the time of Nigeria’s telecom liberalization in 2001, the naira exchanged at ₦104 to the dollar. By 2003, it had risen to ₦135, prompting the NCC to approve a tariff hike. By 2013, when the naira stabilized at ₦155, tariffs were revised downward as the sector grew faster than headline inflation r. However, the current tariff structure has become increasingly unsustainable as the naira has fluctuated between ₦1,500 and ₦1,700 over the past year. Headline inflation has accelerated above 33% since October 2024, putting additional strain on telecom operators’ ability to meet rising costs. “What has happened over the years is compounded inflation and the devaluation of the naira, which has made production costs significantly higher than they used to be,” said a telecom CEO who asked not to be named for fear of suggesting bad faith around the negotiations. Many operators believe the long-term solution lies in fully deregulating the telecom sector, allowing prices to be determined by market forces rather than a centralized tariff system. Under the current regulatory framework, the Nigerian Communications Act of 2003 gives the NCC the authority to set price floors and ceilings for telecom services. For instance, the price floor for a one-minute call is ₦6.40, while the ceiling is ₦50. Operators can set their prices within this range but must seek NCC approval for any adjustments—a process that is often slow and restrictive. “The ideal solution would be to fully deregulate the telecom market and let tariffs be set by market forces,” said one senior telecom executive who asked not to be named so he could speak freely. “This would allow operators the flexibility to adjust prices in real-time to respond to economic conditions. However, such a move would require a comprehensive review of the Nigerian Communications Act.” Some have proposed an alternative solution: implementing a fixed approval timeline for any tariff hike. For example, operators would have 90 days to submit price changes, and if the NCC does not respond within that period, the proposed price changes would be considered approved.
Read MoreAfter raising $9 million in a Series A extension round in late 2024, the Nigerian HR Software-as-a-service (SaaS) company SeamlessHR initiated informal discussions with competitor PaidHR about a possible acquisition, according to multiple sources familiar with the discussions. However, those early stage talks did not progress to a formal offer or agreement, the same people said. According to one person close to the discussions who requested anonymity due to the sensitive nature of the talks, SeamlessHR initiated those informal conversations in the fourth quarter of 2024 but was rebuffed. Typically, a formal acquisition offer involves sending an indication of interest (IOI), while informal talks often occur without paperwork. No formal IOI was ever presented in this case. Instead of focusing on acquisition opportunities, PaidHR has continued to focus on its aggressive growth trajectory. Since its 2020 launch, the company has rapidly expanded, offering key payroll and HR services to over 200 businesses, including major Nigerian firms such as Flutterwave, Oando, and Mavin Group. In 2023, it paid ₦11 billion ($77 million) in client salaries, a significant jump from ₦2.7 billion ($18.5 million) in 2022. The company has also invested heavily in cross-border payroll technology, which many view as a unique competitive advantage. The acquisition would have allowed SeamlessHR, founded in 2018, to consolidate its position in the fiercely competitive HR-tech space. A successful deal would have enabled SeamlessHR to absorb PaidHR’s customer base in a space where customer acquisition is expensive and switching costs are high. Both companies declined to comment on the matter. SeamlessHR confirmed, however, that no formal acquisition discussions took place. The Nigerian HR-tech sector has become increasingly fragmented, with companies like BizEdge, PaidHR, Motherboard, Bento Africa, NotchHR, and Ropay all vying for market share. This growing competition has made it more challenging for a clear market leader to emerge, but there have been notable developments in the space. PaidHR’s cross-border payroll system, which enables companies to pay employees in different countries using local currencies, has been a standout feature since its launch. Within 10 weeks of launch, it contributed 9% of PaidHR’s revenue, said a company executive who asked not to be named because they were not authorised to speak to the press. The cross-border capability is a key reason SeamlessHR reached out, the same person said. The feature would have complemented SeamlessHR’s product suite, including HR management, performance management, leave and payroll management, recruitment, and HR analytics. In addition, the broader HR-tech sector in Nigeria is increasingly seen as ripe for consolidation. With over 20 companies competing in a crowded market, industry experts believe the sector would benefit from reduced fragmentation. “The HR Payroll space will benefit from contraction,” said the CEO of one HR-SaaS startup who asked not to be named so he could speak freely. “The ecosystem is better served by a few larger companies that can deliver high-quality services, rather than many small ones that may struggle with scaling.” However, other industry stakeholders caution that sub-Saharan Africa’s HR-tech space may not yet be ready for consolidation. “Most players in the region are still in the early stages of product development,” said another HR-SaaS CEO, who also spoke anonymously. “For consolidation to succeed, companies need to have reached product maturity.” Deel’s acquisition of South Africa’s PaySpace was possible because the company had been in operation for over two decades, giving it the time to refine its product and establish a mature offering, the same person added.
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