- June 15 2023
Africans have a fair amount of trust in digital news outlets, according to Reuters Institute report
According to Reuters Institute’s 2023 Digital News report, on average, 59% of surveyed Africans trust digital news outlets “most of the time.” Kenya led the way in terms of trustworthy news outlets at 63%, with Nigeria and South Africa following suit at 57% each. Both countries ranked second and fourth respectively, out of 46 surveyed countries in the world. 88% of Kenyans consumed news via online mediums, slightly down 1% from last year’s figures. Tuko.co.ke led the way in terms of attracting traffic, bringing in 62 million visitors. Citizen TV and Daily Nation followed suit with 58 million and 46 million visitors respectively. In Nigeria, where 93% of the surveyed population consumed news via online mediums, Legit.ng, Punch Online, and Pulse.ng led the way in terms of web traffic, attracting 46 million, 44 million, and 41 million visitors respectively. South Africa, where 90% of news consumption was via digital means, led the way in terms of attracting web traffic, with News24, SABC News Online, and eNCA online garnering 70 million, 50 million, and 40 million visitors respectively. This is despite having a lower internet penetration than both Kenya and Nigeria. The country also led the way in terms of media freedom, ranking 25th out of 180 countries according to another report by Reporters Without Borders referenced in the Reuters Institute report. Kenya, on the other hand, ranked 116th while Nigeria ranked 123rd. This year’s Reuters Institute Digital News report covered 46 countries and polled 93,000 respondents via an online survey.
Read More- June 15 2023
WhatsApp incorporates another feature from Telegram and Slack in latest update
WhatsApp users in two countries can now broadcast messages on Channels. However, the feature is not new and appears to have been ‘borrowed’ from rival chat apps. WhatsApp has launched Channels, a highly popular feature among Telegram and Slack users. Channels, which anyone can create, allow broadcasts to be sent to a large number of people. They function similarly to groups but have some limitations. For instance, on Telegram channels, users cannot participate in conversations unless the admin has allowed them to do so. This is because channels are primarily designed for broadcasts and lack conversation-style interactions found in groups. WhatsApp Channels, currently live in Colombia and Singapore, mark another step toward making the chat app as robust as possible. The Meta-owned platform is known for introducing new features months or years after rival apps have had them. WhatsApp does not shy away from copying other chat apps in terms of feature integrations, but that is a common practice in the global tech ecosystem where rival services attempt to appeal to users with great features. WhatsApp has been updated over the last few years with useful additions. For instance, the app can now be used on more than one device, although it is not fully cloud-based like Telegram, which does not need workarounds to function on multiple devices. The instant messaging service can be used on two or three smartphones and not just WhatsApp web. WhatsApp has also released official apps for Windows and macOS. Lastly, it has adjusted its UI with a modern look that matches Material You design guidelines for Android. The launch of the Channels feature seems to make sense. Leading publications such as The Verge share their stories on Telegram as soon as they are published on their sites. If WhatsApp can replicate the popularity of Telegram Channels, it could pull these publishers, and other popular channels from other platforms, into its ecosystem. WhatsApp is one of the most widely used chat apps worldwide, with over two billion users. It is the most used chat app in over 100 countries and is among the select few apps downloaded over five billion times. Meta reported that WhatsApp for Business generated over $900 million in revenue. There are a few areas where WhatsApp could improve to cater to a niche group of users who find Slack or Telegram valuable. Firstly, the app could synchronise conversations on the cloud, enabling users to switch between devices and access their messages seamlessly. Secondly, WhatsApp could strive to introduce unique and original features instead of imitating features other apps have already implemented. However, it’s important to acknowledge that while these suggestions may remain unfulfilled, WhatsApp will maintain its leadership position in the user base due to its early market entry and widespread positive reception worldwide.
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- June 15 2023
TechCabal Daily – MTN is frozen in Cameroon
In partnership with Share this newsletter: Lire en Français اقرأ هذا باللغة العربية Happy pre-Friday AI is taking a serious byte off the workload of developers! GitHub has revealed that a whopping 92% of programmers are already using artificial intelligence at work. And it’s not just the tech bros. Google has some AI tricks up its sleeve for advertisers too. The company is set to unveil not one but two shiny new AI-powered features that will help advertisers find the perfect ad spots. In today’s edition MTN’s assets caught in Cameroonian dispute Kenyan court freezes 45 Flutterwave accounts Nigeria floats the naira YouTube simplifies earnings for creators The World Wide Web3 Event: The Moonshot Conference Opportunities Telecoms MTN’s assets caught in Cameroonian dispute South African mobile operator MTN says it is caught in someone else’s tangled web. It says that its Cameroon operations were threatened by the seizure of its bank accounts containing 14 billion CFA francs ($22 million) in the country as part of a dispute. But here’s the twist: MTN says it has nothing to do with the dispute Image source: Zikoko Memes What dispute? Per Reuters, it all started in 2022 when a Cameroonian big shot, Ahmadou Baba Danpullo, and South Africa’s First National Bank (FNB) locked horns over a real estate loan. The bank decided to get its hands on Danpullo’s properties in South Africa, leading the business tycoon to strike back witha sneaky move. He persuaded a Cameroonian court to freeze the accounts of South African companies like MTN and Chococam, owned by Tiger Brands. Now the funds have been transferred into an escrow account managed by the court registrar. Sounds tough. Yes. MTN said the matter has caused difficulties in paying thousands of service providers and its 800 Cameroonian employees. So far, no resolution has been made but the South African foreign ministry is urging MTN’s executives to pursue all legal avenues available. Moniepoint ranked 2nd fastest-growing African company Moniepoint is Africa’s second-fastest growing company, as shown in FTs latest report. We also processed 1 billion transactions worth $43 billion in Q1 alone. Read all about it here. Fintech Kenyan court freezes 45 accounts belonging to Flutterwave Image source: Flutterwave Nigerian fintech company, Flutterwave, has been sued by 2,468 Nigerian nationals in a Kenyan court, for allegedly being the medium through which they were defrauded of Ksh1.6 billion ($12.04 million). The lawsuit: Last week, after hearing the case, Judge Alfred Mabeya gave the order to freeze45 Flutterwave bank accounts and 10 mobile money wallets for 14 days. Additionally, six other financial institutions that hold the company’s funds have been named as interested parties. Among the interested parties named, five of them are banks including Access Bank, Ecobank, and Safaricom PLC. Safaricom PLC’s involvement is due to Flutterwave operating 10 PayBill Numbers on their Mpesa Platform. ICYMI: Flutterwave’s image took a beating in July 2022, when Kenya charged Flutterwave to court on suspicions of card fraud and money laundering. It was later reported that Kenya dropped the financial impropriety case against Flutterwave. The fintech company has a history of dealing with court processes and facing unfavourable rulings. Economy Nigeria floats the naira Image source: Zikoko Memes Nigeria’s Central Bank (CBN) has floated the naira in a bid to loosen its control of the exchange rate, and eventually unify it. Floating? The country has been tightly controlling the official exchange rate even while its forex reserves drowned. Now that the CBN has made this move, banks are now free to source for their own forex and exchange USD at the same rate that the parallel market—Bureau De Change—has been doing for years. Trusted sources told TechCabal that banks are now exchanging for ₦699 (buy rate) and ₦700 (sell rate). Why haven’t things always been this way? It depends on who you ask really. However, it has been an obvious option for a long time. Even the World Bank recommended it. However, the CBN maintained an artificial rate of $1/₦462, even when the demand for USD was too high for banks to handle. Instead of floating the naira, it tried several other means to curb the rising demand for dollars. This included limiting goods that could be bought with USD, limiting FX access for students travelling abroad, and other measures. However, the demand only increased, creating an arbitrage opportunity at the parallel market where prices rose to as much as $1/₦755 this year. Why the change? The CBN has unified the rates to improve the exchange rates. While it is a step in the right direction, the immediate result might not be a relief. However, because banks will be responsible for sourcing their own FX supply moving forward, the unification of the rates is sure to happen. Experience Viva Technology Tune in to Europe’s biggest Startup and Business event here. Consumer Tech YouTube simplifies earnings for creators Image source: Zikoko Memes If you’ve got a small YouTube channel, you could become the next thousand-naire! On Tuesday, YouTube announced new eligibility requirements for creators with small followings to be part of the YouTube Partner Programme (YPP) and monetise their content. This means that small creators can now earn money from YouTube, as long as they meet certain requirements. What are the requirements? Creators must have up to 500 subscribers, which is half the previous requirement; three public uploads within a 90-day period; and achieve 3,000 watch hours in the past year or garner 3 million Shorts views within the last 90 days. Once creators meet the updated requirements, they can apply for the YPP and gain access to various tipping and subscription tools and also have the ability to promote their merchandise using YouTube Shopping. In addition, US creators already part of the YPP with over 20,000 subscribers will also be eligible to tag products in their videos and Shorts earning commissions in the process. Not so fast though: It’s not available in Africa yet. The revised eligibility criteria will first be implemented in the US, the
Read More- June 14 2023
Registration cost for new BDC licences falls to N15 million as Nigeria ponders unified exchange rate
Today’s loosening of exchange rate controls will diminish the arbitrage advantage previously enjoyed by BDCs, resulting in a notable decrease in the price of BDC licenses. The cost of obtaining a Bureau De Change (BDC) license is declining following news of Nigeria’s move towards a single exchange rate. While the Central Bank has not confirmed the new policy stance, the Naira fell by as much as 38% on the I&E window today, its largest slide in four years. While it’s still unclear if the CBN will pursue a free or managed float, there are already concerns that a single exchange rate will make the business of Bureau De Change operators a lot less profitable. BDCs have traditionally benefited from arbitrage and Nigeria’s multiple exchange windows. Historically, this gap has remained reasonable, but in the last year, the spread has grown as the CBN stuck to an artificial rate of $1/N462. A unified window will close that spread, and the market is already reacting, with interest in BDC licences cooling this week. Three reliable sources told TechCabal that before now, the CBN required a registration cost of N35 Million share capital company with CAC (fee can be negotiated with a CAC Agent) among several requirements to grant BDC licences. Sources close to the matter told TechCabal that the registration cost is down to N15 million today and will likely plummet further. A market expert explained to TechCabal, “Before now, the BDCs received a $20,000 allocation at the official rate every week and sold it for an almost 100% margin on the parallel market. The significant arbitrage ensured that it was profitable, which led to an influx of a record number of BDC dealers. Now that rates have been unified, they have little motivation to hold on to it.” As this article explains, BDCs are “insanely profitable” businesses because the CBN receives 500 requests for BDC licences weekly. TechCabal reported today that the CBN had floated the naira, with the USD is now exchanging at a sell rate of N700. The ripple effect is that the activities of the parallel market—run by BDCs—will slow down significantly. “Rate parity automatically means whatever BDC offers is the same or slightly similar with/to the banks. Naira floating ensures this, which means the monopoly of BDCs or sure assurance that they are the only ones with readily available FX will dwindle drastically as I can get the same FX at any bank,” another financial analyst explained to TechCabal. The truth is that while a unified FX rate might hold some potential for the market in the long run, it will badly affect the businesses of BDCs that thrive on arbitrage. CBN had in 2021 threatened to stop the issuance of BDC licenses. However, this doesn’t particularly solve the problem because even a unified FX rate still won’t fix the backlog of FX demand in Nigeria.
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- June 14 2023
Nigeria gets new data protection body as President Tinubu signs much-anticipated bill into law
A new law signed by President Tinubu provides for the establishment of a new data protection body as well as a regulatory framework for data protection in the country. On Wednesday, President Bola Tinubu signed the Nigeria Data Protection Bill 2023 into law. The new law provides a legal framework for protecting and regulating personal information in the country. Data protection is a contentious issue in Nigeria where personal data is collected with no assurance of protection. The problem is compounded by the surge in incidents of data breaches. In January 2022, for instance, a hacker claimed to have accessed the NIN database in January 2022, but the National Identity Management Commission (NIMC) denied the breach. There have been many other reported breaches like this, with the organisations involved often denying them. The new law will put a better framework around protecting personal information and ensuring they won’t fall into the wrong hands. A new data protection body The key provision of the new law is the establishment of the Nigeria Data Protection Commission, which replaces the Nigeria Data Protection Bureau (NDPB) established by immediate past President Muhammadu Buhari in February 2022. The new body will be headed by a National Commissioner appointed by the President for a term of four years which is renewable once. According to Section 8 of the Act, the powers of the Commission include issuing regulations, rules, directives, and guidance under the Act; engaging consultants for assistance in the discharge of its functions; imposing penalties; prescribing fees payable by data controllers and data processors in accordance with data processing activities, and prescribe the manner and frequency of filing, and content, of compliance returns by data controllers and data processors of major importance to the Commission. The Act also provides for creating a Governing Council to be chaired by a retired judge of a superior court of record. The members of the Council—who the President will appoint—will be part-time members other than the National Commissioner. Framework for processing data Section 25 of the Act outlines the principles of the processing of personal data, stating that the data controller or data processor must ensure that data is collected legitimately and “processed in a manner that ensures appropriate security”. While Section 26 provides the lawful basis for personal data processing anchored on the consent of the subject data for the specific purpose or purposes for which the data will be processed. Similarly, section 35-38 establishes the rights of a data subject—a person whose information is being collected. The law also prohibits the cross-border transfer of personal data, except if there is legal backing for it. It equally states that all data controllers and processors of significant importance must be registered with the Commission within six months after the commencement of the Act. The timeline of the bill October 2022: The bill was developed by the Nigeria Data Protection Bureau (NDPB). January 2023: The Federal Executive Council (FEC) approved the bill for further ratification and endorsement by the National Assembly. April 2023: President Muhammadu Buhari transmitted the bill to the National Assembly for consideration and passage May 2023: The Nigerian Senate announced that the bill had passed its third reading and sent to the House of Representatives for consideration.
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- June 14 2023
Digital Economy Taxation: The Two-Pillar Framework and Africa’s Response
The evolution of digitalization is changing how multinationals operate and relate with foreign governments. It is raising questions about taxation in the digital economy. There have been debates over the last few years about how the standard international tax system needs to properly capture the expanding reach of digitalization. Hitherto, big tech firms like Netflix, Meta, Google, Microsoft, Spotify and a host of others did not pay taxes on revenues earned in countries other than the home country – typically the United States (US). This is so because, under the standard international tax rule, multinational firms paid corporate income taxes where production takes place (rather than where consumption occurs) or where there is a physical presence. But the amount of revenue generated by these multinational companies leveraging digital technologies and platforms has shown that value can be created with little or no physical presence as long as there are consumers for these services. This scenario entitles foreign governments to impose varying taxes on revenues drawn by multinational companies from local consumers. To address these concerns, the Organisation for Economic Co-operation and Development (OECD) and the G20 Inclusive Framework developed a two-pillar solution to settle the inherent challenges of taxation in the digital economy. Twenty-three African countries were part of the 136 countries worldwide that met to discuss the global tax reforms. Pillar 1 focuses on the reallocation of (a portion of) the consolidated profit of a multinational enterprise to jurisdictions where sales arise as well as the standardization of the remuneration of routine marketing and distribution activities. By changing where/how companies pay taxes, Pillar 1 essentially expands a country’s authority to impose taxes on the profits of non-resident companies that make sales from local consumers in the country. Effectively, more countries all over the world have imposed and are implementing value-added tax (VAT) and other service-level taxation on digital products and services. In 2019, the Minister for Finance in France, Bruno Le Maire approved a digital services tax (DST) of 3% on intermediary services and advertising services based on users’ data. The United Kingdom imposed a DST of 2%, while Italy and Spain imposed a DST of 3% among other countries in Europe. Some other countries like Slovakia, and Turkey applied withholding tax (WHT) of 5% and 15% respectively. In Africa, DST has also been applied to revenues generated by digital services companies in market jurisdictions. In Nigeria, the Finance Act 2021 introduced a six (6%) digital service tax on non-resident companies with a significant economic presence estimated to be N25 million ($54,230) in annual revenue. Other African countries that imposed some form of taxes on digital services provided by non-resident companies include Zimbabwe (5%), Tunisia (3%), and Tanzania (2%); Sierra Leone and Kenya have DST of 1.5%. The latest is Uganda which proposed a DST of 5% to take effect in July 2023. This map reports only DST. Even more countries have imposed VAT on digital services Nonetheless, the varying rate of taxes across markets and the concentration of multinational companies in the United States implies that it would bear most of the taxes of digital service export. This scenario could have implications for retaliatory taxation and trade wars. For instance, the United States Trade Representative (USTR) responded to France’s imposition of DST by proposing tariffs of up to 100% on certain French exports to the US, citing discriminatory practices against US-based digital service companies. France eventually suspended the collection of DST revenue. Given the issues generated by DSTs, it became pertinent to review how the digital economy is taxed and work towards a fairer tax rule. As Pillar 1 focuses on changing where multinational companies are taxed (considering consumer location), Pillar 2 introduces a global minimum tax of Effective Tax Rate (ETR) through a system where multinational companies with consolidated revenue over €750m are subject to a minimum ETR of 15% on income arising in low-tax jurisdictions. Both Pillars 1 and 2 are of the OECD/G20 Inclusive Framework of Base Erosion and Profit Shifting (BEPS) 2.0 to address the tax challenges of the digital economy. Pillar 2, also known as the Global Anti-Base Erosion Rules (GLoBE), streamlines international taxes rules to ensure that large multinational companies pay a minimum tax (of 15%) on the income arising in the jurisdiction where they operate. The OECD has recommended that the Pillar Two rules become effective in 2024, except the Undertaxed Profits Rule (UTPR) recommended to become effective in 2025. The UTPR allows a country to increase taxes on a business if that business is part of a larger company that pays less than the proposed global minimum tax of 15% in another jurisdiction. According to the initial analysis of the original proposals, Pillar 1 and Pillar 2 would increase the effective average tax rate by around 0.7% across all jurisdictions. Pillar 1 is responsible for only 0.1% of this increase. So far, about 138 countries have signed up to be Pillar 2 compliant as of December 2022. The Africa case: Spotlight on Kenya, Nigeria, and Uganda Nonetheless, African countries have not entirely bought into the Two-Pillar framework. Though some African countries have segued to the idea of a framework, many are yet to join or enact domestic laws that are consistent with the BEPS 2.0 initiative. Nigeria is one of four countries (Kenya, Pakistan and Sri Lanka) that did not endorse the agreement in October 2021. This article cites complex compliance frameworks and the high cost of implementation as some of the reasons the Nigerian government is sceptical about joining the agreement. In 2022, the Nigerian government enacted a DST of 6% on large corporations with significant economic presence. In the first week of April 2023, the OECD sent a delegation to meet with representatives of the Nigerian government from the Federal Inland Revenue Service (FIRS) to discuss the maximization of the benefits of the framework for Nigeria and the need for Nigeria’s continued participation in developing the rules. Interestingly, Kenyan President, William Ruto announced that Kenya will withdraw
Read More- June 14 2023
Banking stocks in Nigeria drive market rally as CBN loosens FX control
Nigeria’s banking stocks have pushed the NGX to positive results this week. Experts believe the suspension of CBN chief Godwin Emefiele and floating of the naira could be responsible. Nigeria’s NGX continued its mini-bull run today in a strong week for the stock exchange. The NGX All Share index gained 3.9% yesterday, and in the early hours of trading today, it was up another 1.8%, driven primarily by the stocks of Nigeria’s Tier 1 banks. Financial markets experts told TechCabal that the market and investors are reacting positively to the suspension of Central Bank chief Godwin Emefiele. The move towards a unified exchange rate in the early hours of today was also well received. Onome Ohwovoriole, an analyst with Money Africa, told TechCabal, “The stock market rally this week has been driven, in my opinion, by two factors: reported unification of the official exchange rates and suspension of the CBN Governor.” Oise Ajayi, the head of investment research at Achoria asset management, also told TechCabal, “Historically, banking stocks have delivered some of the best returns in the market. The general positive mood in the market is because the government is taking steps in the right direction. The removal of subsidy and today’s news about the Naira float has been long coming, but the previous government refused to initiate them for whatever reason. Now that they have come to the fore, the country seems to be moving in the right direction, and investors are showing their confidence by taking a position in the market.” Still early days? The CBN’s latest move in floating the naira and allowing banks to sell forex at market rates would drive a lot of movements. “We might still be seeing more movements later on today or tomorrow,” Samuel Oyekanmi, another researcher, said. Several analysts agree that this bullish run could last five days before investors look to take a profit. “Typically, when prices rise like this, you can expect some profit taking soon. So profit-taking will impede the current bullish run,” Ajayi added. Ultimately, it’s helpful to remember that these are still early days. While these policies are a step in the right direction, naming a cabinet and an economic team will be the litmus test for investor confidence in the coming weeks. Ohwovoriole noted that there still needs to be more clarity around forex policy as the unification of the foreign exchange rates is just the first step.
Read More- June 14 2023
YouTube relaxes monetisation rules, opening the door for smaller creators to earn
YouTube is relaxing the rules for its partner program, so new creators can start earning as early as possible from their video-making careers. However, it is still not rosy for new content creators. YouTube is one of the go-to platforms for video content and has been instrumental in the digital creation era. However, new content creators who mostly have a handful of subscribers do not have access to YouTube’s Partner Program (YPP). This program is a way for creators to earn money from advertisers. This week, YouTube relaxed its eligibility rules for creators, opening the door for these creators to start earning on the platform faster. The partner program also gives creators access to fan funding features like channel memberships, Super Chat, Super Thanks, and more. Lowering the barrier to revenue As of today, creators on YouTube can apply for the partner program once they reach 500 subscribers, upload 3 public videos in the last 90 days, and either accumulate 3000 watch hours in the past year or receive 3 million Shorts views in the last 90 days. Previously, channel owners needed to have either 1,000 subscribers with 4,000 valid public watch hours in the past year or 1,000 subscribers with 10 million valid public Shorts views within the last 90 days to qualify for YPP. “In the U.S., the number of channels that earned a majority of revenue from Fan Funding products in December 2022 saw an increase over 20% compared to the prior year,” YouTube said YouTube in a blog post. “As these creators continue to grow their channel, they’ll automatically become eligible to earn revenue sharing from ads and even more benefits once they reach the existing YPP eligibility criteria without having to go through the full YPP application process again. These existing eligibility requirements to unlock revenue sharing remain unchanged,” adds YouTube. Why is this important to creators? Some local creators are happy about YouTube’s changes to YPP. They can now monetise their content early in their YouTube careers without amassing a big following. However, the content still needs thousands of hours in viewership, and the number set by YouTube is a minimum of 3000 watch hours. According to Dickson Otieno, who runs tech-ish.com and is a video creator, the watch hours are high. Online tech publisher Nixon Kanali, who reviews hardware products for his YouTube channel, told TechCabal, “YouTube should have done this a long time ago. So many young creators have been unable to monetise their content for a long time because the previous requirement was not easily attainable, especially for creators who are just starting. This new requirement is very important as young creators can start earning from their craft early as they build their pages. This is also important because we might now see several creators who are used to sharing their content on platforms like Facebook or any other social now moving their content to YouTube,” said Kanali. YouTube still doesn’t pay much in Kenya Kenyan creators earn as low as KES 1000 (under $10) per 10,000 views from their video viewership and sometimes depend on sponsored content paid for by their clients. The number of views does not solely determine the amount of money earned from YouTube. Even if a video receives 1 million views, only a portion of those viewers may have watched the ads for over 30 seconds, while others may have skipped or used ad blockers. Factors such as niche metrics and geographic location play a role. Science and tech videos, for example, tend to generate higher earnings. These are some of the issues that have been raised by creators, citing that creators in Western countries earn more.
Read More- June 14 2023
Convergence Partners Investments rebrands to Solcon Capital, increasing focus to generative AI investments
Convergence Partners Investments has rebranded to Solcon Capital. The company plans to push into deep tech investments in emerging markets. South Africa-based and pan-African present deep-tech investment firm Convergence Partners Investments is rebranding to “Solcon Capital” and making a push into global deep tech growth “through platform economics”. Founded by South African businessman Andile Ngcaba in 2003, the firm was the first vehicle structured as a permanent capital vehicle in the Convergence Partners stable, which focuses on private equity through its current and future digital infrastructure funds. “Solcon Capital has a 20-year history of innovation and disruption through investments in companies that have built undersea cables, long-haul fibre, Big Data etc. In this new chapter, Solcon Capital will be known as one of the leading global deep-tech investment companies,” Ngcaba said in a statement. Under the new brand, the firm will focus on international deep tech investments in generative AI and large language models (LLM), synthetic data and big data, cybersecurity, and quantum computing across South Africa, India, and Southeast Asia. Additionally, the rebranding also brought some executive changes, with Pramod Venkatesh assuming the position of CEO. Prior to joining Solcon Capital, Pramod was the Group CTO of inq., another Convergence Partners portfolio company. “We are excited to bring on board Pramod Venkatesh, with extensive experience in Silicon Valley and expertise in building deep tech companies. Pramod will execute Solcon Capital’s 2035 strategy. With Pramod at the helm, we will continue to disrupt deep tech and are excited to show what the future holds,” added Ngcaba. In January this year, Solcon Capital’s parent company Convergence Partners announced that it had closed its Convergence Partners Digital Infrastructure Fund (CPDIF) at $296 million, surpassing its initial target by over 18%. The Convergence Partners Digital Infrastructure Fund is the firm’s biggest fund to date and brings its total funds under management to over $600 million.
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- June 14 2023
CBN floats the Naira as banks offer $1 for N700
Days after President Tinubu spoke about the need to unify Nigeria’s exchange rate, Nigeria’s Central Bank appears to have instituted a managed float . In a move away from a fixed foreign exchange policy, Nigeria’s Central Bank has loosened control of rates in what appears to be a managed float. TechCabal confirmed from one of Nigeria’s leading banks that the USD is now exchanging for N699 (buy rate) and N700 (sell rate). For years, Nigeria maintained a tightly controlled official exchange rate as the country’s forex reserves hit new lows. While the CBN maintained an artificial rate of $1/N462, most people couldn’t get the greenback at those rates. To control demand, the CBN created a list of 43 items for which importers could not access FX at official rates. At some point, it also limited FX access for students traveling abroad access. Yet these workarounds didn’t solve the demand problem, forcing individuals and companies to head to the parallel market where prices rose to as much as $1/N755 this year. It created a massive arbitrage opportunity, with the World Bank advising the Central Bank to merge its exchange rate windows on several occasions. The Buhari administration boasted of improving the exchange rate prices before it was elected, and was reluctant to float the Naira. Instead, it blamed other players for the massive gap between official and black market rates. At its most ridiculous, CBN Governor Godwin Emefiele blamed the rate aggregation site, Aboki Fx and other black-market operators for causing volatility in the FX markets. But pressure continued to mount as airlines and multinationals demanded USD. In 2021, Unilever told Bloomberg that it was compelled to buy USD 9% above the CBN’s rate, and in March 2023, airlines said they had over $700 million trapped in Nigeria. For foreign investors, it meant that whatever profits they made in Nigeria were paper profits as they could not move their monies. It worsened uncertainty and contributed to dwindling foreign direct investments. Foreign investment in Nigeria reached new lows in Q2 2022. Read also: As LagRide drivers push for lower daily repayments, it’s time to ask if vehicle financing is right for Nigeria Will floating the Naira solve FX problems? While it is a step in the right direction, today’s float may not immediately produce any immediate relief. The backlog of FX demand is huge and it is unlikely that the banks will be able to meet it in the short-term. As the banks will be responsible for sourcing their own FX supply moving forward, it will eventually lead to a unification of the rates. In theory, the float should precipitate more supply, and in the interim, the CBN will likely intervene and still supply banks with FX whenever necessary. But one thing is clear, investors will appreciate the clarity and reality that comes with today’s managed float.
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