Nigeria’s inflation quickens in June as pressure to cut interest rates mounts
Headline inflation, a measure that tracks consumer prices in an economy, increased in Nigeria in June 2024 as people paid more for food, transportation, and energy. Data from the Bureau of Statistics showed inflation accelerated to 34.19% in June 2024 from 33.95% in May. It will worry policymakers counting on inflation to stall as talks of a nationwide protest gain ground. On Friday, the government suspended taxes and import duties on food items like maize and wheat for 150 days, one year after acknowledging a food emergency. It will likely lower food costs for the first time in over two years and ease political pressure on the CBN to lower rates. Despite this, a month-on-month increase in inflation between May and June will put talks of an interest rate increase on the table in the short term. Nigerian billionaire Aliko Dangote told reporters on July 3 that no growth could happen while interest rates remained at 30%. It’s a position held by many government insiders who believe CBN governor Cardoso—who has raised interest rates twice this year—should backpedal. So far, Cardoso has remained unmoved. The discussion will be back on the table at next week’s Monetary Policy Meeting (MPC). Empty wallets, empty bellies: Food inflation grips Nigerians Have you got your early-bird tickets to the Moonshot Conference? Click this link to grab ’em and check out our fast-growing list of speakers coming to the conference!
Read MoreSkincare e-commerce startup Uncover raises $1.4 million to expand into Ghana and Uganda
Uncover, a Kenyan marketplace for skin care products, has raised $1.4 million in seed funding. The company will use the fresh capital to expand into the US, Ghana, and Uganda. Launched in 2021 by Sneha Mehta and Jade Oyateru, Uncover uses data provided by users on its app–through quizzes, etc—to create personalized skin care products with top labs in South Korea. The company distributes these skincare products through its e-commerce platform and retail partnerships with pharmaceutical chains like Goodlife and Medplus in Kenya and Nigeria. “The industry has represented only a few skin tones in testing and we are one of the first brands testing on women in Africa. What’s exciting is that we are starting in Africa but seeing global demand and opportunity for our solution,” Sneha Mehta, CEO of Uncover, said. This is Uncover’s third funding round. It raised $100,000 in a 2021 pre-seed round from Antler VC and a $1 million seed round in 2022. In its latest funding round, Uncover provided exits for early investors through a secondary sale, according to its CEO. “Secondary sales were driven by demand. There was more demand than the round size,” Mehta said. The funding round was led by EQ2 Ventures and IgniteXL Ventures, with participation from Chui Ventures, Samata Capital, and Altree Capital. Uncover is playing in Africa’s beauty and personal care market estimated to grow to $83.19 billion by 2028. Skincare products have become an essential part of the daily routine of Africa’s young and fashion-savvy middle-class population, driving demand for these products. The startup claims to have over 200,000 users across Kenya, Nigeria, and the diaspora, and has grown its revenue 10x in the last 24 months since its last funding round. Uncover claimed it broke even in the past year and is on course towards profitability. “We are incredibly impressed with Uncover’s use of data and technology to understand their core customer’s needs,” Claire Chang from IgniteXL Ventures said.
Read MoreRuto asks for prayers as Kenyan protests enter fourth week
After weeks of social media hashtags asking Kenya’s Parliament to scrap a plan to raise taxes failed to convince elected representatives, thousands of Kenyans took their protest offline, arguing that a second tax increase in two years was excessive. The Kenyan government dug in, with Parliament passing the bill on the day of the protest and policemen killing at least 41 people. As the government responded forcefully, citizens became more insistent about their demands. Eventually, the tax proposals were scrapped on June 27, but the protests have continued with demonstrations scheduled for Tuesday and Thursday. It is the longest-running protest in Kenyan history and the key ask is the resignation of Ruto, a hustler popular with young voters just two years ago. The President, who has made significant concessions in the last two weeks, appears genuinely puzzled at how quickly public anger has calcified. On Thursday, he dissolved his cabinet and committed to reducing government overhead. He has also walked back some of his bluster from an ill-advised national address on the night of June 25. Yet it is too little, too late for Kenyans who want justice for the 41 protesters killed. The resignation of Police Chief Japhet Koome has not calmed a public that wants the policemen involved in the killings tried for murder. “Koome has resigned, but it should not end with resignation,” said Philip Kisia, a leadership and governance expert. The entire government, the Kenya Kwanza government, should have tendered its resignation.” At a church service in Nyandarua, a county 170km north of Nairobi, Ruto sounded out of touch with protesters’ demands. “I am fully in charge, I am stronger, I assure Kenyans that I will have a very effective cabinet to serve Kenyans, I will have a government of national unity. Pray for me, my government is committed to moving Kenya forward.” Those words sound hollow to most people because public trust in the government has disappeared. The young people who backed Ruto over Raila Odinga in the 2022 presidential elections phrase it better. “The President is talking about having a new cabinet when people are asking serious questions on accountability. There’s no word on corruption and misuse of public resources, yet they want us to believe that changing a few faces in government will fix this country,” said Chris Obwar, a 19-year-old graphic design student in Nairobi.
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Founders continue to raise debt as funding decline persists, according to the State of Tech in Africa report
Venture capital funding in Africa’s tech ecosystem continues to decline. Founders only raised $779.7 million in H1 2024, the lowest amount since 2020, according to the latest edition of the State of Tech in Africa (SOTIA) report by TechCabal Insights. Over a quarter of this funding was from non-equity raises; debt deals, and grants, meaning founders continue to reserve more ownership of their companies. The decline in equity deals continues despite startups refocusing on becoming profitable and taking cost-cutting measures including layoffs. “There’s no glossing over some of the difficulties the African tech ecosystem has seen in the period under review as layoffs continued and mega deals were nowhere to be found,” the report said. The number of equity deals halved and the value of the investments reduced by 24%, year on year, according to SOTIA. Across about 233 deals closed in the half of the year, founders secured the most funding from debt deals, about $254 million. However, venture deals remain the most common form of funding, and most of it went to early-stage startups. In 16 rounds pre-seed startups raised about $12.9 million. As seed-stage startups raised $66.2 million in 20 rounds. But the most venture deal funding—$155 million— came from only 4 series-B rounds. The least funding came from grants—$12.7 million. In this persistent decline, most of what has remained the same is the destination of the funds. Investors continue to show confidence in the Big Four. Egypt, South Africa, Nigeria, and Kenya accounted for 65% of the funding. However, that may change soon, as Benin and Ghana raised—$50 million and $18.6 million respectively— more funds than Nigeria and South Africa in Q2 2024. More new developments can be seen in the sector investors favoured in H1 2024. Fintech which got $863 million in H1 of 2023 lost its first place to the logistics and transportation sector which raised over $218 million. The fintech sector got $185 million, followed closely by the energy and water industry, which attracted about $132 million. The telecom, media & entertainment industry was most impacted by the funding crunch, raising only 3.5 million, its lowest since 2021, per the report.
Read MoreJumia’s market cap rises past $1 billion as Wall Street renews confidence in the e-commerce company
Jumia’s share price has surged 55% over the last five days suggesting growing investor confidence in the e-commerce company in recent months. Jumia’s share price closed trading at $12.08 on Friday, compared to $8.46 on July 8, lifting its market value to $1.32 billion. The rally represents a significant change in fortune for the Pan-African retailer which has endured a mixed fortunes as a publicly traded company ever since it listed on the New York Stock Exchange in April 2019. Although its share price soared to a record $62.4 in February 2021 during the wild days of the meme stock rally, Jumia has lost over 70% of its market value since then as its board and management team race to make a turnaround. After a string of poor performances and an inability to cut costs, the board fired Jumia’s long-time co-CEOs, Jeremy Hodara and Sacha Poignonnec, in late 2022. Francis Dufay, a former management consultant who served as CEO of Jumia Ivory Coast, was promoted to run the company. Under Dufay’s leadership, Jumia has made drastic restructuring to its business over the last 18 months. The company has laid off 43% of its employees, scaled back its presence in underperforming markets, and shuttered its food delivery business. The new boss has also shrunk Jumia’s management team based in the United Arab Emirates and forced several of them to return to work from its offices on the continent. These changes are starting to make an impact. At the end of Q1 2024, the company, which has never turned a profit, reduced its operating losses by 71%. Also, its revenue grew by 18.5% despite rapid currency devaluation and macroeconomic problems in its key markets, especially Nigeria, which represents more than a third of its annual sales. Meanwhile, its salary and administrative expenses have dropped by 37% compared to the first three months of last year. Wall Street analysts have taken notice, with a few of them recommending Jumia shares to their investors. Jumia’s share price is up 252.3% since the start of the year as the business repositions itself for growth, particularly in North Africa. Jumia is also making less direct sales from its own inventory, with third-party merchants responsible for over 52% of sales on the platform in the first quarter. This shift to third-party sellers, which started a few years ago, is helping to reduce costs while increasing alternative platform revenue. Jumia earned $17.3 million in commissions for merchants for the three months of 2024, a 78% jump from the $9.7 million it earned for the same period last year. But as Jumia rejigs its operation, it will have to contend with new competition from social selling platforms, including Instagram and TikTok which are also doubling down on e-commerce tools. One of the world’s biggest retailers, Amazon is also expanding its footprints in Jumia’s key markets, like Egypt. At the same time, Prosus-backed Takealot is looking to consolidate its hold on South Africa, a major economy where Jumia is still trying to catch up with the incumbents. In an interview with TechCabal last year, Jumia’s Dufay said he wants to stabilize the business before chasing new growth across key markets.
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👨🏿🚀TechCabal Daily – Ruto the Executor
In partnership with Share this newsletter: Lire en Français اقرأ هذا باللغة العربية TGIF Have you got that big brain energy? Put it to the test by signing up for The Big Daily, our newsletter that recaps the most important business, culture, and entertainment news from Nigeria. Every edition lands in your inbox by 7 AM WAT, and each takes just two minutes to read. Convinced? Check it out here. In today’s edition President Ruto overhauls his cabinet Nigeria wants 4,173 BDC operators to rename their businesses South Africa has new rules for telecoms Funding Tracker The World Wide Web3 Job openings Economy Ruto fires cabinet members Kenyan President, William Ruto, may have just earned back some good graces with the people of Kenya after dissolving his entire cabinet on Thursday. Only the deputy president and the prime cabinet secretary remain standing in what appears to be a dramatic response to mounting public pressure. Bureaucrats will now run the government until a new administration is appointed, according to Ruto. This sweeping change comes after Ruto’s promise last Friday, following the #EngageKenyans X space, to “listen to Kenyans” more. This is his first move to assuage the vocal Kenyan populace about their desire for governmental overhaul. No tax, now credit-risky: However, while Ruto may be scoring points with Kenyans, the international financial community is singing a different music. After Ruto’s administration back-pedalled on its plan to increase taxes and duties on consumer goods like bread, diapers, and sanitary pads, credit-rating agency, Moody’s has now rated Kenya a “credit-risky” country for investors, junking their rating from B1 to Caa1. With mounting expenses and debt, a forecast from a government analyst shows that Kenya needs about $26 billion over the next decade to pay off its existing foreign debt. Yet, the country has had to slash its 2024/2025 budget by $1.3 billion—almost half of the $2.7 billion it would have raised from taxes if it hadn’t back-pedalled—and plans to borrow more. While Kenyans are still calling for the resignation of some politicians in government offices, the hard-won victory, at least, is that Kenyans have stood together and overturned a decision that would have meant taxing households that can only afford to spend KES4,131 ($32) monthly. Echoing all over the streets of X is “rais William Ruto akisikiliza”—Swahili for “President William Ruto listens” (blame Google Translate if our Swahili is rusty.) Kenya still has a long way to go; but today, the government listens. Read Moniepoint’s 2024 Informal Economy Report 90% of businesses in Nigeria’s informal economy earn less than N500,000 in monthly profit. Click here to explore the financial profile of Nigeria’s informal economy from Moniepoint’s latest report. Economy Nigeria wants 4,173 BDCs to change their names Nigeria’s business regulator has dropped a bombshell: owners of the 4,173 BDC licences revoked in March 2024, have to rename their business or face dissolution. What happened? The Corporate Affairs Commission (CAC) has issued a 3-month ultimatum to these BDCs to restructure their operations and change their names and objects. In CBN’s revocation circular, it stated that the affected BDCs have failed to either pay the licence renewal fees stipulated in its new guidelines for BDC operators, or haven’t complied with the directives issued in the Anti-Money Laundering, Countering the Financing of Terrorism (CFT) and Counter-Proliferation Financing (CPF) regulations. Zoom in: The CBN issued a directive that all BDCs will now operate as either Tier 1 or Tier 2 BDCs, with Tier 1 BDCs required to pay ₦1,000,000 ($636) and ₦5,000,000 ($3,180) as non-refundable application and licence fees respectively. Tier 2 BDCs would pay ₦250,000 ($159) and ₦2,000,000 ($1,272) for the same purpose. But there is a stark difference between the two: Tier 2 BDCs can’t operate beyond one state in Nigeria, while Tier 1 BDCs are free to franchise their business. Additionally, BDCs are required to maintain a minimum capital base of ₦2 billion ($1,272,280 for Tier 1) and ₦500,000,000 ($318,070 for Tier 2), as opposed to the ₦35 million ($22,265) capital non-tiered BDCs operated with in the past. Naira’s free fall: Since 2022, Nigeria’s currency has fallen by more than 350% against the US Dollar. The country’s apex bank is keen on floating policies and directives that help keep the parallel markets in check, including requiring BDCs to request data on private individuals who sell the equivalent of $10,000 and above to these BDCs. These directives have even led to two raids on BDC operators and arrests of over 100 of them, as the government believes they’re inflating prices and making the naira worse. BDCs remain agitated saying that the CBN capital requirements are huge as they are merely buyers and sellers—not deposit-takers. Issue USD and Euro accounts with Fincra Create and manage USD & Euro accounts from anywhere. Fincra allows you to issue accounts to your users, partners & customers to collect payments without the stress of setting up and operating a local account. Get started today. Regulations South Africa has new rules for telecoms South Africa’s telecom regulator, Icasa, is flexing its muscle against mobile network giants in South Africa. New amendments in the Electronic Communications Act aim to tackle potential market dominance in the mobile retail space. What’s changing? Previously, market leaders MTN and Vodacom, who control the market with 31% and 41% respectively, had to disclose everything—retail prices, data revenue, tariffs—on their websites, and share confidential info with Icasa. Now, they only need to publish non-confidential reports publicly, while still sharing confidential details with Icasa quarterly. This move protects commercially sensitive information. For big players like MTN and Vodacom, while this move means less demanding public disclosures, it also means more scrutiny from Icasa on price differences. For smaller operators, it makes it more difficult to compete and negotiate fair deals if they don’t know what their competitors are offering. Not everyone’s happy. Cell C, a smaller player with 12% of the market share, wanted Icasa to maintain oversight over wholesale pricing for smaller operators (MVNOs) and access points (APNs).
Read MoreWhy Africa’s EdTech sector must focus on job creation
EdTech startups, fueled by venture funding, have emerged as powerful tools, offering innovative alternatives to traditional learning. These companies have harnessed digital platforms to make learning more accessible, offering hope for a brighter future in the African job market. At the Mastercard Foundation EdTech Conference in Abuja, a critical question dominated discussions: how can EdTech prepare students for jobs that may not even exist yet? This concern highlights the true measure of these initiatives’ success. According to the World Bank, Africa produces 10 million graduates annually from 668 universities, yet the continent’s economy can only employ three million graduates annually. Bridging this gap requires building stronger relationships between academia and industry, said Dr. Nkemdilim Iheanachor, an Academic Director at the Lagos Business School, during a panel session on Monday. “On our part, we tried to close the gap between classroom learning and industry requirements.” The true test of EdTech’s success lies in job creation, not access to education. Africa is projected to supply the world’s largest share of future workers by 2100. Upskilling future workers with in-demand and futuristic digital skills will close the digital divide and help Africans compete globally. “The unanswered question is EdTech for what?” asked Tochukwu Ezeukwu, Regional Director, African Venture Philanthropy Alliance (AVPA) on the sidelines of the event. “All of these conversations only end one way—how can Africans get or create jobs.” The future of work has long shifted to more in-demand jobs powered by technology, thanks to a coronavirus pandemic in 2020. This contributed to the 2021 EdTech funding surge of $81 million. A 2021 Workplace Learning Trends Report by Udemy revealed that industries have increased demand for data analysis and data science expertise. While remote learning and skills development in data analysis, AI, and automation showcase EdTech’s potential, further progress is essential. “We need tech skills to transform our continent,” said Hendrina Doroba, a division Manager for Education and Skills Development at the AfDB. “We must begin to assess our preparedness for the future.”
Read MoreThe true cost of convenience: Why you pay more when you order food online
A food delivery app’s pitch to a restaurant sounds like this: we’ll help you find new customers, expand your addressable market without the extra cost of building physical branches, and even throw in some free advertising. In return, we’ll take a percentage of the cost of each order as a commission. While the model is straightforward, the razor-thin margins of restaurant businesses mean the commissions eat into profits. It’s a delicate dance but restaurant owners are now familiar with the steps: pay the commission—which typically ranges from 10-30% per order—and reduce already meager profits or pass on all or part of the commission to customers who order online. “If I charge ₦6,000 for a plate of Abacha, I only get about ₦4,200,” said Kennedy Elobuike, a restaurant owner whose business is listed on Glovo and Chowdeck. Glovo and Chowdeck did not respond to a request for comments. “Giving away nearly one-third of the value of your food can have serious cost implications, and the potential impact has only increased with food inflation.” While Elobuike claims he doesn’t mark up his prices on the platforms, he doesn’t frown at the practice. These markups are a key part of the delivery process, even for big restaurant chains that negotiate lower commission fees—some restaurant chains pay as little as 10%—because of their size and scale. A pot of 8-piece chicken which costs ₦12,800 at a Chicken Republic outlet in Lagos is sold for ₦13,300 on one food app while a ‘maxi’ pot of chicken that’s available for ₦20,900 in-store is listed on another delivery app for ₦22,100. Since restaurant customers don’t want to pay prices that reflect how expensive deliveries are, these markups are a workaround for everyone in the value chain. It’s similar to retailers adding part of the delivery fee to the cost of the item so that customers aren’t discouraged by high service fees. However, this strategy has its critics. “I watched my orders from Jumia Food [dwindle] from over 100 to nothing in 2021 when Glovo came in offering free delivery and later ₦250 [half of what Jumia charged at the time],” said Olamide Olaleye, the founder of ChopNowNow, a restaurant that offered free delivery for five years before it paused operations. “Most of the users this strategy attracts are price sensitive and disloyal, Adjusting the subsidised prices to reflect the true cost of delivery will send many of them shopping where delivery is cheaper. Some restaurant owners stay off delivery apps despite the promise of more customers. “The cost of goat meat has gone so high that sometimes I sell on a ₦20,000 loss,” said one restaurant owner in Lagos who once considered onboarding on one of the delivery apps. “I still have to pay staff and pay rent from my sales. The commission is too expensive for me.” Yet it’s not all gloom. Startups like Mano that charge a flat fee of ₦1,400 have shown that there are customers who are open to paying true prices. “The convenience of delivery is worth it as long as the price difference between delivery and walking in is not excessive,” Pascal* who earns around ₦1 million ($600) monthly told TechCabal. “I think that the days of marking up to offset delivery costs are behind us,” said a ghost kitchen operator who no longer marks up prices. “People who use these platforms are the exact kind of customers we are looking for, and we know we can win them over [to our food delivery platforms] with quality food.” Ultimately, commission fees and restaurants’ margins are a universal concern. While some restaurants treat the commission as marketing costs, others prefer to pass it on to customers. Bolder delivery players will simply charge customers more and keep the clients happy. While it’s a balancing act for everyone in the value chain, the customer wants their food now or ten minutes ago when they placed the order on the app.
Read MoreBreaking: Ruto dissolves his cabinet with immediate effect
President William Ruto has dissolved his cabinet with immediate effect in what will be interpreted as a move to appease protesters who spent two weeks asking for an end to his administration. His plans to raise revenues through tax raises have suffered setbacks even as the Kenyan Revenue Authority missed its tax targets for 2023. “I have decided to dismiss with immediate effect all the cabinet secretaries and the Attorney General of the cabinet of Kenya, except the prime cabinet secretary and cabinet secretary for diaspora affairs. The office of the vice president is not affected in any way,” Ruto said in a televised address on Thursday. On Tuesday, the president reached out to opposition leader Raila Odinga to help quell the tensions that have gripped the country for a month. The current crisis started after the ruling Kenya Kwanza coalition failed to heed calls to reject the controversial 2024 Finance Bill, which was finally withdrawn on June 25 after demonstrators overran parliament. But what started as protests against new taxes on bread, cars, diapers, and sanitary towels, among other items, has now morphed into calls for Ruto to resign, with Kenyans accusing his government of corruption, extra-judicial killings, abductions, and incompetence. Following the withdrawal of the tax bill, Ruto has slashed the 2024/2025 budget by $1.3 billion. This represents almost half of the $2.7 billion extra revenue the Ruto administration had hoped to raise from the new taxes in the scrapped bill. *This is a developing story
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Exclusive: How a six-week freeze on customer onboarding slowed card demand for OPay and Moniepoint
In April, Nigeria’s central bank barred fintechs from onboarding new customers for six weeks. In that period, two of Nigeria’s biggest fintechs—Opay and Moniepoint—slowed card distribution because the demand for cards declined, according to ten point-of-sale agents who spoke to TechCabal. “A lot of people [opening] new accounts also want a card that just makes them feel that (they are) completely financially included,” said an OPay executive who asked not to be named. Since getting a card is a natural extension of the account opening process, a customer onboarding freeze led to a decline in card demand. Opay and Moniepoint responded by reducing the number of cards dispensed to agents—the agency banking sector’s backbone. OPay, which began offering cards in 2021, has distributed about 13 million cards, while Moniepoint has distributed around 4 million cards, one person with knowledge of Verve’s business, a card issuer for both fintechs, told TechCabal in June. Despite this initial explosion, card growth is slowing. It has allowed some fintechs to deprioritise cards, historically an excellent but loss-making customer acquisition strategy. “Moniepoint reduced the pack of cards to only five (from 30),” a card distributor told TechCabal. These distributors move cards across multiple local governments and fulfill requests from an online platform, although most of the demand is generated offline. Nigerian cloud provider hit with ransomware attack as government agency works to “swiftly resolve incident” While other fintechs customers apply for cards through apps, many OPay and Moniepoint customers use banking agents instead, making those agents mini bank branches. Although cards help customers pay online, adoption is slowing. Fintech customers feel comfortable moving around without their cards as transfer speeds improve and businesses increasingly accept bank transfers. “We expected it. We were very aggressive when we launched cards in 2021. Naturally, the pace at which it was growing two years ago is not the same now. It’s the law of diminishing returns,” said an OPay executive about the drop in card demand. A combination of the growing adoption of online transfers and cards reaching maturity as customer growth maintains a steady pace has played a significant part in the drop in card demand.
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