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These Nigerian Startups may not ‘make it’ to 2019, If….




These Nigerian Startups may not ‘make it’ to 2019, if they don’t change their business model.


This is not a death sentence and we do not categorically believe that these Startups will fail. Please direct any question you might have about this post to @UgoDre. The post is based on public information and might not reflect the current strategy of the businesses being analysed here. That said, let’s get into it.


Last week, I profiled a few Nigerian tech startups which I believe will make a real dent in 2018. Feedback from that article suggests a demand for my opinion on startups which I believe will struggle this year. Like I have always mentioned and will continue to emphasise, a startup is a business, simple! If we are not careful, we will continue with this “startup” thing and never create real value for anybody.

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Like I must have mentioned in previous posts, the Nigerian VC industry is still emerging, so you can’t expect to always have investors’ funds to subsidise operational sustainability. What I am saying is that you can’t continue to raise equity to support operations. If your business cannot pay for its own running, then you might have to check that business again. Trust me, I am in support of raising capital, especially for rapid growth and expansion, but not because you can’t pay salaries or rent.

Wait wait wait! Depending on the stage of your business, you might need to raise equity, but please note that this strategy is not sustainable in the long run. If your business cannot survive without raising money, then you probably don’t have a business.

So today, I will write about startups which I believe will struggle this year, describe their businesses, state why I believe they will struggle and what I think they can do to salvage the situations.


Releaf is a B2B marketplace for agricultural products. It wants to help African businesses prosper by helping them find partners who they can trust. According to the cofounder, Ikenna Nzewi, “the internet hasn’t made finding a trusted business easier. Existing B2B portals are full of fake businesses trying to deceive people. Because of this 419, many businesses don’t trust B2B internet portals. I’ve spoken with tens of agribusiness entrepreneurs and they’ve told me their businesses are struggling to grow because of a lack of trust and reliability with other businesses. They don’t need another portal with thousands of random businesses. They need a shortlist of the ones they can trust. We have created a free solution to this problem.”

Releaf is trying to solve the trust problem which is endemic, but I have fundamental issues with the way they are going about it.

First, the founders do not seem to understand the Nigerian context that well. They are really smart people with degrees from the best universities in the US, but they might lack the local understanding of the industry whose problem they are trying to solve. From what the COO said, he has “spoken to tens (not hundreds) of agribusiness entrepreneurs and they’ve told” him what their challenge is.


That said, I also believe that creating an online portal for the farmer in Taraba is stretching their luck. Haba! The guy who can barely operate his palasa mobile phone will be required to log in to the internet to find trusted buyers? The platform also requires incorporation documents from both the sellers and buyers. This again is a big deal. How many farmers in Bauchi are registered with the CAC? It looks the founders are trying to solve the problems of an American farmer, definitely not a Nigerian one.

If the platform is focused on cash crops like cocoa, with international pricing, then I believe this model can work. This is because the farmers planting these types of crops know that the price of their produce is determined in some commodity exchange, so they have to follow the trend. Creating a trust environment for these types of farmers might be a better approach.

Additionally, looking at the success story of Twiga Foods, they focused on 3 crops and leveraged mobile penetration and M-Pesa not internet penetration and apps. Twiga Foods controls the supply chain; they deal with the farmers directly, while the buyers buy from them.

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Releaf could employ a similar model. Rather than being a marketplace, they can be the sellers of the produce which would be sourced from their own trusted farmers. This is not simplistic as it comes with a lot of logistic hassles, but like Twiga Foods, they can start with maybe 2 crops then expand the portfolio.


This essentially is Uber for auto-rickshaws (Keke Napep). According to Techpoint, Samuel Ajiboyede (Founder), has been a tech enthusiast since childhood and serial entrepreneur whose background speaks volumes about his passion for technology.

In 2009, he quit his job as a director at Robert Johnson — a software and telecom company that provides solutions to banks and telcos — to start a keke transport business. While running this, he proceeded to enhance his knowledge about innovation and global strategy management at Harvard. After his studies in 2016, he founded Workclick, an on-demand service that matches trained worker-partners/professionals and domestic onsite services to customers, which has a presence in San Francisco and Nigeria. What’s more interesting is that he founded Fleet Partners, a fleet management and leasing firm, back in 2012.

He soon realised how much Nigerians have embraced ride-sharing and eHailing. With his intuitive understanding of technology, he quickly figured that it was easy to marry eHailing with an existing love for kekes. The outcome of his conception is Matattu, an on-demand transportation network for hailing tricycles online.

My biggest struggle with this product is that the target users are not clearly defined. If you understand how people use keke right now, you will be able to guess that an on-demand version of it might not work. Let’s take a step back to pre-Uber. Most people who could afford to take taxis always had one taxi guy’s number on speed dial who was called when they needed to get to places urgently. Even if the guy was not around, he could send the number of another guy or you could walk to the nearest taxi park. The point is that the users’ behaviors justified the need for an on-demand taxi app, hence Uber.

Now keke napep. I am not sure how many people have their keke guy’s number on speed dial. Even if they do, regulation will not allow the ride within certain parts of Lagos. The other challenge is that of the target market. Who is Matattu targeting? The people that can afford to hail a ride have options (Uber or Taxify). Why should I hail a ride to the junction?

Now, to the technology. Matattu wants keke drivers to download an app. Really? I love the fact that the CEO has been engaging the association of keke operators, the Lagos State Government, Federal Road Safety Corps, etc. My challenge is that the solution is akin to that of trying to kill a fly with a pistol. We don’t need an app to hail keke. Haba!

I will suggest that Matattu ignores the keke market and focuses on bikes. Trust me, if it is not raining, I might decide to abandon my car and hail a bike just to cross the third mainland bridge. Matattu cannot do that for me right now.


Drivertise is a social enterprise that promotes businesses by pairing them with everyday car users, who use their cars as mediums of advertising, thereby earning extra income. It is an online platform targeted at consumers who are looking to earn extra money by helping brand partners run advertising campaigns on their vehicles.


Great idea, I believe. But the business will struggle simply because of our culture. A car is that machine that moves you from point A to point B, that’s all. So, if you saw my car dirty, I don’t necessarily care once the engine is fine and it won’t breakdown on the road. Unfortunately, I am in the minority. I was shocked to learn that most men see their cars as their girlfriends, babies or their first wives. That is why these people block roads if you hit their cars.

Imagine that you go to such people (who are in the majority anyway) and ask, “How much would you require (per month) to wrap an Indomie advert round your car?” Then you will understand why Drivertise will struggle to make money. This is because the price will be too expensive for the advertiser to pay.

Additionally, Lagos state government will have to sic the Lagos State Signage and Advertising Agency (LASAA) on such cars and the owners will then have to pay the annual LASSA fees, etc.

For this model to work, I think Drivertise should forget about private car owners and target the taxi drivers (yellow taxis) instead. I am sure they won’t mind earning a few extra thousands of naira by just wrapping ads round their cars. In fact, they will do it gladly. Uber and Taxify are making their businesses less attractive, hence the need to diversify income streams.


Others include payment gateways and freelance marketplaces. I believe that the market for payment gateways is too small to make any real impact, and the major merchants are creating their own gateways anyway. Also, remember that most payments in Nigeria happen offline. I would rather you target those ones rather than the web payment thing. Alternatively, you can pursue backward integration by becoming a payment infrastructure provider. However, be aware of who you want to battle against – NIBSS, InterSwitch and Flutterwave. I will just look for another business to do.

Regarding the freelance marketplace, the biggest risk here is that of intermediation. Once the user gets in touch with the professional, that is the end of the platform. It will be difficult to guaranty repeat usage. Why should I come to your platform to hire a new graphics designer when I have the phone number of the guy who worked for me the last time?


My preferred title for this article is “This is not a death sentence” however, @UgoDre knows better. In that spirit, I sincerely wish the entrepreneurs success in their businesses.

Happy Entrepreneuring.


Total Nigeria caught in the oil demand and lockdown saga

In Q1 2020, the company had recorded a revenue drop of 9.3% to N70.2 billion compared to Q1 2019.



Total Nigeria caught in the oil demand and lockdown saga

The year 2020 was supposed to be a good one for the global oil and gas industry. Save for the unprecedented fangs of the Covid-19 pandemic, the IEA had forecasted in February that the global oil demand would grow by 825,000 barrels a day in 2020. On the contrary, lockdown measures restraining travel and other economic activities to contain the pandemic in many parts of the world had global oil demand down around 90,000 barrels a day from 2019. While the upstream sector had a direct hit owing to this reduced demand, the impact of the pandemic on the downstream oil industry caused the price of crude oil to fall significantly in a short period of time. GlobalData had forecasted that the energy sector would face downward earnings revisions of 208% in 2020.

READ MORE: Analysis: Total Nigeria needs a financial overhaul

With the pandemic leading to a slowdown in a wide range of business and personal travel, even gasoline demand had reduced and this has led to inventory challenges in both the distribution network as well as the refineries. In Nigeria, following the challenges of the pandemic, the federal government deregulated the downstream sector of the oil industry through the removal of fuel subsidy. While it presents a level playing field for the downstream oil private sector, it didn’t take long before companies like Total Nigeria plc. started caving into the overall reduction in inventory from the reduced demand for oil products in Q2 2020. Consequently, the company witnessed a 45% reduction in inventories from N33.6 billion as at 31st December 2019 to N18.5 at the end of Q2 2020.

READ ALSO: Nigeria’s Foreign Trade hits N9.18 trillion in Q3, as non-oil export rose by 374.5%

How the exogenous shocks affected an already ailing Total Nigeria

The success or failure of any organization depends on both the macroeconomic environment as well as the operations of the company itself. For Total Nigeria, the timing for the crisis had been off as it too had operational challenges to deal with. In Q1 2020, the company had recorded a revenue drop of 9.3% to N70.2 billion compared to Q1 2019. While the headwinds of the pandemic might have played a small role in the decline at least in the latter part of the quarter, the loss after tax of N163 million it had recorded was 65.6% better than the loss after tax of the  comparative quarter – a testament of the series of operational challenges it had from huge loans to raging expenses. While the company had set off on a strategic trajectory deploying a series of initiatives around cost efficiency, process optimization, as well as a significant reduction of working capital requirement and finance costs, Q2 had its own troubles waiting.

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Restrictions in the oil market had led to weaknesses across product lines. Total revenue fell by as much as 50% from N73 billion in Q2 2019 to N36.5 billion in Q2 2020. Revenues from petroleum products had contracted by 55.7% while lubricant sales also fell by 26.7% in the quarter. Across the company’s core business sectors comprising Networks, General Trade, and Aviation, revenue from aviation experienced the most decline, falling by 83.0%. Its performance can be predominantly attributed to the fall in demand owing to strict lockdown measures even in major Nigerian cities.

READ MORE: Five oil majors reduce value of their assets by $50 billion in Q2


The outcome of the company’s internal and external challenges is a loss after tax of N373.9 million from N604 million in Q2 2019 – an alarming drop of 161.9%. However, its strategic intent is also visible. Net cash balance was a negative N19.6 billion at the end of the quarter, compared to negative N41.8 billion a year ago. Finance costs also declined by 76.1% to N830.3 million as the company sought to reduce its leverage position. In the same vein, borrowings came at N31.0 billion in Q2 2020 as opposed to the N39.9 billion in Q2 2019. Yet, the success of the company in the immediate future is somewhat bleak.

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This is because of the conditions of the oil market and overall economic landscape which is set to take a few years before returning to the norm as well as the financial and operational position of the company. That said, its earnings per share (EPS) of N4.37 and its price-to-earnings ratio of 18.12, reveal that the company has a good potential to make a rebound. However, it could take a few years. Hence, investors must be willing to wait for the long term. With its share price of N79.10 at the far bottom of its 52-week range of N78 and N129.50, it’s a great time to purchase its shares if you are willing to wait the long term.

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Implications of CBN’s latest devaluation and FX unification

This move portends significant implications for Nigeria’s public and private sector.



Implications of CBN's latest devaluation and FX unification, current account deficit, IMF, COVID-19, CBN OMO ban could give stocks a much-needed boost , CBN’s N132.56 billion T-bills auction records oversubscription by 327% , Nigeria pays $1.09 billion to service external debt in 9 months , Implications of the new CBN stance on treasury bill sale to individuals, Digital technology and blockchain altering conventional banking models - Emefiele  , Increasing food prices might erase chances of CBN cutting interest rate   , Customer complaint against excess/unauthorized charges hits 1, 612 - CBN , CBN moves to reduce cassava derivatives import worth $600 million  , Invest in infrastructural development - CBN Governor admonishes investors , Credit to government declines, as Credit to private sector hits N25.8 trillion, CBN sets N10 billion minimum capital for Mortgage firms, CBN sets N10 billion minimum capital for Mortgage firms , Why you should be worried about the latest drop in external reserves, CBN, Alert: CBN issues N847.4 billion treasury bills for Q1 2020 , PMI: Nigeria’s manufacturing sector gains momentum in November, CBN warns high foreign credits could collapse Nigeria’s economy, predicts high poverty, MPC Member, BVN, Fitch, Foreign excchange (Forex), Overnight rates crash after CBN’s N1.4 trillion deduction, Nigeria’s foreign reserves hit $36.57 billion; Emefiele keeps his word on defending the naira, CBN to support maize farmers, projects 12.5 million metric tons in 18 months

The CBN devalued the naira by 5% at the end of last week, adjusting the official exchange rate to N380/$1  in a major move aimed at unifying the multiple exchange rate windows.

Whilst no official confirmation was issued by the apex bank, its website displayed the buying rate of N379/$1 and selling rate of N380/$1. Nigeria is clearly in a new exchange rate territory.

This move portends significant implications for Nigeria’s public and private sectors. Since March when the CBN last depreciated from N307/$1 to N360/$1, there have been calls for further depreciation to at least close the gap between the official CBN rate and the more market-friendly NAFEX exchange rate. The NAFEX rate has traded between N385-390 in recent weeks.

READ MORE: Manufacturing sector in Nigeria and the reality of a “new normal”

Government Finances

For the federal government, devaluing the naira solves two major issues:

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  • Firstly, it increases the amount available to share from the Federal Allocation (FAAC) between the FG and States.
  • Oil proceeds, which is a major source of revenue sharing for the government is deposited at the CBN and then converted to naira using the official exchange rate of N360/$1. The CBN’s latest devaluation suggests more money for the government as the conversion rate is now N379/$1.
  • Government taxes that are priced in forex but converted to naira also stand to gain a major earnings boost.
  • Custom duties, petroleum profit taxes, and other charges will now be converted at an exchange rate of N379/$1 or whatever new rate the CBN chooses, assuming it will work within the NAFEX band.
  • A second issue the solves is the condition precedent towards obtaining a $3 billion world bank loan. The government applied for a world bank loan as part of its N2.3 trillion stimulus expected to be injected into the economy.
  • It is understood that a unification of the exchange rate is critical to the disbursement of the loan.

Whilst these are positives, the government will record cost escalations for some if not all of its capital projects and expenditure. From vehicle purchases to furniture and fittings we should expect a spike except the contracts are fixed-priced.

READ ALSO: Explained: CBN’s powers to seize bank account of criminals

Private Sector

The impact of the latest devaluation will also be significant for the private sector.

  • While the private sector has recorded its own devaluation via the NAFEX and more recently the SMIS window, the impact of the CBN’s latest move will still be felt.
  • Most private pubic partnership projects, contracts are priced using the CBN official exchange rate. The price will now change to N379/$1 at the least.
  • The latest move could also lead to a reopening of forex sale to BDC’s which the CBN suspended in March as the Covid-19 pandemic ensued.
  • Sectors such as Power, Downstream Oil and Gas where the government has control over pricing will be significantly affected by the new price.
  • An example if fuel prices. With the exchange rate devalued again, fuel prices might increase if the impact of the exchange rate is reflected in the pricing template.

READ MORE: Expert simplifies FIRS’ newly-introduced stamp duty

NAFEX versus Official Rate

It is not clear how the latest round of devaluation affects the NAFEX rate and other separate rates currently in use by the CBN. Whilst the disparity has been closed somewhat, we still do not know if these windows will be retained or if we will just have two major exchange rate windows, the BDC and the NAFEX.

Most critics of the CBN’s forex policy prefer a uniform exchange rate that is floating or under a managed float system. The difference is that the CBN intervenes occasionally to ensure the exchange rate trades within its preferred band. It does this even if it means burning through its thin reserves.


We expect a string of circulars in the coming days which will perhaps douse some of the confusion providing needed clarity to the exchange rate situation.

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Why Shoprite is “exiting” Nigeria

Shoprite’s intention to divest from its Nigerian operations appears to be anchored on these factors.



Shoprite, Growth outlook

Africa’s largest retail chain, Shoprite, announced on Monday that it is considering divesting from its Nigerian retail entity, Retail Supermarkets Nigeria, the owners of Shoprite Supermarket Nigeria.

Shoprite Nigeria operates about 26 outlets across the country and employs about 2000 employees who are 99% Nigerians. A divestment means it will sell its holdings to another investor who will continue to run the business.

According to the company, it has taken a decision to leave “following approaches from various potential investors” looking to invest in the Nigerian entity.  The group also said the decision is in line with its “re-evaluation of the Group’s operating model in Nigeria” one of the 15 countries where it currently operates.

Shoprite also confirmed it has initiated a formal process to sell its entire stake in the Nigerian entity or a majority stake.

READ ALSO: Nigeria’s retail outlets risk CBN sanction, debit N50 PoS fee from customers 

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Why the exit?

Shoprite’s explanation of its intention to divest from its Nigerian operations appears to be anchored on its investment expectation and operating environment. However, there could be more to it.

Firstly, Nigeria is a highly competitive space, where retail is the survival of the fittest. Following Shoprite’s foray into Nigeria in 2002, the retail chain disrupted Nigeria’s retail space giving ordinary Nigerians a taste of what it feels to shop with family and friends. But the fairy tale was not going to last forever. Previous retail outlets like Park n Shop rebranded and injected significant funds in their operations and business expansion. Park n Shop rebranded to Spar and has 14 outlets across the country. It only makes sense for them to divest having held on to the Nigerian operations for almost two decades.

Shoprite also competes with homegrown retail outlets especially in Nigeria’s commercial city, Lagos State. Retail outlets like Ebeano, Citydia, and Adiba are now household names that are expanding rapidly across the state. There are also several neighbourhood supermarkets in the nooks and cranny of Nigeria’s commercial capital piling pressure on Shoprite’s market share. Shoprite does not disclose revenues from its Nigerian operations.

Shopping is also going online as evidenced by the growth in online shopping since COVID-19 hit Nigeria. Jumia, one of Nigeria’s largest online retail outlets, revealed lower earnings in the first quarter of 2020. However, the company is optimistic of higher revenue growth in Q2, on the back of the COVID-19 lockdowns. Jumia had earlier noted that “we are seeing unprecedented demand to join the Jumia platform, especially for named brands. We believe those dynamics will help accelerate the shift toward online.”

READ MORE: The deal that helped Lafarge stock gain 18% in less than a week

Local competitors like Spar and Ebeano already offer online shopping experiences and deliver goods to your doorstep. Shoprite’s business model relies heavily on physical store visits.


As internet services become faster and cheaper, more Nigerians will rely on e-commerce to meet their shopping needs. Jumia has often struggled in this space and remains unprofitable. However, gravitation towards online shopping is inevitable and only those who have the capital and know-how will come out winners.

Jumia’s competitor in this space, Konga, was also recently acquired by Zinnox. Konga was then merged with another Nigerian retail giant Yudula. Interestingly, Konga’s model includes a combination of online and brick and mortar. The company has since been acquiring warehouses across the country as delivery points for its retail expansion drive.

Nigeria’s harsh operating environment is also another major challenge Shoprite faces. The Muhammadu Buhari-led administration, through the CBN, has focused on supporting locally made goods by banning forex availability for the importation of local substitutes. This has negatively impacted the number of products Shoprite can sell and how many new shelves it can create per floor space. It also creates supply chain challenges, especially with locally produced goods.

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Note that supermarkets sell on very thin margins. Therefore, the more products they can sell the higher the operating profits. Taxes are also higher and Nigeria’s susceptibility to exchange rate devaluation is also a major challenge. The company makes money in Naira and must convert to dollars before converting back to Rands.

READ MORE: Exploring branchless, other digital forms of banking in a crisis

In 2017, when Nigeria last faced a currency crisis, Shoprite explained that it has about Rand 2.3 billion in cash locked up in Angola and Nigeria due to currency restrictions (inability to repatriate their money on time). Information reaching Nairametrics from traders suggest most foreign-owned investments in Nigeria are also facing “restrictions” due to limited liquidity in the NAFEX window.

Shoprite’s less talked challenge is its Legal Issues. In 2011, Nigerian company A.I.C Limited (the Claimant), which is owned by Chief Henry Akande, issued a summons against Shoprite South Africa and its Nigerian subsidiary for an alleged breach of a joint venture agreement (the JV Agreement) allegedly concluded in 1998. The company took Shoprite to court claiming it breached on an agreement to set up the Nigerian arm of the business.

The Federal High Court then ruled in favour of AIC and awarded damages of $10 million against Shoprite in 2017. Shoprite appealed the judgment in the appeal court and lost again earlier in 2020. It is unclear if Shoprite has any plans to take the matter up to the Supreme Court. Could this be another reason why the owners are deciding to divest?

Whatever the reason is, officially, it perhaps makes sense for the company to exit its Nigerian operations in the light of the points mentioned above. Its Nigerian entity is worth 1.1 billion Rands (N24 billion) per its financial statements and could be worth more when the sale is eventually consummated.

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