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How tech is disrupting Nigeria’s transport ecosystem – part 2

So, last week I started a “thread” to figure out the evolution of Nigeria’s transportation technology ecosystem.



So, last week I started a “thread” to figure out the evolution of Nigeria’s transportation technology ecosystem. I touched on the ride hailing business, how and why some of them failed, some barely surviving, with others being somewhat successful. I also looked at new entrants into the space.

This week, we’ll take it a step further, starting with bikes and how they are returning to Lagos roads.

I remember a few years ago, it appeared that entrepreneurs in Nigeria were only thinking about e-commerce (just like lending apps are in vogue today, e-commerce was the beautiful bride then… I will write about this sometime later). Entrepreneurs were quick (maybe not so quick) to find out that it was not all rosy. It was not all about building a website. It was not all about writing lines of code, nor all about UI/UX. Building an e-commerce business involved (still involves) lots more.

Entrepreneurs had to solve infrastructure related problems including payment, warehousing, merchant management, customer service and of course reliable logistics. That is where I believe bikes began to return to our roads.

Tunde Kehinde and Ercin Eksin, both former Co-CEOs of Jumia Nigeria, faced this logistics problem first-hand while running Jumia. I am sure they learnt that their business then (Jumia) would not survive without an effective logistics platform. I believe they saw the problem and the opportunity, hence they left Jumia to co-found Africa Courier Express (ACE).

If the CEOs of Jumia could have left to start another business to support Jumia and other e-commerce businesses, it could be because they think that the logistics opportunity is larger than the e-commerce opportunity. Irrespective of what their thinking was, the most important thing is that they found that the opportunity was worth pursuing.

ACE had a value proposition to e-commerce businesses – to handle all their customers’ orders so that the founders of these platforms could focus on the core of their business – selling. For ACE to achieve this, it would require bikes to run these errands for the e-commerce platforms. I remember thinking about this problem then, and how the value flow within the industry would shape up. For ACE, it won’t have to bother too much about revenue collection, since the e-commerce platform guarantees that. However, the e-commerce platform would still have to figure out a way to collect her money from her own customers.

Needless to say that there are tens of these logistics play right now. In addition, the founders of ACE have moved on (again) from that business to co-found another – Lidya (a platform for small & medium business lending in emerging markets).

For a business like ACE, few things to track will be the efficiency of their delivery infrastructure. They have to invest in route optimization and manage downtime. They also have to grow their merchant pipeline. This is true for most B2B businesses. You can’t afford to have dependency risk. If one business contributes 50% of your total revenue, then you can as well be the subsidiary of that business. So your job as the founder will be to widen that partner pool in case you lose one of them.

If I were a founder of a business like ACE, I would run the customer experience bit of the business myself. Guys think about it, another business entrusts its own customers to me! That is a huge responsibility! I can’t afford to mess that up. As far as it depends on me, the customers will have a solid experience with our own dispatch riders and delivery agents. I might not be able to guarantee the quality of products being shipped, but the customer would love our own service.

Another company fueling the return of bikes is MaxGo. MaxGo started as a similar platform just like ACE, with a different twist. Max focused on individuals or businesses sending letters, documents or other packages from one location to another. Businesses typically send packages through their own in-house dispatch riders or drivers. Some also had partnerships with legacy courier companies to pick up letters at a certain time daily or weekly. Max created an on-demand platform where businesses could just order a dispatch rider from their app. I believe the market taught them something different, now they are focused on moving people around using these bikes.

The need is clear. Back in the days, before the ban on okadas, I could board a bike from my house at Ojodu Berger (then) to Victoria Island via Third Mainland Bridge without incident. Even if there was an accident, I would board again the following day. That was the best way we knew to beat Lagos traffic. Through its app, customers can request a bike ride to any location within the city.

Max had not settled in before competition hit. Gokada emerged with exactly the same offer – an on demand bike hailing app. From global trends, Uber and Taxify might be preparing their own entries into that space, like they are doing in other countries. In fact, Uber and Taxify had launched this bike hailing business in Kenya and Uganda. Nigeria will not be too far away. Go Jek (the Indonesian bike power) might also be looking at Nigeria as well.

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This bike business is about to evolve into a street fight. We’ll wait and see.


Like we saw with ride hailing, distribution and pricing are major ingredients for success in this space. By distribution, I mean the ratio of bikes to customers. If I had to wait 30 minutes for the driver to get to me, then there is no point. To solve this distribution problem requires HEAVY capital investment to buy these bikes. Both Max and Gokada will have to figure out the best way to acquire their bikes.

Then they will need to track the payback and profitability on each bike. Imagine I bought a bike for 100k, payback period checks how long the 100k investment is returned by the bike itself. Profitability then checks how much each bike is able to make after deducting the cost of operating the bike. These are metrics that need to be tracked as they both scale.

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They need to know how much each bike will need to make daily and the cost of operating the bike for that day. If that is not profitable, then they might need to check their pricing strategy.

Regarding pricing, Uber and Taxify are bad examples. Taxify entered into the market by undercutting Uber on price. Reducing the per kilometer cost of a trip for the customers, while increasing the drivers’ share of the revenue. Both companies are still loss making.

So, Max and Gokada will have to be deliberate about their pricing strategy. Pricing strategy is typically informed by the overall business strategy. What is the business trying to achieve at this point? Is it to drive customer usage or improve profitability.


Now I need a Part 3. I still need to talk about the heavy industries and market data gathering (Kobo 360, TruckIt, Trade Depot and Delivery Science). I need to write about Staffbus, GidiTraffic (if it has overstayed its welcome), and Lagos Traffic Radio. I need to discuss the response of the incumbents including NIPOST and the likes of God is Good Motors. I don’t think that the car dealership space has changed too much, except of course the used car market that is being redesigned by Cars45. I am not sure Elizade and Coscharis have gotten the memo yet. This car market will change. This is where Corporate Venture capital comes in. I think companies like Elizade and Coscharis should be investing “small change” into these startups. That “might be” (is) the future. Even the car manufacturers themselves are hedging their bets by investing in Uber, Lyft, Didi, Taxify, etc. Some are investing in electric cars, self-driving cars and technology amongst others. Let me not start another post here.

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CBN “Naira 4 Dollar Scheme” Explained

What the CBN’s Naira 4 Dollar scheme means for your money.




In what appears to be an attempt to incentivize dollar remittances by all means possible, the Central Bank of Nigeria (CBN) released a circular to Deposit Money Banks (DMBs), International Money Transfer Operators (IMTO), and the General Public, advising that remittances paid into a bank account will attract an additional credit alert for every USD$1 received!

Yes, you read that correctly. The CBN will facilitate a special additional credit alert of N5 for every USD$1 received. In other words,

  • if someone sends you $10,000, you get an additional special credit alert for N50,000.
  • If someone sends you $100,000, you get an additional special credit alert for N500,000.

Who is eligible?

To be eligible, the diaspora remittances need to be processed and received from one of the registered IMTOs and funds received into a Bank account operated by the DMBs. (So, if you are receiving funds via Crypto sorry you are not eligible).

Additionally, the circular says this “incentive runs from Monday 8th March 2021 to Saturday 8th May 2021″. So, if you have plans to receive dollars, you can plan accordingly.

The circular is not clear how exactly the commercial banks will know which account to pay the extra special credits into. Although, that may be a question diaspora funds recipients will need to ask their DMB accounts officers to clarify for them.

How will this be funded?

The circular notes that the “CBN shall through commercial banks, pay to recipients the N5 incentive for every USD$1”. In other words, it is the CBN funding the cost of this special extra credit.

  • One would argue that given the costs of alternative incentives to attract dollars such as the special OMO window for FPI, this may be a cheaper alternative for the CBN.
  • But we will need to see the volume of expected remittance to be certain of that. Nigeria attracts about $5billion per quarter in remittances and only trails oil in terms of foreign earnings.

Why this matter to Nigerians?

Following the collapse of US Dollar inflows into the country, the CBN initially tried to balance its current account deficits and avoid an official devaluation by tackling FOREX demand (Think ban of 41 items, etc).

Finally, this short-term Naira-4-Dollar scheme will not be called an official Naira Devaluation. But a question is what do we call the new short-term price of N412.50 + N5.00? Maybe we can call it Naira Modulation.


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Nigerian Breweries leveraging, but stacking cash through rising input costs

The marathon continues for Nigerian Breweries with its 2020 financials.



Humanity might need more booze to survive the increasingly daunting intricacies of life, but Nigerian Breweries 2020 financial statement is proof that even the best can get caught up in the reality of changing business lifecycles.

Nigerian Breweries Plc had floored the market providing both alcoholic and non-alcoholic premium quality beverages across the nation. But with brands like Star lager beer launched as far back as 1949, Gulder lager beer launched in 1970, and even the family-friendly Maltina introduced as far back as 1976, it is only natural that both the old and new generation competition gives them a run for their market share.

Much like other old money companies, Nigerian Breweries has done its bit to remain relevant in the industry from creating new variants of existing favoured brands to paying dividends consistently annually for the past few years. Yet within the same period, the company’s financial statements have been a testament to its streamlined market share and reducing profits. The marathon continues with its 2020 financials. The industry giant may as well be setting itself up for a debt quagmire peradventure its projections do not match the true reality of events.

READ: How COVID-19 has changed Nigeria’s consumer goods & industrial markets –KPMG

2020 financials: A tale of higher costs & larger debts

2020’s unfavourable financial/ business environment led to the increase in the prices of raw materials and disruptions in logistics for many Nigerian-domiciled businesses including Nigerian Breweries. Raw materials and consumables witnessed a 17% increase despite the marginal growth in revenue.

While the group’s 2020 results revealed a 4.35% increase in revenue from N323 billion in the prior year to around N337 billion, these gains were curtailed by a higher-than-par increase in cost of sales which had risen by 13.9%, from the N191.8 billion expended in 2019 to N218.4 billion as its 2020 financials reveal and interest rates going way up.

READ: Flour Mills and its diverse challenges

The company’s lower operating expenses were not enough to salvage the disruption caused by the raging interest expense following increased charges paid on bank loans and overdraft facilities as well as the significant increase in overall debt. Between 2019 and 2020 alone, long term loans and borrowings increased by 974% from N4.8 billion to as much as N51.8 billion. Even trade and other long term payables increased by 35%.

In its financials, the company noted that it has revolving credit facilities with five Nigerian banks to finance its working capital. The approved limit of the loan with each of the banks range from ₦6 billion to ₦15 billion (total of ₦66 billion) and each of the agreements had been signed in 2016 with a tenor of five years. The Company had also obtained Capital and Working capital finance from the BoI in 2019.

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

It is no news that the company is involved in diversified lease arrangements. Following reclassifications made in 2019 to some of its lease assets, the 2020 asset base also witnessed significant increase in Right of Use Assets which increased by 288%% from N11.1 billion to N42.9 billion. Yet, the fact that in one year, interest expense on Lease Liabilities rose from N19.7 million in 2019 and to a whopping N4.171 billion shows that the company is taking way more debt than its books require.

But what’s it using all the cash for?

Beyond rising material costs, borrowing costs have been huge and the annual interest payment by virtue of these loans make the possibility of higher profits for the company a mirage. That said, the overall increase in total liabilities might not have been such a bad idea if the funds were being used to increase revenue and profits. But having a huge chunk of all that money in cash creates a different kind of challenge. Cash and bank values in its statement of financial position significantly increased by 377% from N6.4 billion in 2019 to N30.4 billion in 2020.

Is the cash being held to mitigate possible challenges of the volatile economy or are they being used to pay dividends? Even at a share price of N52 per share, the company’s price-to-book value sits at 2.5816, testament of its dire overvaluation. Consequently, there is an ardent need for the company to come up with newer ways to attract the wider market and keep its book in the green with a little less external funding.

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