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Why Nigeria’s tech ecosystem shouldn’t be built exclusively with foreign capital

Funding this digital evolution shouldn’t be with foreign capital alone.



Digital System

I was privileged last week to join the closing gong event for at the Nigerian Stock Exchange yesterday and to give a speech addressing the stakeholders of the Exchange. While we celebrate the inflow of foreign capital into local technology businesses, it is critical to consider both the long-term and short-term impact of this capital inflow.

Joining the Honourees to sound the closing gong ending Trading for the day 31st August 2018.

Joining the Honourees to sound the closing gong ending Trading for the day 31st August 2018.

In the short-term, there is the supply of capital and the badly needed expertise/non-financial support for technology businesses to thrive. This is critical especially in a market with poor infrastructure and a number challenges facing these businesses. Strategic counsel and expertise that comes with foreign capital are vital and necessary for the development of the local ecosystem.

The potential of Nigeria’s Digital Economy

Nigeria is Africa’s largest digital market and the 8th largest country in the world regarding internet users. More internet users than the UK, South Africa, Egypt, Portugal, Spain and Italy, obviously due to mobile penetration and the country’s population.

Nigeria is 8th largest Internet Country (by the number of Internet users) in the world

Nigeria is 8th largest Internet Country (by the number of Internet users) in the world.

This is both good and bad news. The good news is the size of the population/market with access to the internet while the bad is millions of unskilled/semi-skilled internet users with abysmally low purchasing power. Nigeria was recently crowned country with the world’s poorest overtaking India.

What does this mean? It’s simple when you look at the literacy & unemployment rate and the average age of our population; millions of poor uneducated people with access to mobile internet from Nigeria will be potential nuisance to a connected world…..this is a Medium publication for another day.

Let’s look at how the Nigerian digital economy is evolving.

Digital Economy

Digital Economy

From the above chart, Nigeria straddles Break out (Countries held back by infrastructure deficit though with huge potential to join the Standouts) and Watch out (Countries facing significant digitisation challenges). Nigeria has vast digital possibilities and with the right policies and infrastructure, the balance could tilt significantly raising millions out of poverty while moving Nigeria to the standout league.

The size of our digital economy or knowledge economy is enormous and potentially could be twice its current size within the next decade. The Nigerian economy of the future (a knowledge economy) should not be built with foreign capital alone; there must be a healthy mix of local and international capital.

Foreign Capital is building the Nigerian Tech Ecosystem

Let’s look at the news headlines over the last seven days.

Last Tuesday, Paystack raised $8m from some investors including Stripe and Visa, on Thursday UK Government announced 70 million pounds fund for tech and innovative start-ups in Nigeria during Theresa May’s visit. Yesterday our president signed a $328m facility for ICT development from the Chinese EXIM Bank. Funding this digital evolution shouldn’t be with foreign capital alone, there is a need for a hybrid of local capital from private investors, crowdfunding sources, local banks, government grants and foreign capital. The much bigger technology companies could get listed on the stock exchange reflecting the maturity of the industry and strengthening investors confidence.

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While I do celebrate the good news received these past seven days, my favourite being Paystack (for obvious reasons), I cannot get past the fact that in one week over $406m in capital pledge is going into the technology sector from foreign sources.


Downside of building Tech Ecosystem exclusively from external capital

Is there any potential downside to this?

Of course.

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The downside in building the ecosystem with foreign capital exclusively will be visible in the long term. A knowledge economy wholly owned by foreign companies/stakeholders. Our intellectual capital, proprietary assets, data will be domiciled offshore, solutions to local problems will be owned and controlled by foreign companies. Tax on revenue made in country will be paid to foreign governments while profit will be repatriated offshore. Whoever owns technology determines who has access and how the politics of the technology could evolve.

Whenever there is a change in technology usage by the society (which happens from time to time), there is a resultant impact on local politics and culture. With allegations that Russia relied on technology to influence social and political changes in Europe and the United State still being investigated, it is critical to have these considerations today.

Technology is powerful and has much more impact on a people and society than a lot of us can envisage. Whoever wields its power (inventors, shareholders and technology owners) are pivotal to the socio-political placidity of the society.

This is why as a people, we must think, deliberate and work towards our technology autonomy, our technology future and have an understanding of the status quo what my friend Nkemdilim Begho refers to as digital colonisation.

If the ecosystem is funded wholly by foreign capital, local investors will miss a great opportunity to sit on the table of the future economy. Interesting how Warren Buffet a seasoned investor admitted missing tech opportunities years ago because he didn’t understand the tech business model. Businesses need capital from any source so I will encourage wealthy individuals and organisations within the country to invest time and resources in building the local tech ecosystem.

It is one of the reasons I accepted to co-found Greentree to provide support for early technology businesses to thrive.

Nigerian Stock Exchange NSE is a viable option for the Tech ecosystem

The local bourse, the Nigerian Stock Exchange has taken some steps to encourage listing for smaller businesses. From my initial conversation and listening to the CEO of the Exchange Mr Oscar Onyeama last week, I learnt this is of great interest to the exchange and some steps have been taken creating possibilities for technology businesses to get listed.

An example of this is the Alternative Security Exchange and the requirements can be found here. A number of technology companies looking for capital have met these requirements.

Budding tech companies should aspire to list someday and there are a number of benefits of listing.

With the CEO of Nigerian Stock Exchange Mr. Oscar Onyeama

With the CEO of Nigerian Stock Exchange Mr. Oscar Onyeama

Let me try to break this down. It is important to note there are minimum requirements for listing. The benefits are:

  1. Access to Capital. This is critical especially in our market and being able to access capital unlocks the potential for your tech company. Do also note by listing your company more capital inflow from local and international investors is available creating value for your business and existing shareholders.
  2. Better transparency and Business Integrity. Due to the strict governance compliance requirements, your business becomes more transparent and sustainable de-risking the company further and ensuring longevity. The corporate governance framework is critical for long term growth of a business.
  3. Risk of Ownership is spread creating more value for the shareholders while eliminating key man risk which is a common problem in the local ecosystem.
  4. With more tech companies listing, more venture capital or early stage deals will be encouraged as there are potential for exit.
  5. Listing incentivises employees while motivating and improving value for employees stock options.

Technology service and product companies like MTN, Interswitch, MainOne, Jumia, Iroko, (great to see possibilities here), Piggybank, Wild Fusion, Andela, Farmcrowdy, Paystack, Anakle, Afritickets to mention a few could consider listing when they are ready to raise capital. Hopefully someday, creating opportunities for local and international investors.

El Dorado will be a tech ecosystem built by international and local investors in a sustainable manner creating a win-win scenario for all parties alike.

Abaiama is CEO & Founder Wild Fusion Group, Director & Co-Founder Greentree Investment Fund (Tech-focus VC) and a firm believer in the rise of Africa.

Nairametrics frequently publishes articles from experts such as financial analysts, economists, researchers and investors. We also feature articles from guest writers and bloggers who wish to push their views and opinions through our platform.To get your articles on Nairametrics, kindly send an email to [email protected] and we will publish it within 24 hours of approval by our editorial team.

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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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Secret behind MTN’s blistering performance

Despite COVID-19 disruptions, MTN Nigeria’s 2020 financials showed marked improvements compared to its 2019-year-end.



NCC, MTN’s parent company faults regulator’s recommendation for data price reduction, MTN Nigeria reacts to poor internet as network issues go beyond Nigeria 

MTN Nigeria Communications Plc (MTN Nigeria) released its audited financial results for the financial year ended December 31, 2020.

Despite a challenging 2020 to individuals and businesses caused by COVID-19 disruptions, MTN Nigeria’s financial and non-financial information showed marked improvements compared to its 2019-year-end as well as prior quarters of 2020 results that were impacted by the COVID-19 pandemic.

Indeed, the evolving pandemic which intensified lockdown, remote working, and work-from-home procedures, appeared to have led to increased adoption of MTN Nigeria data and digital services.

Specifically, year-on-year on non-financial information, mobile subscribers increased by 12.2 million to 76.5 million; active data users increased by 7.4 million to 32,6 million while the company’s mobile money business continued to accelerate with a 269.2 % increase in the number of registered agents to over 395,000 and 4.7 million active subscribers from approximately 553,000 in 2019.

Year-on-year on financial information, service revenue increased by 14.7 % to NGN1.3 trillion driven principally by voice (with revenue growth of 5.9 %) and data revenues (rising by 52.2 % led by increased data use and traffic); profit before tax (PBT) grew by 2.6 % to N298.9 billion; profit after tax (PAT) increased by 0.9 % to N205.21 billion; while Earnings per share (EPS) rose by 0.9 % to N10.1 (N9.93, 2019).

Nonetheless, significant increases were noted in its operating expenditure as well as capital expenditure. First, there was a 2.3 % increase in operating expenses arising from the rollout of new sites and the impact of naira currency depreciation affecting the costs of MTN Nigeria lease contracts. Secondly, EBITDA margin declined by 2.5 %age points to 50.9 % (from 53.4 % in 2019) There were also other significant cost rises including a 25.4 % increase in net finance cost, and 19.4 % increase in capital expenditure which had a 11.7 % knock-on increase in depreciation and amortization costs.

On the back of the year-end result, MTN Nigeria has proposed a final dividend per share (DPS) of N5.90 kobo per share to be paid out of distributable income and brings the total dividend for the year to N9.40 kobo per share, representing an increase of 18.7 %. MTN Nigeria paid N4.97 as final dividend for the year ended December 31, 2019. This was in addition to an interim dividend of N2.95, which brought its total 2019 dividend to N7.92 per share.

The proposed dividend implies a yield of 3.4%. Having paid an interim dividend of NGN3.50 in 2020, the proposed dividend, if approved, will bring the total dividend per share to NGN9.40 or c.19% higher compared with 2019.  We expect a positive reaction from the market due to the marked improvement in earnings. However, the market’s reaction may be dampened by negative investor sentiments on equities arising from the uptick in yields on fixed-income securities.

We expect that the introduction of additional customer registration requirements requiring subscriber records are updated with respective National Identity Numbers (NIN), and the continued suspension of the sale and activation of new SIM cards will affect subscriber growth.

MTNN share price remains unchanged at the end of trading yesterday at N174 per share.


Tade Fadare PhD, is an economist, and a professionally qualified accountant, banker and stockbroker. He has significant experience working or consulting for financial institutions in Europe, North America, and Africa.

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