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Five quick loan fintechs that banks should be worried about 

Thanks to fintechs, Olumide can now easily access a quick loan whenever he needs one, without having to stake the whole world as collateral

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Quick Loan

Since the introduction of financial technology (fintech) firms to the Nigerian financial services ecosystem, the story has never been the same. These companies came with a special kind of innovation that has broken down many barriers and made a lot of things possible  specifically, financial inclusion. Thanks to these innovative companies, Olumide, who lives and works in Lagos, can now easily send money across to his unbanked mother in Alawaye villageEkiti. In the same vein, he can also easily access a quick loan whenever he needs one, without having to stake the whole world as collateral.  

The Fintechs versus banks narrative 

Indeed, fintechs have been phenomenal so far. However, the stiff competition they brought along hacaused discomfort for some of the original players in the spacealbeit to the benefit of customers.  

While some banks have been swift in responding to the “threat” posed by fintechs, the truth remains that these companies remain a source of threat. If not for anything, they keep attracting new customers every now and thencustomers who would normally go to traditional banking halls to transact business. It is in light of this that Nairametrics has decided to highlight some of the fintechs, which banks should be wary of. 

The basis for the ranking 

Before we proceed with this, it is important to note that we used a number of parameters in our analysis. These include: 

  1. Ease of registration 
  2. Conditions of loan 
  3. Cost of loan 
  4. Innovation 
  5. Customer experience 
  6. Advertising/marketing 
  7. Presence on social media 

[READ: This is what OPay’s N10 food looks like]

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It should be noted that each of the five loan platforms featured here are striving, in their various capacities, to use innovation to change the lending game. The conditions of loan are relatively considerate and the same can be said for the cost of loan. Comparatively, customer experience is fair, even as these companies are continuously using adverts to endear themselves to existing and new customers. They also use social media platforms to target their customers, seeing as the majority of their customers in the younger demographic are there.   

Loan

  1. Kwik Money 

This is one of the best quick loan companies in Nigeria, and there are reasons to support this. Importantly, it is quite easy to access loans from Kwik Money. You do not even need to present documentation or collateral. Instead, all you need is your phone number which, by the way, must be connected to your bank account.  

Kwik Money has a special innovation which can access and rate your credit score by simply using the phone number you provide upon registration. How it works is that the fintech’s automated system will access your financial records and use that to calculate how much you are eligible to borrow. You could be eligible to borrow anything between N500 and N500,000.  

[READ: How to know when your debts have gone overboard]

In terms of the cost of loan, you will be required to pay back at an interest rate of 15% for a duration of 14 days, and 25% for a duration of thirty days. The interest rates are within the range collected by many other fintech loan platforms.  

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Kwik Money is relatively active on social media, though it could do more to increase the number of its followers, especially on Twitter and Facebook. The company can also put in more effort in terms of advertising and marketing in order to reach more customers. 

Meanwhile, there have been concerns about privacy when using the Kwik Money platform. Customers interviewed in the course of compiling this report complained that the fact that vital customer information can be accessed through their phone numbers is rather problematic. One customer even recalled how his mother and a friend were contacted to help forewarn him to refund his loan. This is an issue for the customers because, as another customer noted, “what if I didn’t want my family and friends to know that I am borrowing money from Kwik money? The fact that they could even contact those people without my knowledge is an issue. 

2. Carbon (formerly Paylater) 

Carbon is yet another quick loan fintech that is arguably giving banks headache. Much like Kwik Money, you could become eligible to borrow between N10,000 and N500,000. To access loans via this platform, you will be required to download the Carbon app and register. The platform caters to everyone: from students, to salary earners and business owners.  

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Carbon’s cost of loan is probably the best when compared to the other platforms herein ranked. This is because, the more money you borrow, the less interest rate you will be required to pay the company. However, before you can borrow a lot of money from Carbon, you must have successfully passed through various stages. 

[READ: If this doesn’t encourage you to start investing today, nothing ever will]

According to the Carbon ladder, the starting point for any borrower is N10,000. This loan is for the duration of 15-30 days at an interest rate of 10%. You will then remain on this stage until you’ve successfully repaid your loans nine times, after which you become eligible to borrow N50,000 at an interest rate of 5%. This is for a duration of 1-3 months. The next stage will accord you the opportunity to borrow N100,000 at 4% interest rate, also, for a period of 1-3 months. However, before you can borrow N500,000 for a duration of 3-6 months at 2%, you will be required to present a list of documents including your letter of employment, a valid ID card, your bank statement, and more.  

Fintechs

3. Zedvance 

Zedvance offers assorted loan packages to salary earners, and business owners. If information available on their website is anything to go by, customers can borrow as much as N5million upon registration. Registration requires downloading the Zedvance app from Google Play. The company is present in three other major Nigerian cities besides Lagos – Abuja, Ibadan, and Port Harcourt. 

This company’s cost of loan is fixed at a 5.4665% interest rate per any amount you borrow. This makes it one of the most reasonable and attractive interest rates currently being offered by a Nigerian loan fintech.  

In terms of marketing/publicity, Zedvance is doing a considerably good job to endear itself to existing and potential customers. It has nearly three thousand followers on Twitter whom it regularly engages, with marketing contents. 

4. Renmoney 

Renmoney is one of the most popular and innovative loan fintechs in Nigeria today, though its terms of engagement may not be best out there. The company says that customers can get loans of up to N4 million for a duration of 12 months at an interest rate of 33.9%. Meanwhile, the company has a policy of collecting what it calls “management fees” of N35,700 which is collected alongside the interest. This does not sit well with some customers. 

5. Aella Credit 

Much like the process for the other fintechs mentioned above, accessing loan from Aella Credit is reasonably easy. There are four basic steps – download the app, register, fill out an application, and receive your money. Based on their assessment, you could be qualified to receive N1,500 to N90,000 for a duration of one to two months. The interest rate varies from 4% to 29%, depending on the company’s metrics.  

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[READ: See the top ten Nigerian adverts in H1 2019]

In conclusion, it is important to mention that banks are already upping their games in the area of quick loans to customers. The activities of these fintechs have been a wake-up call for them to do better. Consequently, the likes of Guaranty Trust Bank Plc and Sterling Bank Plc are making considerable effort by offering reduced interest rates and efficient services. 

Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs. He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor. Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan. If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

3 Comments

3 Comments

  1. AHMED O ODUFUWA

    September 6, 2019 at 10:40 am

    Hi,
    nice piece

  2. Waheed Bello

    September 6, 2019 at 1:43 pm

    Nice work from Emmanuel. Please can you also do a similar expose on saving and fixed deposit rates and terms of the fintech companies.

  3. Divine Obeagu

    September 12, 2019 at 5:45 pm

    Good content.
    Have you got the chance to check out Page Financials?
    They have great service delivery in this space too, I am sure they are worthy of mention.

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Blurb

Julius Berger’s rebound contingent on full economic bounce back

Julius Berger’s construction portfolio includes infrastructure, industry, building, and facility services solutions.

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Expatriates

Due to the COVID-19 pandemic as well as the economic impact of the measures put in place to slow the spread of it, many industries have experienced slower growth. The construction industry was not left out. According to reports by GlobalData, the construction output growth forecast for Sub-Saharan Africa (SSA) has been revised to 2.3%, down from the previous projection of 3.3% (as of mid-April) and 6.0% in the pre-COVID-19 case (Q4 2019 update).

The reason for the contraction was noted by GlobalData to be as a result of the global slowdown and the outbreak of COVID-19 in the region. Other factors responsible include economic headwinds such as inflation, spending cuts, widening fiscal slippages, suspension of certain projects and more that could disrupt the construction sector. This contraction is projected to be 4.3% in South and Southeast Asia while France is expected to shrink by 9.4% in 2020.

Leading Construction Company, Julius Berger, had foreseen the contraction in the industry and commenced efforts to mitigate its impact and cushion the blow. One of such efforts was the reduction in dividend pay-out. After initially announcing a dividend pay-out of N2.75K per 50K share for the financial year ended December 31, 2019 and a bonus of 1 (one) new share for every existing 5 (five) shares held, the company eventually recommended a final cash dividend pay-out of N2.00K per 50k share.

READ ALSO: Lafarge Africa is cutting it all out

It noted that the Group had “carefully considered the emerging social, operational, financial and economic impact of the COVID 19 pandemic, the outlook for Nigeria for the financial year 2020, and the impact on the business and cash flows of the Group.”

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The company’s fears have been confirmed by its recent financials which, among other negatives, showed huge foreign exchange losses of N3.102 billion in the first half of 2020.

Q2 was the hardest

Julius Berger’s construction portfolio includes infrastructure, industry, building, and facility services solutions. With companies and nations alike revising scheduled capital expenses as a result of the shrinkages in product demand (owing to global quarantine measures), uncertainties around supply logistics as well as supply of materials, the company had gotten hit. Q1 had its own issues, but Q2 birthed a new dimension of challenges for the company.

Revenue was down 33% from N68.9 billion in Q2 2019 to N46.1 billion in 2020. There was also a huge loss in profit after tax of around 200% from a profit of N2.3 billion in Q2 2019 to a loss of N2.3 billion and this can be attributed to lower revenue, and increased losses from the company’s many investments.

Exchange difference on translation of foreign operations for the quarter alone increased by 227% to N1.4 billion in Q2 2020 from N438.5 million in the comparative quarter.

READ ALSO: Petrol importation drops by 512 million litres in 3 months

Outlook for the company and for investors

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The disruptions the construction industry is currently experiencing is expected to continue for the medium-long term. Reports by Beroe Inc., a procurement intelligence firm, reveal major concerns that companies in the industry will witness profits being hurt and may even incur losses on a number of projects.

Companies having worldwide supply chains could see tier 2 and tier 3 suppliers highly affected by disruptions related to the pandemic. Worse off, it explains that construction materials like “steel, wood, plaster, aluminum, glazed partition systems, cement and cementitious products, paints, HVAC equipment, electrical equipment, and light fixtures from China are expected to be delayed.”

For the company, cost-cutting has never been more important. While there are a series of strategies it could explore to augment the challenges, its growth right now depends largely on the speed of global economic recovery. This is because both the company’s input needs as well as its output in terms of the recommencement of projects, depends on the speed with which business as usual commences and the amount of time it takes for the industry to find a new balance for its operations.

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READ MORE: The “new normal” in business and economy

For investors, however, this presents a long term opportunity. Julius Berger currently trades at N15.05, falling 44.26% just within the last 3 months. The share price is also on the downside of its 52-week range (N14.42 and 22.92) and its price-to-book ratio of 0.6331 shows that the stock is undervalued.

While the company’s EPS is currently low at N2.52, investors who are willing to wait the time could find a gem in the stock particularly with the increased infrastructural needs born out of the population expansion which is taking place in many parts of the world in the years to come.

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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.

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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

Outlook

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.

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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.

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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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