On 9 January, we published a report on the fintech industry. In the report, we analysed how technology is disrupting the global financial services industry including Nigeria. Although a cash-based economy, Nigeria’s financial system has been receptive to the new transformations in the financial system, especially the introduction of technology.
Globally, the fintech market is driven primarily by electronic payments following the increasing use of smartphones. Beyond payments, fintech firms are expanding swiftly into providing key financial services, including lending, savings, insurance, banking, and wealth management.
Nigeria’s fintech landscape consists of 210-250 fintech companies, key stakeholders (banks, telecom companies, and the government), enablers and funding partners (i.e., universities and research institutions, investors, incubators, technology, and consumers).
According to Frost and Sullivan, Nigeria’s fintech revenue is expected to reach US$543.3 million in 2022 from US$153.1 million in 2017.
Nigeria’s fintech industry continues to evolve on the back of technological advancement and demographic support as 50% of the population is expected to be less than 25 years of age by the end of 2020. Besides, the prevailing financial exclusion has resulted in low access to complex financial products for the masses.
For instance, insurance penetration in Nigeria is estimated at a mere 0.3%. In Nigeria, transactions are increasingly shifting towards mobile with the growing popularity of mobile technology among the population, especially the unbanked.
[READ MORE: Events that shaped FinTech industry in 2019)
The number of mobile money transactions increased c.14x to 217.8 million as at 9M 2019 from 15.9 million in 2013. Nigeria’s expanding fintech space should be further supported by Nigeria’s remittance market, one of the leading remittance markets in Africa due to the blossoming diaspora in the US, UK, Canada and Europe.
Nigeria’s significantly under-tapped digital payments industry is poised for significant growth over the next 5 years. A myriad of factors across industry fundamentals, positive country demographics and regulatory support have formed the base of expected accelerated growth for the fintech industry in Nigeria.
This expectation has received significant attention from investors which has led to significant investments as existing players look to position for future growth.
Nigeria’s fintech industry saw funding rounds from various global investors in 2019, with Interswitch, a payment platform infrastructure service obtaining equity funds worth US$200 million from Visa and Branch receiving funds of US$170 million from foundation capital and Visa. Overall, Application Program Interface (API) technology-enabled fintech companies control the funding scenario, reflecting investor confidence in the technology.
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IMF revised growth projection: a tale of vaccinated optimism
In Q4 2020, the economy surprisingly escaped recession evidenced by the 0.11% y/y rise in GDP.
Yesterday, the International Monetary Fund (IMF) revised its Nigerian growth projection for FY 2021 from 1.5% to 2.5% in its World Economic Outlook.
According to the IMF, the improved optimism stems from the expectation that available vaccines would continue to quell the diverse mutations of the coronavirus, which had surfaced in different strains recently. The IMF also cited the effectiveness of policy supports in the short to medium term.
Recall that the Nigerian economy closed FY 2020 in the negative (-1.8% y/y), having suffered consecutive growth contraction in Q2 and Q3 2020, leading to the economic recession. Worthy of note is that in Q4 2020, the economy surprisingly escaped recession evidenced by the 0.11% y/y rise in Gross Domestic Product (GDP) following the relaxation of the lockdown measures starting in July 2020.
The recent adjustment of the IMF’s forecast is hinged on some expectations. One, the OPEC+ alliances will continue to manage crude oil supply. Hence, more activities in the Nigerian oil sector which constituted an average of 8.52% of the total GDP in the last two years. Secondly, the coronavirus curve will continue to flatten amid the mass deployment of vaccines, while the stop-gap measures adopted at the heat of the virus would continue to spur economic activities toward the pre-pandemic levels thus fuelling the necessary recovery.
Whilst we note that the forecast is achievable going by the current macro-economic clime amid the low base from the dip in FY2020, there are some downside concerns. For instance, the continued spate of insecurity does not bode well for the agricultural sector (which contributed 25.54% to GDP in the past two years).
The ongoing NIN-SIM integration portends the likelihood of stiffening the performance of the telecommunication sector (one of the key drivers of the recovery in Q4 2020) if not quickly nipped.
Reiterating our positions on the need to optimize the economy further, the government needs to bridge the existing infrastructure deficit, diversify its source of foreign exchange receipt, eliminate bureaucracies that stifle businesses, and promote measured economic liberality that suits the nation.
CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.
Did OPEC+ April fool the oil market?
OPEC+ understands the sensitivity of the oil markets, so it prepares accordingly.
Before the April 1st meeting of OPEC members, the consensus was that OPEC+ would roll over cuts. This was clearly because last month’s rollover was the right decision, as Saudi Arabia said the group’s cautious approach had brought dividends.
When the market corrected last month, limited supply gave prices the support it needed. In an event where production cuts were eased last month, oil prices would have declined further than what we witnessed.
However, the group decided to increase output albeit gradually. The increase in output is an optimistic decision that there will be an increase in demand. The demand recovery will begin this summer as vaccines would have been rolled out and accelerated. More people will travel as economies begin to open, hence a return to jet fuel. The decision is clearly a U-turn on their cautious strategy in recent months.
Oil prices follow an “up the stairs,” “down like an elevator” movement. Understandably, OPEC+ understands the sensitivity of the oil markets, so it prepares accordingly. The JMMC technical meetings that precede OPEC policy meetings highlights how much the decision-making process entails. This month, there were no policy recommendations — the first joker card played.
So on Thursday, the 1st of April, when discussions on easing cuts were debated, it appeared as a surprise. The demand for more oil was much lower than it had been before the March meeting.
Nigeria supported a rollover of the cuts. However, there have been question marks on the country’s conformity and honouring its compensation plan, just like Iraq and Kazakhstan—both oil-producing nations who have also submitted their compensation cuts.
The importance of conformity and compensation plans cannot be overstressed, especially as OPEC+’s excess oil production rose to 3 million bpd as reported last week. The extension of the compensation plan till the end of September, which was recommended by JMMC, is to protect the interests of the group.
In addition, the oil ministers of Angola and Oman supported a rollover. The rollover discussed was for the month of May. During the meetings, traders were curious about updates on Saudi’s 1 million voluntary cut and if Russia would ask for another exemption.
During the meeting, Algeria’s minister suggested a two-month rollover which was different from the one-month rollover, plus gradual easing of cuts that the United Arab Emirates supported. Bahrain and Brunei supported a rollover. Kuwait as well. At that point, Saudi Arabia noted the oil ministers who were in agreement with either a one-month rollover or two-month rollover.
Notably, Saudi Arabia’s minister pointed out that as summer approached, there was avenue for domestic demand to rise and the need to gradually increase output in the second half of the year. It was on this premise that sources revealed that Saudi Arabia might ease their voluntary one million cut by May.
According to sources, Saudi proposed: May 350k OPEC+ ease and 250k KSA, June 350k OPEC+ ease and 250k KSA, and July the remainder to reach 5.6m barrels.
Russia agreed with Saudi’s proposal (a very cordial relationship developing between both nations). At this point, it appeared that the group was in support of a gradual increase in output.
Saudi Arabia emphasised the compliance aspect again, as it appeared that some countries were taking advantage of other countries’ cuts.
The group finally reached a consensus on a gradual increase for a 3-month period—the last joker that gave oil traders the poker face.
The easing would be May 350k, June 350k, and July 450k for OPEC+. For Saudi Arabia, it would be May 250K, June 350K, July 400k.
Prior to the meeting, the U.S energy secretary had emphasized that affordable and reliable means of energy should be the priority of Saudi Arabia and its counterparts. However, the Saudi energy minister denied its role in their decision. Perhaps this might have prompted the decision of the group. Debates on Joe Biden’s energy policy ensued afterwards. Analysts claim Joe Biden cared about clean energy and cheaper gasoline, and not the profitability of Shale.
Unity appears to be guiding OPEC’s recent decisions and prices have been stable, unlike last year’s tumultuous crash after the group’s division.
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
- Cornerstone Insurance Plc notifies stakeholders of late submission of financial statements.
- NSE approves delisting of 11 Plc shares.
- Berger Paints Nigeria Plc reports a 67% decline in Profits in FY 2020.
- MTN Nigeria raises N73.5 billion from CP Issuance to finance operations.
- Jaiz Bank proposes dividend worth N884 million for shareholders.