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Fintech: Increasing funding rounds affirms growth opportunities 

Flutterwave, an African focused fintech company disclosed that it secured US$35 million through its Series B funding round.

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Nigerian fintech companies

Two days ago, Flutterwave, an African focused fintech company disclosed that it secured US$35 million through its Series B funding round. The company also disclosed it is now teaming up with Worldpay and Visa for facilitating payments across Africa.

According to the CEO of the firm, Olugbenga Agboola, the partnership will enable any Worldpay merchant in Europe or the U.S. to accept any African payment. He also disclosed that Flutterwave processed close to US$2 billion in payments and 25 million transactions across over 33 African countries where it currently operates since it was established in 2006.

Flutterwave emerges Y Combinator’s African most valuable startup 

We recall that in 2019, Visa, a renowned American multinational financial services corporation bought a 20% stake in leading Nigerian payments provider Interswitch Ltd, raising its valuation to US$1 billion. In our view, the growing attraction of investors to the fintech industry is reflective of the positive industry dynamics, favourable country demographics amid increased regulatory support towards deepening financial inclusion.

Despite the relatively large number of players in the industry amid the growing number of payment channels available to Nigerian consumers, we believe the digital payments industry remains significantly under-tapped. Our view is underpinned by the relative dominance of cash payment in settlement of transactions.

According to the Enterprise Development Centre (EDC) of the Pan African University, cash payment accounted for 95.3% of transaction volumes at the end of 2018. This compares less favourably with SSA’s 88.5% cash payments. Additionally, we think increasing mobile and internet penetration will continue to support growth in the volume of online payments.

[READ MORE: Economy: IMF & World Bank differ on Nigeria’s growth outlook)

Fintech: Increasing funding rounds affirms growth opportunities 

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Fintechs in Nigeria have raised over US$500 million since 2014, either through equity or grants. While equity funding is led by international investors targeting a few early- and growth-stage fintechs, grant funding is driven by local investors and state governments focusing on proof-of-concept and early-stage fintechs.

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CSL STOCKBROKERS LIMITED CSL Stockbrokers,

Member of the Nigerian Stock Exchange,

First City Plaza, 44 Marina,

Stanbic 728 x 90

PO Box 9117,

Lagos State,

NIGERIA.

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Columnists

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.

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Explainer: What does GDP actually mean, and how does it affect you?

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.

READ: Real estate sector GDP positive in Q4 2020, but still in the woods

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).

READ: IMF lifts 2021 global GDP growth to 6%

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.

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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.

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Columnists

Did OPEC+ April fool the oil market?

OPEC+ understands the sensitivity of the oil markets, so it prepares accordingly.

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Saudi, Russia agree to cut oil by 20 million barrel, Further oil production cut required to keep oil price above $40 in 2020 , OPEC + deal to boost Nigeria’s earnings by $2.8 Billion

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.

READ: Why NNPC should be commercialised

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 Kazakhstanboth 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.

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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.

READ: Saudi government reports drone attack on Riyadh oil refinery

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.

Stanbic 728 x 90

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.

READ: Nigeria’s new and ambitious offshore crude prospects excites IOCs

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 periodthe 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.

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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.

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