One can hardly switch from the years of carrying large volumes of cash around to the years of using a card for financial transactions in Nigeria, without mentioning Interswitch.
Like the name suggests, the company uses a ‘switching’ infrastructure to connect the different banks in Nigeria and provides the technology now used for ATM cards. From a time when the company had only 3 banks on its network, Interswitch has grown in the last 19 years and now has 11,000 ATMs across different banks on its network.
How the journey started
A young graduate working in Telnet, Mitchell Elegbe was worried by the several inconveniences Nigerians had to go through to carry out financial transactions. From making long and stressful journeys to the banks, waiting in long queues, missing transaction deadlines, and increased loss of cash to criminals, that was certainly not the easiest of times to be an adult. Some opted for bank drafts to avoid carrying cash to travel, and I remember accompanying my mother to the bank a couple of time to buy a bank draft to pay my school fees.
Many people had to join long queues at the banks on Friday evening to withdraw enough cash for the weekend, and this naturally meant that weekends became work hours for criminals. The most frustrating part of it was that the bank branches did not have any software connecting them, so customers had to continue withdrawing money from the exact branch they opened the account, even when they needed to make long business trips. Even the highway became a playfield for robbers.
The young Elegbe who had only worked two years after his National Youth Service Corps, came up with the Switch idea, but the plans did not materialise as many traditional players were not interested in buying the switch software.
Not deterred by this little glitch, Elegbe went ahead to establish Interswitch, an organisation which would use the Switch software to address the problem. This time, he got the support of Accenture, and also got buy-in from some banks to raise a part of the start-up capital. Getting a Chief Executive to head the company was the next hurdle to be crossed, as Elegbe recalls that most of the capable hands then available were expatriates “who expected to earn more than the company’s capital”.
In search of cheap labour, he had to take up the task even though he had very little experience thus resigning his job at Telnet. The shareholders and the sponsoring company (TELNET) had their concerns at first, but they gave Insterswitch a shot and under Elegbe’s leadership, the company pushed through the uncertain years to become what it is now. Eight years later after starting Interswitch, the company was valued to be worth N26 billion (over $170 million), giving massive returns to early private equity holders. The company’s network grew steadily from 7 banks to 13, and then an ATM consortium and Globacom, a mobile telecommunications provider, up till this point when it has almost all Nigerian banks and 11,000 ATMs on its network.
Though Elegbe had no shares at the outset, his impressive performance earned him and his team some equity in the company in the coming years.
“So you have somebody who invested N10 million in this business going away with N2.6 billion after eight years. That to me was real value,” Elegbe said. When you help solve big problems, Mitchell says, you’re bound to be well rewarded.
Mitchell Elegbe is now the Group MD & CEO, Akeem Lawal is Divisional CEO, Switching & Processing Group while Mike Ogbalu is CEO, Verve International.
In 2019, Visa bought a fifth of Interswitch at a valuation of $1billion, making Interswtich Africa’s first fintech unicorn.
Interswitch is the owner of Verve, an international debit card and Nigeria’s most used payment card which is said to account for over 70% of the 25 million cards in circulation in the country. The company also owns Quickteller, an online payments platform; Retailpay, a mobile business management platform; Interswitch S&P, the first Nigerian in-country interbank transaction switching and third party processing for all card brands; and Smartgov, an identity management and e-payment infrastructure for state governments. Interswitch now serves almost all the state government of Nigeria, and is present in several other African countries including Kenya and Uganda.
Just last month, the group announced the launch of Quickteller Business – a new comprehensive corporate solution focused on empowering businesses of all sizes, to facilitate payments and manage transactions from anywhere in the world– through one, simple integrated platform. The platform added to its launch offer, a three-month zero transaction fee incentive for SMEs that sign up immediately.
Buy-ins, acquisitions and buy-outs
Interswitch has had several achievements over the years, and some more distinct than others. Two-third of the company was sold to a consortium led by Helios Investment Partners in 2010, and barely a year after, Interswitch took a 60% stake in Bankom in Uganda.
In 2013 the payment processing company entered into an agreement with Discover Financial Services, and in September 2014, Interswitch acquired a majority shareholding in Paynet Group, an East-African payments provider.
In 2015 Interswitch launched a $10m investment fund for African start-ups in the payments sector, and has since then, strategically invested in other African startups in the payments services.
Interswitch has also acquired VANSO, a mobile-focused technology provider to banks. This new acquisition has VANSO’s mobile banking, SMS and security business lines being fully integrated into Interswitch’s digital commerce and technology operations in Nigeria, and across Africa.
The IPO that never was
It was in 2016 the Interswitch first hinted at an Initial Public Offering (IPO) on the London Stock Exchange and /or the Nigerian Stock Exchange as part of options to create possible exits for its backers, but that listing never happened due to “unfavourable economic situation”.
By July 2019, it was reported that Interswitch had resumed its IPO plans and enlisted JPMorgan Chase & Co and Standard Bank Group to work on the potential IPO that was expected to value the company between $1.3 billion to $1.5 billion. This listing was expected to come through by 2020, but it is believed that the COVID-19 pandemic and other economic issues which plagued 2020 may have altered the company’s plans.
A recent statement from the CEO says that Interswitch will continue with alliances in line with its growth plans, but an IPO might not be in immediate view. According to him an IPO may be considered when private equity investors want an exit out of the business.
In place of the earlier expected IPO, the company announced the listing of N23 million bond on the Nigerian Stock Exchange (NSE) in February 2020. The bond is to run at a fixed interest rate of 15% for a tenure of 7 years.
Cloud services are your safest bet against data and intellectual breaches – Adejumo, Cloudflex founder
The rule of keeping data within the country of origin allows Cloudflex to collaborate rather than compete with international players.
The Twitter community went up in flames last year when the official accounts of notable personalities like Donald Trump, Elon Musk, Jeff Bezos, Bill Gates, and Barack Obama were hacked by individuals who managed to rip some followers of their cryptocurrency. Those accounts were suspended for some days pending investigations but what this did was to alert the world to the need for heightened cybersecurity in countries.
In Nigeria, particularly, where cybercrime has been on the increase in the last couple of years, cybersecurity is a touchy topic; especially since global laws expect that customer data should not be stored outside the company of origin and most of the cloud services companies are international. There is, however, a local cloud company providing cloud services for Nigerians in Nigeria.
Cloudflex was founded in 2016 and has focused on providing cloud support infrastructure and services for companies away from the company premises. Founder and CEO of Cloudflex, Remi Adejumo was a guest on Nairametrics Business Half Hour recently, where he explained that the company was created to provide tailored solutions for clients in the Nigerian space.
Having worked almost three decades in several institutions, the last of which was EcoBank Nigeria Plc where he was in charge of IT Infrastructure, Adejumo saw the opportunity to create a Nigerian-built cyber-security solution, “that is fully Nigerian and run by Nigerians.”
“This is not a service where one size fits all. We have our peculiarities as a market and we are designed to serve the Nigerian market. If you want to get a foreign cloud service, you could wait 6 to 8 weeks, but if you want to get one from Cloudflex, you could have it in 24 hours.” Adejumo explained.
When companies were making several adjustments to fully activate the remote-working policy at the peak of the coronavirus pandemic lockdown, the importance of cloud services became more obvious. Companies needed a round-the-clock server from where the staff could access data from their homes and still work seamlessly.
The rule of keeping data within the country of origin allows Cloudflex to collaborate rather than compete with international players like Microsoft Azure and Amazon’s AWS, and use one another’s platforms.
There are a lot of security concerns about cloud services which some people think is not safe enough, but cloud-service providers would still insist that they are the safest option.
“The cloud platform is far safer than your own private server because your private server is on your premises and everyone knows where it is. From experience, 70% of breaches are done by the staff of your own organisation, and having a third party manage your own platform, means that you and your staff don’t know where it is. There is a protocol in giving access from the service provider, so security is higher. The data breach is not just financial, it is also intellectual. You can secure a building as much as you want, but as long as there is a door, somebody can still go in. That is the limit to your physical server in your office premises,” Adejumo explained.
There are also advancements in predictive learning, analysis, and reactive security, that allows the cloud systems to detect and flag activities outside the patterns until it is confirmed and validated.
Like most other startups in the tech space, funding remains a challenge. Adejumo recounts that the company started off solely on his savings and proceeds from the sales of some assets. Nigerian investors appear to still be sceptical of the tech startups and the result of this is that a lot of investment in the tech space comes from outside the country.
Cloud services will play a major role in the future of cybersecurity and Cloudflex is poised to take a space in that scene. According to Adejumo, the company is in the process of securing funds for expansion, although crowdfunding is not one of the options being considered.
Seplat: Why the buzz around Nigeria’s foremost oil exploration company?
Seplat’s legal trouble with Access Bank seems to have drawn a lot of attention to it in recent times.
The last couple of months have seen Seplat Petroleum Development Company trending in the news, and oftentimes in relation with some very controversial issues. Besides the ANOH gas project, Seplat has been roped into the Access Bank loan disputes with Cardinal Drillings, which even led to the shutdown of its corporate headquarters.
Seplat’s offices have been reopened in the last couple weeks, but there are still a lot of discussions around the Access Bank versus Seplat loan tussle. There have also been protests from some of the company’s staff over delayed confirmation and other employment-related matters, as well as a protest of the Ikweghwu community in Amukpe, Delta state demanding jobs and infrastructure development from the company.
So what is it about Seplat that continues to be of interest to individuals and corporations?
Seplat Petroleum Development Company was established in 2009 after a merger of Austin Avuru’s Platform Petroleum Limited and A.B.C Orjiako’s Shebah Petroleum Development Company. Avuru became the MD, while Orjiako was the Board Chairman. Both men had been friends from their years of working for others and later running their individual businesses; they reached the decision to merge their companies to take advantage of the opportunities in the nation’s upstream sector.
The benefits they sought played out soon after the merger, when they got a major investment from Muarel & Prom, a French oil company. This investment ceded a 45% interest in the company to the French oil company, and gave Seplat an opening to more lucrative opportunities. Seplat was appointed operator of three oil mining leases (OMLs), which include OML 4, OML 41 and OML 38.
With a strong reserve base and track record, Seplat had a consistent increase in its gross oil production and in April 2014, completed the dual listing on both the London Stock Exchange and the Nigerian Stock Exchange.
The $535 million raised in the initial public offering (IPO) ranked as the largest for a sub-Saharan Africa company since 2008 and the second-largest ever for a Nigerian company, further enabling the company to acquire additional blocks.
Revenue and profit have consistently been on the rise since Seplat commenced operations, and gross liquid production has grown more than sixfold over the decade.
At a time when many still regarded gas as a by-product of oil production, Seplat foresaw that gas would soon grow to become an alternate source of energy in Nigeria and started making investments in commercialising the gas reserves it had on its oil blocks. Seplat carried out aggressive investment in the installation of dedicated processing and drilling facilities for gas production wells. Today, the company supplies gas to three power plants that generate almost 40 per cent of power supply in Nigeria.
Seplat’s legal battles
Seplat had a series of protracted disputes and court cases over the years. One of such disputes was with Canadian oil company, Crestar Natural Resources Limited, over the acquisition of OML 25 from Shell. According to the details of the case, both companies jointly emerged the preferred bidders in the acquisition of the OML in 2014, but disagreed along the line over a $20.5 million deposit held in escrow. This case dragged till 2018 before it was resolved.
There was also another case in which Seplat alongside Chevron Nigeria Limited won against Brittania-U Nigeria Limited in 2016. This was a dispute over OMLs 53 and 55.
The most recent and publicised court case Seplat has had to grapple with is the case of Access Bank Vs. Seplat Petroleum Development Company which resulted in the sealing up of the building that houses the company’s head office. The details of the case revealed that Cardinal Drilling Services obtained a loan facility from Diamond Bank (now Access Bank) to purchase the CDS Rigs 101, 201, 202, and 203. The facility was secured by a fixed and floating Debenture over Cardinal’s assets.
With Cardinal Drilling unable to service the outstanding part of the facility (amounting to $85.8 million), the bank activated Clause 6 of the Deed of Debenture, which allows it to appoint a Receiver/Manager over Cardinal’s assets, and listed Seplat and its Chairman, Dr. A.B.C Orjiako, as co-defendants in the litigation.
Access Bank claimed that two of Cardinal Drilling Services rigs (CDS 101 and 201) were deployed into Seplat’s operations, while all the four rigs purchased with the loan were very critical to Seplat’s future drilling plans, making Seplat “a sister company to Cardinal, jointly promoted by Orjiako who is the alter ego of the two companies.”
The bank further claimed that Seplat was the ‘real debtor’ while Cardinal Drilling was merely a ‘vehicle smokescreen’, and thus sealed Seplat’s headquarters at Ikoyi. It was also granted a Mareva injunction to seize bank accounts and other assets owned by Seplat, while also appointing Kunle Ogunba, SAN, as the receiver-manager for the assets of the defendants.
The statement from Seplat however insists that Seplat neither borrowed nor guaranteed any loan for Cardinal Drilling, but only supported discussions between Cardinal Drilling and Access Bank towards the settlement of the debt owing to business relationship.
A statement signed by Seplat’s Company Secretary and General Counsel, Mrs. Edith Onwuchekwa, read: “We understand that Cardinal Drilling has outstanding loan obligations to Access Bank. However, Seplat is neither a shareholder in Cardinal Drilling nor has outstanding loan obligations or guarantees to Access Bank and did not at any time make any commitments or guarantees in respect of Cardinal Drilling’s loan obligations to Access Bank.”
Seplat Petroleum also filed an application dated 12 December 2020 seeking to discharge or lift the same interim order, and be granted access to the offices and the frozen accounts. Despite posting a bond of $20 million as security, its application was turned down.
A month after, a Lagos Court of Appeal ordered the suspension of the interim order issued by a Federal High Court sealing the corporate offices of Seplat Petroleum Development Company holding that the balance of convenience favoured the petroleum company. The court held that the petroleum company couldn’t deliver this service unless the order was suspended. It however ordered the company to issue a bond of $20 million in the name of the Court’s Chief Registrar.
Seplat has been fairly fortunate with its management and has its impressive financials and strategic decisions over the years to show for this. The duo who started the company as Managing Director and Board Chairman were both seasoned executives in the oil sector and so had a lot of know-how and know-who to bring to the marriage.
Avuru retired from his position as Managing Director in 2020 and was succeeded by Roger Thompson. Orjiako has remained the board Chairman even after 11 years, with several equally competent members on the board.
Oil companies and the Social Responsibility dragnet
One sure cause of dispute between oil exploring companies and their host communities has been the issue of corporate social responsibility – an avenue of giving to the community and boosting the social welfare of the people who bear the brunt of the company’s profit-making activities.
A recent analysis by Nairametrics showed that between 2010 and 2019, Seplat spent no less than $66.69 million on Corporate Social Responsibility (CSR). The report dug deeper on the Seplat Petroleum Development Company – 2019 Sustainability Report,” made available on the Nigeria Stock Exchange platform.
According to the report, Seplat had invested in 55 community development projects in 2019 alone, with 31 projects completed and 24 projects ongoing. Also in the same year, the company awarded 201 university scholarships and spent over N11.9 million as prize money to winning schools and students in the PEARL QUIZ competition.
Other areas touched include the healthcare sector where 3,500 pregnant women and over 15,690 patients with eye diseases have received free treatment courtesy of the oil company. Hundreds of youths have also been trained and empowered to engage in commerce.
However, it would seem that some of these projects do not extend to all their host communities because of the recent protest by some members of the Ikweghwu community over what they termed “oppression and intimidation from the management” despite exploring oil from their community for eight years.
The press statement signed by Dr. Chioma Nwachuku, Seplat’s GM, External Affairs & Communications said that the company was not aware of any existing agreement, but was in talks with the community for a peaceful settlement.
It is not clear whether the company has any defined policy or understanding that cuts across all its host communities in terms of infrastructural development, job allocation and social welfare, or if it reaches a different understanding from one community to the other. As an oil company, it is almost normal that host communities would come up with demands intermittently, sometimes to avoid being exploited by the company, and at other times, to exploit the company. A definite policy in this regard will no doubt save Seplat the unwanted disruptions that protests cause to its activities.
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