Category: Finance

BY BEN EGUZOZIE 

 

• Survey shows revenue expands 30% over 10-yrs 

• HDI’s inadequate response to 1% IGR rise

• Citizens not getting value for taxes 

• Most states’ IGR are wasted, unproductive

An appreciable rise in internally generated revenue (IGR) among sub-national governments in Nigeria following marked improvements in the efficiency of collection has sadly failed to translate to improvements in the welfare of its citizens, the results of a 10-year survey on the annual average growth (AAGR) in states’ IGR have revealed.

 

The survey report, titled, “The IGR Initiative,” released January this year by Subnational IGR Informer, and produced by a team led by Martin Ike-Muonso, a professor of economics with interest in subnational government IGR growth strategies, and a columnist with Business A.M., also indicated that, while the various states’ revenue collection agencies have been efficient at pressing out tax and non-tax revenue compliance from their economic agents, multidimensional poverty have increased as the state governments expanded their IGR by 30 percent on a 10- year annual average growth rate.

“The multidimensional poverty window is the flip view of the human development index. Both indices facilitate our understanding of how well the government has performed on its duty of enhancing citizens’ well-being. We expect that subnational governments growing very quickly in the past ten years on their IGR mobilisation should have used the same to tame the incidences of poverty. We also expect the same for State governments collecting 1% or more of their citizens’ total output as revenue. Contrary to our expectations, multidimensional poverty in Nigeria appears to be positive, albeit weakly correlated with the annual average growth rates of the IGR of subnational governments in Nigeria,” the report said.

 

The nation’s data agency, the National Bureau of Statistics (NBS), informed late last year (2022) that some 133 million Nigerians were submerged into multidimensional poverty.

 

IGR growth not a great driver of HDI 

Sadly too, the survey found that the human development index (HDI) of the various states had also exhibited an “inadequate response, growing only by about 0.86% for every 1% increase in subnational IGR. It concluded that IGR growth may not be a great driver of HDI among Nigeria’s sub-nationals, if good leadership was absent from the indicators.

 

Additionally, the report revealed a humongous subnational IGR wastage, and potentially unproductive, which grew at approximately a 15.3 percent rate over the period reviewed. The direct interpretation of this is that the citizens of Nigeria’s 36 sub-nationals have not been receiving value for their tax compliance over the 10-year period reviewed.

 

From the IGR expansion versus people’s economic wellbeing survey, only 30 percent of Nigerian states were able to collect IGR above 15 percent for the period from 2011 to 2019, and also above 1% (>=1%) share of their state GDP. The states are Jigawa, Ebonyi, Ogun, Kwara, Enugu, Oyo, Lagos, Plateau, Kaduna, Borno, and Nasarawa.

 

The report further found that Delta and Rivers states, two of Nigeria’s leading oil producing states, which are able to mobilise more than 1.2 percent of their states’ economic output as IGR, are sadly not growing by up to 15 percent.

 

“It is reasonable to expect that the (two states) should provide comparably more well-being to their citizens,” the report stated.

 

It also observed that: “There is a conjured feeling of the government robbing its citizens when they do not receive the quantum of well-being corresponding to their payments. An excellent way to understand this situation better is to determine whether increasing rates of IGR receipts are consistent with improvements in citizens’ well-being. Analysts have relied on measures of the quality of human development, prosperity, multidimensional poverty, and ease of doing business, among others, to appreciate the level of general well-being or its substructure of good governance”.

 

Citizens’ trust critical for tax compliance

Noting that citizens’ trust was paramount in securing tax compliance, the Subnational IGR Informer stated that sadly, more than 90 percent of subnational governments in Nigeria fell within this category. It further noted that benchmarking the internal revenue service’s (IRS’s) poor performance in technology adaptation and their parent governments’ weakness in the provision of public goods, ease of doing business, and the quality of human development against their internally generated revenue increases, makes the question of citizens’ trust resonate.

 

Rapid IGR rises have not improved citizens’ welfare 

The results of the survey also showed that 21 subnational governments (or states) in Nigeria are below average in revenue (IGR) collection and distribution. The states are: Abia, Adamawa, Akwa Ibom, Anambra, Bauchi, Bayelsa, Benue, Cross River, Ekiti, Gombe, Imo, Kano, Katsina, Kebbi, Kogi, Niger, Ondo, Sokoto, Taraba, Yobe, and Zamfara.

 

Also, approximately 58.3 percent of the states in the country fall below the average on IGR per capita measure. Surprisingly, with more than 20 percent annual rate of growth of their IGR, Ekiti, Sokoto, Zamfara, Ondo, Taraba, Kogi, Bauchi and Kano all fall within the cluster of states not doing averagely well on the IGR per capita measure.

 

The finding raises questions about how well the solid 10-year IGR average growth has impacted the well-being of the states’ citizens, assuming they share all revenue collected. The IGR per capita dimension categorised the states into three groups.

 

Lagos was adjudged by several multiples as the best performer on the IGR per capita indicator, thereby categorised in the first cluster.

 

However, although Lagos State government’s rate of IGR growth was below the national average, it was nevertheless, more than an average performer in collection efficiency using the IGR-TO-GDP ratio criterion, the report said.

 

The next set are state governments that are quickly growing their IGR, as well as being reasonably efficient in their collection, and who are more likely to be above-average performers in sharing the welfare derivable from it. The states that fell into this cluster are: Ebonyi, Jigawa, Nasarawa, Ogun and Osun.

 

On the flip side are states such as Benue, Cross River, Yobe, and Abia, identified as “critically below-average performers on the IGR per capita indicator,” the report anchored by Martin Ike-Muonso stated.

Investment is a mindful technique. Choosing the right stocks to invest in is vital to determine your returns. Investors motivated by the results of 2022 may be looking to devote a greater percentage of their savings to capitalize on stocks. Selecting which stocks to purchase can be overwhelming. Research is required to choose wisely the right sector. The best way of securing healthy returns is by diversifying your portfolio. One good option for 2023 is that investors need to get in on the best growth and high-yield stock picks if they want their portfolios to perform well in 2023 and beyond.

High dividend yields are stocks that offer a higher rate of return than the market average and can be an attractive option for generating extra cash. High-yield stocks are crucial as they can provide a steady income over time. These can be used to add to your collection of dividend stocks and create a portfolio that will perform well in the coming years.

Areas of investment in 2023

Technology sector

 

Growth stocks are an attractive option for investors as they offer the potential for high returns. As we move into 2023, knowing which growth stocks can provide the best opportunities for investors is essential.

 

Some of the top growth picks heading into 2023 include technology companies. These companies have consistently shown strong performance over the years and are expected to continue doing so in the coming years. Even with the recent news of recession and market downfall, technology companies still seem to have a future and can be a wise investment choice for the future.

Healthcare sector

 

The healthcare sector has proven to be a reliable source of high-yield returns in recent years, and this trend is likely to continue into 2023. Healthcare stocks have outperformed the broader market over the past year, with many companies delivering substantial dividend payouts. Several factors are driving this growth, including aging populations and increased demand for healthcare services and products. In addition, technological advances are allowing for more efficient treatments at lower costs, enabling healthcare companies to maximize profits while still providing quality care. Investors looking for high-yield returns should consider investing in established healthcare providers by tracking them through a stock market tracker and ensuring to invest in the right company.

Finance and banking sector

 

The finance and banking sector is one of the most promising areas for growth and high-yield stock picks in 2023. With the global economy continuing to recover from the pandemic, banks are likely to be at the forefront of this recovery through increased lending and providing a secure haven for investors in an otherwise volatile market.

 

For investors looking for higher returns, some smaller regional banks may offer more attractive yield opportunities than larger ones due to having greater exposure to local economies that have been less affected by the pandemic.

Energy sector

 

The energy sector continues to be a popular choice for investors looking for growth and high-yield stocks in 2023. Oil prices have been steadily rising over the past year, and many companies in this sector are expected to benefit from this trend. For those looking for dividend income, several oil majors offer attractive yields.

 

One of the best ways to know such companies is by browsing through https://delta.app/en/, an application that provides you with real-time market updates and profitable investment opportunities.

By Onome Amuge

Union Bank of Nigeria Plc has secured a loan worth $30 million from the International Finance Corporation (IFC) to support small businesses in the country, boost access to finance for small businesses in Nigeria and to support increased trade across the country.

Business A.M gathered that IFC’s partnership with the commercial bank is aimed at  helping the bank expand lending to hundreds of businesses operating in critical sectors in the country, including food, healthcare, manufacturing, and services.

The $30 million loan is also expected to allow Union Bank to increase trade financing and working capital lending to Nigerian businesses, including those whose cash flows have been strained by recent disruptions in global and local markets.

Commenting on the development,Mudassir Amray, the chief executive of Union Bank, said: “As a bank, we are deeply committed to enabling success for SMEs. We understand the critical role of small businesses in leading Nigeria’s economy towards growth.

Amray added that the funding from IFC will enable the bank to extend financial relief to its customers during this difficult time. He further expressed confidence that the funds will help the businesses harness opportunities and preserve jobs.

Kalim Shah,IFC’s senior country manager for Nigeria, Liberia and Sierra Leone, remarked that strengthening supply chains and trade flows through working capital financing sets the stage for faster growth and economic diversification in Nigeria.

“IFC’s partnership with Union Bank is part of a wider strategy to ensure the flow of goods and services are sustained despite global trade disruptions,” he said.

The IFC in a statement, disclosed that the loan facility to Union Bank is being made through its COVID-19 Emergency Response Working Capital Solutions Envelope, which was launched in 2020 to provide funding to existing IFC clients in emerging markets that will then extend new loans to companies affected by the economic impacts of COVID-19.

The statement said that recent disruptions to the global economy following COVID-19, including from rising inflation and limited access to finance, have left many businesses in Nigeria, particularly SMEs, struggling with supply chain shortages, increased cost of doing business and limited trade growth.

The partnership with Union Bank, it explained, underscores IFC’s commitment to supporting smaller businesses in Nigeria, helping them preserve and create jobs and access critical inputs.

The loan is supported by the blended finance facility of the International Development Association’s Private Sector Window, which mitigates the financial risks associated with investments in sectors like SMEs and agribusiness.

IFC has an active investment portfolio of $2.3 billion in Nigeria – the second largest in Africa after South Africa – across sectors including agribusiness, healthcare, manufacturing, infrastructure, technology, and financial services.

The largest global development institution also noted that the $30 million loan  is supported by the blended finance facility of the International Development Association’s Private Sector Window, which mitigates the financial risks associated with investments in sectors like SMEs and agribusiness.

Currently, IFC has an active investment portfolio of $2.3 billion in Nigeria ,the second largest in Africa after South Africa. The portfolio cuts across several sectors including agribusiness, healthcare, manufacturing, infrastructure, technology, and financial services.

 

By Business AM

The board of directors of the African Development Bank Group (AfDB) have  approved a dual-currency trade finance line of credit for ECOWAS Bank for Investment and Development (EBID) comprising $50 million and  50 million euros.

The fundings, according to the  African Development Bank, is expected to reduce the annual trade finance gap for Africa, estimated to be around $81 billion.

The EBID,on its part, said the three-and-a-half-year facility would be utilised to provide direct financing to local corporates. Part of the facility will also be channelled through select local banks for on-lending to key sectors such as agriculture, infrastructure, and transport.

It added that the ultimate beneficiaries will be Small and Medium-sized Enterprises (SMEs), local enterprises, cooperatives and farmers in the West Africa region who have greater difficulty in accessing trade finance compared to multinational corporates and large local corporates.

Commenting on the approval, Joseph Ribeiro, the deputy director general for the West Africa region, noted that regional development finance institutions like EBID are key partners of the African Development Bank and serve markets and client segments critical to the overall development of the continent.

“They play an important role in promoting trade and regional integration. This is the Bank’s first financing support to EBID, and we look forward to an even stronger partnership in the near future,” Ribeiro said.

On his part, Lamin Drammeh, the Bank’s head of trade finance,emphasised the critical need for such support in the region. “We are excited to work with EBID to increase access to trade finance in the ECOWAS region with a special focus on the agriculture value chain, SMEs and women-owned businesses”, he said.

He added that regional institutions like EBID complement the AfDB’s efforts to bridge the trade finance gap in Africa and serve as an effective conduit for channeling much-needed funds to underserved countries and sectors.

The African Development Bank further noted that an additional co-financing of $30 million for the credit line is also expected to come through the Africa Growing Together Fund (AGTF) from the People’s Bank of China (PBOC).

By Olivia Nnorom & Habeeb Adamu

The African Development Bank’s Affirmative Finance Action for Women in Africa (AFAWA) initiative has reached a landmark $1 billion in approved funding designated for lending to African  women entrepreneurs, to bridge the $42 billion financing gap facing women in Africa.

This milestone was disclosed in a press release by the African Development Bank group after it held its AFAWA meeting in Abidjan, Ivory Coast on January 31st, 2023.

“I am incredibly proud of AFAWA’s financing achievement. AFAWA’s benchmark reminds us that when we invest to grow Africa’s food systems, we must also invest in Africa’s women agripreneurs.” Beth Dunford, the Bank’s Vice President for Agriculture, Human and Social Development said.

Dunford noted that despite the significant contribution women make in Africa’s agricultural sector, including small and medium-sized enterprises (SMEs), they face significant barriers to accessing finance, stressing that African women entrepreneurs face an estimated $42 billion gender financing gap compared to men, across the continent.

However, Dunford claimed that the AfDB, through AFAWA, has multiplied the volume of investments toward women-owned small and medium enterprises sevenfold.

According to Malado Kaba, director of the Bank’s gender, women and civil society department AFAWA-approved lending to women-led small and medium sized enterprises reached $1.051 billion by the end of December 2022, with $135 million targeted to women in the agriculture sector.

“AFAWA’s approved lending reaches across 27 countries, and through 56 financial institutions. Already 4,115 women business owners have benefited from AFAWA financing instruments. This is just the beginning,” Kaba said.

The statement emphasised that the AFAWA investment is continuously addressing financial barriers to African women ‘agripreneurs’ growing their businesses. It also noted that the programme is working to boost the professional and financial capacities of over 200 women cooperatives in the staple crop food sector in Cote d’Ivoire which includes training and access to a digital platform connecting women producers to buyers of agricultural products like wholesalers, retailers and consumers across Cote d’Ivoire.

Furthermore, the pan-African investment initiative is currently collaborating with Ecobank on the “Financing Climate Resilient Agricultural Practices in Ghana” project. A project which mobilized $20 million from the Green Climate Fund, and $5 million from Ecobank Ghana as co-financing, to fill the gap for working capital to farmers.

Also, the project aims to provide financing and technical support to 400 women-led, farmer-based associations and women-owned small and medium enterprises, to foster their agriculture productivity and strengthen their climate resilience practices.

To further establish its commitment towards bridging the financial gender gap in Africa, and accelerate progress toward unlocking $5 billion in lending for women by 2026, AFAWA has said it has established a guarantee mechanism which de-risks the women’s market and increases the ability of financial institutions to lend to women business owners.

 

“In 2023, we will continue to work closely with our partners to accelerate their ability to lend to women-led micro and small enterprises. Ensuring that the enabling environment is inclusive to enhance women’s ability to access financing will be critical. Thus, we will work closely with policymakers to ensure that the right reforms are in place to accelerate women-led small and medium enterprises’ financial access,” Kaba assured.

AFAWA was launched in 2015 in Dakar,Senegal during the first Feed Africa conference.

By Cynthia Ezekwe

The ideal benefits and importance of revenues generated in the form of tax has become imperative for developing economies to enhance the mobilisation of their internal resources for the enhancement of economic growth, and also to minimise the rates of fiscal deficits by ensuring effective implementation of an appropriate tax policy.

In Nigeria, Value Added Tax (VAT), a broad based business tax imposed at each stage of production and distribution process typically designed to tax final household consumption is an indirect  tax imposed on consumption of some specified goods and services which contributes to the economic development by influencing the rate of revenue accruable and the consumption rate the people.

The VAT Act requires manufacturers, wholesalers, importers, and suppliers of VATable goods and services to be registered within six months of commencement of business. The Federal Inland Revenue Service (FIRS) has the sole responsibility of VAT collection at the rate of 7.5 percent of the value of goods and services supplied.

Unfortunately, VAT administration and collection by the  revenue service has been subjected to  challenges including, inadequate VAT zonal offices, non-compliance of business owners, lack of transparency, evasion of VAT-able goods and services, inadequate workforce, amongst others.

This has resulted in a VAT gap in Nigeria, which according to a UN report into VAT gaps for 24 African countries in 2018, stood at 71.2 percent.

Soji Abolarin, managing director, Westmetro Limited, a leading provider of industry-focused Technology solutions, and advisory services, described the gap as alarming and a reflection of poor revenue generation in that aspect.  He added that the figure shows that about 72 percent of revenues that should accrue to the government is not being  remitted.

Abolarin, in a recent webinar hosted by KPMG themed, “Enhancing Tax Compliance Through Technology Sharing: The FIRS Experience”,  defined VAT gap as the difference between what is expected to be collected and the amount actually collected. He, however, noted that there has been an improvement over the last two years, especially with the introduction of TaxProMax.

The Westmetro MD identified some of the reasons for the huge gap in terms of VAT to include; underreporting, poor understanding of how VAT works, as well as  tax agents operating outside of the tax net.

Highlighting other challenges, the FIRS consultant said:

“We also have registered businesses, especially a sector like the hospitality sector, that are operating with a brand name that is different from their registered brand name. This  makes it significantly harder for the tax authorities to be able to keep track of such people.

“We also have the issue of  branch  management.  Of course, people just wake up and open a new branch without informing the tax management authorities. We also have the quality of records during retroactive audits/monitoring, which is accompanied with poor records.”

He further emphasised the lack of  software solutions, which calls for companies to check the type of software solutions that they use for resource planning and corporate management.

In order to adjust this, Abolarin noted that countries around the world are moving into what is known as Continuous Transaction Controls (CTCs).

According to him, CTCs are not only technological implements, but also a  legal and technological process that allows government and  relevant agencies to be able to build transactions in real time.

“Under CTCs, we have two things, one is called  electronic invoicing, and one is called fiscalization. Electronic invoicing has to do with the issuance of invoice electronically, but it does not only include invoicing, starting from the quotation,to when  actually register the payment; you also look at the documents that business uses to do the transactions. On the other hand, fiscalization is all about retail transactions,” he explained.

Abolarin noted that the Lagos State hospitality industry has a well detailed fiscalization law in Nigeria, adding that it speaks specifically on how federal receipts should be issued to customers.

On the journey so far, he pointed out that at about 2016/2017, Lagos State came up with its Fiscalisation  Act to cover for the construction tax in hotels, restaurants, and the model they used then was to include electronic to fiscal devices for the electronic sector.  He added that the project is still ongoing as there have been various forms of resistance to it.

“FIRS has also set up virtual fiscal devices in the retail sector, and of course we have what is called software fiscalization(API connections) in the hospitality sector,” he said.

On the challenges facing the innovative system, he said noted that since 2016  till now,there has been natural resistance   which has raised major concerns for  tax agents, with concerns bordering  on cybersecurity-threat to hacking, system compatibility which has to do with installation of third party devices or software, and then data privacy which has to do with threat to personal, proprietary and customer data.

“They are all valid concerns. In terms of cybersecurity, it is a global issue, because the more digital systems, the more the risk to your organisation. Adding this level of automation also exposes customers to different levels of risk. Also, installation of physical electronic devices or virtual devices will definitely be an issue overtime, due to the way systems are configured.

“We need to ensure that the right data is being sent to FIRS and not any type of personal identifiable information pulled out from the system,” he said.

Abolarin observed that the FIRS has so far been able to address the challenge through a system called the ATRS onboarding process.

On how it is being implemented, he said, “FIRS will first of all write to you and give you  30 days to comply, and all you need to do is to complete the form on the taxpayers platform. For FIRS to complete your tax integration,  all you need to do is to contact your software vendor to complete the integration on your behalf after  which FIRS issues a compliance certificate to you and  they continue to monitor and evaluate your device.

Talking about data privacy and protection, he noted that the data the FIRS requires includes tax identification number (TIN) of the tax agent, business place and device,the bill date and time, the bill number, the amount  of the transaction,the  total amount of the transaction, payment type, currency code, security code, and tax rate.

He noted that the  details of the transactions are very confidential as all transactional data needs to be secured. The above process, he explained, will help in the management of cybersecurity which needs to be understood by the general public.

BY BEN EGUZOZIE

• As Africa gets just $30bn of required $277bn

• Continent needs $2.8trn 2020-2030 to implement NDCs under Paris agreement

A new study by FSD Africa in partnership with UMOA-Titre (UT) in which Genesis Analytics was commissioned, has found that deploying Development Impact and Social Impact bonds can significantly unlock climate finance flows to address climate change challenges in Africa.

The study carried out in Saint Louis, Senegal’s port city, aimed at developing a study that determines the likelihood of deploying a financial instrument to address climate change, environmental and/or waste management challenges in Saint-Louis, a coastal town with an estimated 1.1 million people.

 

The impact bonds recommended as financial instruments for challenges facing Saint-Louis include, Social Impact Bonds (SIBs), Development Impact Bonds (DIBs), or Environmental Impact Bonds (EIBs).

Impact bonds such as social impact bonds (SIBs), also known as social bonds or social benefit goods, are a type of financial security that offers capital to the public sector to fund projects that will create better social outcomes, and lead to savings. The Centre for Global Development (CGD) says these bonds are a new development in finance.

According to Climate Policy Initiative (CPI) estimates, Africa requires $277 billion annually to implement its Nationally Determined Contributions (NDCs) and meet the 2030 climate goals. Published with the title: “Landscape of Climate Finance in Africa,” CPI indicates that, so far, Africa’s annual climate finance flows stand at only $30 billion.

The United Nations Framework Convention on Climate Change (UNFCCC) in 2021 said this gap is likely to get even wider as countries often underestimate their financial needs, especially in relation to adaptation, due to data and methodological problems in costing their NDCs. It warned that time is of the essence; delaying action will cost the continent more in the future.

The FSD Africa – UMOA-Titre study found that both the physical and socio-economic characteristics in Saint Louis make it vulnerable to climate change. Numerous government and donor-led resilience interventions have been implemented in the area. However, there has been little participation by the private sector at scale. Also, approximately 80,000 of people of the coastal city live in densely populated fishing neighbourhoods, high-risk zones which are constantly under attack from flooding and coastal erosion. Between 2019 and 2020 more than 2,000 people, mostly inhabitants of Saint-Louis’ northern fishing district of Guet N’dar lost their homes due to the rising sea levels. The World Bank estimated that 10,000-15,000 people in the city are either already displaced or live within 20 metres of these high-risk zones. Also, climate change continues to cause rising sea levels, heavier rainfall and higher temperatures in the city, thereby impacting the livelihoods of the local people.

Saint-Louis is the former capital of Senegal and a UNESCO World Heritage site since the year 2000. The city benefits from programmes such as the Safeguard and Enhancement Plan (PSMV), a key legal instrument for the protection of the site adopted in 2008 by the government of Senegal. However, it still faces the effects of climate change with the sea levels on the West African coast rising between 3.5 and 4.0 millimetres annually, which poses an existential threat.

With the new study, the city has a big chance to capture a greater portion of the international climate finance flows available globally, through the deployment of impact bonds.

Reproducing Saint Louis across Africa

It follows that African national governments can successfully reproduce the Saint Louis research success across the continent. The study is due for launch during the forthcoming West African Economic and Monetary Union (WAEMU) Government Securities Markets meetings in Dakar, Senegal.

There is a continental refrain of limited finance to fund climate change resilience and adaptation programmes. It was to deal with these challenges that the Saint Louis study appears to have unveiled solutions such as involving the private sector through impact bonds to widen the capital pool for various projects.

Evans Osano, the director of capital markets at FSD Africa, emphasised that climate action requires significant financial investments.

“Africa requires USD 2.8 trillion between 2020-2030 to implement its Nationally Determined Contributions under the Paris Agreement. This is the cost of the continent’s contribution to limiting warming to 1.5°C and addressing the biggest impacts of climate change. However, annual climate finance flows in Africa stand at only USD 30 billion with private sector contribution at only 14%. This study is critical in identifying opportunities to attract climate finance flows in addressing climate challenges,” Osano said.

The new study highlights the opportunities to tackle flooding, coastal erosion, heavy rains, land and ecosystem degradation, fishery decline, and poor waste management, to improve living conditions for the communities living in Saint-Louis. Funding for the study was provided by the UK government through the Foreign Commonwealth and Development Office (FCDO).

The Covid pandemic has left a deep mark on the global economy, affecting businesses all across the world, but it appears that the African start-up scene has remained largely unaffected. If anything, investors’ interest in the region continued to grow over the past few years. However, not all countries benefit from this interest equally, as some areas are doing a lot better than others in terms of cash influx.

The African Development Bank’s (AfDB) 2021 report reveals that the largest part of these investments goes to only four countries: Nigeria, Egypt, South Africa and Kenya – also known as Africa’s big four. This is where a third of Africa’s foreign direct investment (FDI) ends up. And according to recent figures, it seems that Nigeria’s growing tech startup environment plays a very important role in the equation.

Africa’s big four are emerging as tech hotspots

As every entrepreneur knows, getting a start-up off the ground is anything but easy. From developing a viable business plan and hiring the right talent to intense competition, startup fundraising and cash flow management, there are numerous challenges businesses face in their early stages. That’s why startup failure rates are so high across all industries, with 10% of businesses closing shop within the first year.

However discouraging these figures might be, they don’t seem to stop entrepreneurs from taking the leap, and Africa’s tech scene serves as a good example in this respect. According to the seventh edition of Disrupt Africa’s African Tech Startups Funding Report, 2021 was a particularly auspicious year for African tech ventures, with startups in Nigeria, Egypt, South Africa and Kenya raising nearly 2 billion USD – accounting for almost 90% of the total investment amount. This comes as no surprise, considering that business investments in the big four have been increasing steadily over the past few years, going from 79% in 2018 to 89% in 2020. A big part of these investments is concentrated in the fintech sector.

Unfortunately, the same cannot be said about other countries on the African continent that have been lagging behind in terms of start-up funding. There’s quite a big gap between the big four and countries like Ethiopia, the Democratic Republic of Congo and Tanzania. The disparity is also highlighted in the report, revealing that the rest of the African countries barely make up 7.9% of the total investment sum.

This raises the question: how did the big four manage to take the lead on the start-up investment front and differentiate themselves from the rest? The African Development Bank Group points toward two major factors: the countries’ thriving economies and their population size, which are considerably larger than others’. In terms of gross domestic product (GDP), Nigeria reached 440 billion US dollars in 2021. Similarly, Egypt, South Africa and Kenya have some of the largest economies on the continent, with a reported GDP of 404, 420, 110 billion US dollars.

Population-wise, there are approximately 213 people currently living in Nigeria, and the country is expected to grow considerably in the years to come and become the third most populated nation in the world by 2050, after India and China. Egypt, South Africa and Kenya follow suit, with population sizes of 102 million, 59 million and 53 million inhabitants respectively. The large number of residents ensures high venture capital ROI, serving as an important incentive for investors.

But the economy and number of inhabitants are not the only factors at play. If these were the only aspects to matter, countries like Tanzania and Ethiopia with large populations or countries like Mauritius and the Seychelles with growing economies would also boast high levels of start-up funding, but that’s not the case. It appears that fintech solutions play an important part in this regard. More technologically advanced countries are more likely to catch investors’ interest, and that’s exactly what’s happening in the big four.

Nigeria is touted as Africa’s Silicon Valley

Out of all the countries that have managed to secure high start-up funding, Nigeria stands out the most. In the past few years, Nigeria has grown into one of the leading regions for high-tech innovation and development and the most prominent player in the tech start-up scene, so much so that people started calling it Africa’s Silicon Valley.

It’s generally difficult for newbie entrepreneurs to attract funding, which is why they often need to resort to all sorts of strategies and solutions like leveraging networks and referrals, focusing on equity management or showing investors proof of consumer interest in their products/services. Starting a business in a region that’s already swarming with investors can make your job as an entrepreneur a lot easier, and that’s exactly the case with Nigerian startups.

The Nigerian Startup Ecosystem Report 2022 revealed just how far ahead Nigeria is compared to other countries when it comes to start-up investments. The study was conducted by research company Disrupt Africa in partnership with a large number of business ventures, start-ups, and other organizations in the field in order to piece together a comprehensive picture of Nigeria’s start-up space and how it evolved over the past decade.

According to the report’s findings, Nigeria is the main investment hub on the continent, with over 383 tech startups raising nearly 2 billion US dollars in the period spanning from January 2015 to August 2022. Lagos seems to lead the rankings of Nigerian tech hotspots, boasting the largest number of start-ups in the country (approximately 88%). Also, the report reveals fintech to be the leading sub-sector, with 173 (36%) start-ups operating in this area.

Wrapping up

Judging by Nigeria’s growing startup ecosystem and the high-tech advances it has experienced in recent years, this is only the beginning for the continent’s thriving tech scene. If other countries follow Nigeria’s example and provide incentives for venture capitalists to invest in the financial and tech sectors, Africa has the potential to become the next global technology hub in the near future.

 

Many people want to make money in the forex market, but few of those who start trading want to do the groundwork necessary to become successful traders. While Forex trading is easier than ever before because you can trade online over the Internet, most new traders still lose money.

 

A combination of factors, including market ignorance, insufficient trading capital, trading not according to plan, and failure to practice sound money management techniques to preserve trading capital, contribute to the loss. But once these limiting factors are overcome, almost everyone will have a chance to become a successful Forex trader.

So how to trade Forex?

Five straightforward steps to trade Forex

 

You can take the subsequent steps to prepare for Forex trading:

1. Connect your device to the Internet

For Forex trading, you will need access to a reliable Internet connection. It is required to have minimal service interruptions to trade through an online broker. You will also need a smartphone, tablet, or computer to run the trading platform. If your Internet goes down while trading, it can lead to unwanted losses if the market goes against you.

2. Find the right online Forex broker

You can open an account with an online forex broker wherever you live. Just find one that suits your requirements as a trader and accepts you as a client. At a minimum, the broker you choose must keep your money separate from theirs and operate in a well-regulated jurisdiction under the oversight of a respected regulator such as FCA – the UK Financial Conduct Authority or CFTC – the US Commodity Futures Trading Commission.

3. Open and top up a trading account

Once you have chosen a broker, you can deposit funds into your trading account. Most online forex brokers accept multiple deposit methods, including bank transfers, debit card payments, or transfers from electronic payment providers such as Skrill or PayPal.

4. Get a Forex trading platform

You will need to download or access an online Forex trading platform supported by your broker. Most brokers either offer their own trading platform or support popular third-party platforms such as MetaTrader4 and 5 from MetaQuotes.com or NinjaTrader.

5. Start trading

After completing all the previous steps, you will have a funded forex account, and you will be ready to trade. You can also usually open a virtual money-funded demo account to test the broker’s platforms and services before you get started. Demo accounts are also convenient for testing trading strategies and trading practices without risking funds.

Final thoughts

Trading without a plan is like swimming without a compass – if you don’t understand where you’re going, you’ll get lost battling the waves. So, try to come up with a forex trading plan that includes a trading strategy that you have tested and found to be generally successful and easy to stick to.

 

While developing your own tactics may take some effort, you can instead analyze and learn from market players who have well-established and profitable track records. Find some on YouTube or TikTok.

Obelix 4.1.1 Alternative Finance Limited (Obelix), Nigeria’s SEC-regulated Crowdfunding Intermediary, has announced that it has fundraised N100 million from 9,324 registered small-ticket retail investors for 3 promising small and medium enterprises in just 10 days, thus successfully pioneering an alternative way of raising badly-needed cash for SMEs operating in Nigeria.

The investors were wholly from its waitlist of 42,545 early adopters. The average investment in the Private Notes was N10,725 with the smallest and biggest tickets being N1,200 and N20,000 respectively. The longest duration of the new asset class for individual investors is 90 days, with a fixed rate of 12% p.a.

Formal SMEs number 40 million in Nigeria, contribute 84% of total employment, 45% of GDP but just 8% of exports and tax collections by the Federal Inland Revenue Service (FIRS) according to a recent joint report by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the National Bureau of Statistics (NBS).

A total of 15 eligible applications to raise funds were considered by the company’s Screening Committee but only 3 of the SMEs were accepted by Obelix to utilise monieworx®, its registered Funding Portal, to embark on their crowdfunding campaigns. All the fundraisers have a good corporate governance record and are SMEDAN-registered. The 3 most promising small and medium enterprises that have their securities offerings hosted are, namely: Imose Technologies Limited, Alatiron Nigeria Limited and Q21 Solutions Limited.

According to a Formal MSME Finance Gap in Developing Countries report by the World Bank, the unmet financing needs of Nigeria’s formal SMEs is estimated at US$22 billion yearly. For context, total banking loans was US$66 billion as of December 31, 2022, giving SME loans an 8% share of the loan book. The risk in this sub-sector is priced in the range of 28% to 35% p.a. Gaining access to finance is by far the biggest constraint to SME growth. Over 70% of the 40 million SMEs cited a lack of finance and access to financing as the main constraint to their business growth. Access to advisory services and access to markets weighed in at a distant second and third. According to the Credit Bureau Association of Nigeria (CBAN), only four percent of the 40 million SMEs have access to credit from Nigerian banks. 80% of new SMEs in Nigeria thus die before their fifth year.

Obelix was able to onboard 42,545 users on monieworx®, over a 12-month period, through a combination of extensive community engagements to build a suitable “banking replacement”, and the first-of-its-kind early access programme (EAP) that nudges users to join a community or a group. A surprising insight from its target audience poll of 100,000 people is that they are willing to invest in the absence of outsized financial returns. Specifically, when asked what they value most, regulated products (15%), small ticket sizes (13%), money-on-demand without a withdrawal penalty (12%), short-term securities (11%), weekly coupon payment (10%), Web3-first approach (10%) and Community Subscription Offer Plans (9%) had a combined response rate of 80%. Outsized returns (8%) ranked a distant eighth. On aggregate, individual investors are most interested in near-term liquidity (stacked up to 43% of the response rates).

According to McKinsey’s Global Private Markets Annual Review 2022, “private debt is an asset class for all seasons as evidenced by continued fundraising growth, making it the only private asset class to grow fundraising every year since 2011, including through the pandemic”.

“monieworx® has broadened participation in a very significant way”, said Lanre Showunmi, Director and Co-founder of Obelix. “Debt is the safety part in a portfolio, and we are on course to become the dominant portal through which small-ticket investors enter the debt capital market in keeping with our commitment to make investing fair, accessible, and inclusive”, he stated.

“SME financing is at an inflection point. We have been presented with a once-in-a-lifetime opportunity to win customer primacy and we intend to seize it with both hands”. Thus, Ali Yakubu-Concern, the Managing Director and CEO said, “owning alternative investments will become increasingly valuable”.

“It is said that regulation is how you cap risk”, said Titus Akintola, the Chief Compliance Officer. “This forms the building block in our plan to build a global layer of services for small and medium enterprises”, he continued. We aspire to adopt a safety-first approach in delivering on our “Better – Faster – Cheaper” service charter.

“This is a critical first step in our aspiration to build technology that can create a single Capital Market”, said Salvation Arinze, the Chief Technology Officer. “We are an innovative provider of online retail and SME financial and lifestyle services”.

“There is 100% custody of funds and investment contracts through an arrangement with First Bank, Nigeria’s oldest bank that is registered with Nigeria’s SEC to be a Custodian Bank”, said Abubakar Maibe, Director at Alatiron Nigeria. “This reinforces our confidence and lessens the administrative burden imposed on fundraisers by the Investment Crowdfunding Rules, 2021”.

“Debt crowdfunding presents us with a unique opportunity to access growth capital during this acute funding crunch leveraging alternate financing options that are non-dilutive and founder-friendly by design, on the one part and provides an incentive for the communities in which we operate to get involved through co-creation of value, on the other part”, said Osaretin Sule, the Chief Operating Officer at Imose Technologies Limited. “This way, the local economies become more resilient”.

“We went to Obelix first over our traditional banks”, said Eunice Adeyemi, the Creative Director at Q21 Solutions, “and this was a no-brainer because monieworx® hosted our debt-based securities with more favorable terms, lower interest rates, quicker approval times, and a simpler application process”.

Obelix is widely recognized as the poster child of regulation crowdfunding (Reg CF) and the SME-focused financier of first choice in Nigeria. Crowdfunding is proving itself as a financial solution that speaks to the largest numbers through its simplicity, its transparency, and the service it provides to the local economy and to projects that are meaningful for retail investors.