A pointless policy meets an unexciting end
A.k.a What was all that suffering for?
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In Nigeria, everything stops for the elections, even Notadeepdive. The elections created one of the slowest news weeks I’ve seen in recent times, especially with how the elections went. Not a single soul wants to read anything that’s not related to how Nigerians want to get their mandate back. It’s tough being a journalist on weeks like this, I tell ya. But at the last minute, I got a reprieve when a Supreme Court ruling threw up something interesting.
A pointless policy meets an unexciting end
When the Central Bank of Nigeria announced the naira redesign policy in October, few people could have figured that it would become such a shitshow. After all, it’s not the first time we’re doing a currency redesign; most times, the new notes are rolled out while the old ones remain in circulation for a year before they’re phased out. It’s a simple process. But the running theme of the CBN under Emefiele has been complicating simple things.
So for months, a routine currency redesign became a source of national frustration. I read so many headlines about it that I nearly lost my mind; I also contributed my own fair share in the newsletter here and here. We considered all the stupid theories of how this was really about preventing vote buying and one time, some guy who a TV station claimed was an economic expert even said the policy would curb inflation.
One Bloomberg article said vote buying declined in Saturday’s elections but the electoral body has bigger problems. Public opinion is that the election was rigged and the credibility of the commission is under question. If the currency redesign policy was to prevent Bola Tinubu from buying votes, what was the plan to ensure INEC was not compromised? It’s hard not to feel like this is an “all this for a drop of blood” moment. If that reference is lost on you, you’re too old.
January’s inflation figures also mean that said the economic expert on TV the other night was full of hot air. In the end, the Supreme Court has put an end to the madness, calling Buhari’s democratic principles into question and extending the validity of the old notes to December 31, 2023. It took longer than expected, but reason has prevailed.
The model vs the underlying risk
I’ve had a lot of time this week to think about the hire-purchase model in the wake of this news report that showed that Moove drivers were protesting in Lagos. If you live under a rock, Moove is the startup that allows drivers to buy new cars (for ride-hailing) with a hire-purchase model. It also links them with Uber, making its payment collection from the drivers fairly easy.
If you live in Lagos and Accra, then you probably know as those super tiny cars with those red Moove stickers on the windows. In Ghana, it feels like you see them everywhere and in Lagos, they’ve formed the backbone of Uber Go, a value category for Uber. It feels like a brilliant, win-win for Uber and customers, but the drivers say that they get a sour deal. Per this TechCabal article, “The drivers say that they are forced to work for 12 hours, complete 12 rides daily for 6 days a week, and remit $20 (₦9,400) every day to Moove while still having to pay a commission to Uber.”
If your instinct is to bash Moove and think of them as this evil corporation, that’s completely normal. But when you do the maths, you realise that it’s an impossible situation. The hire-purchase model itself is simple, allowing drivers to use the car and earn money while repaying weekly. Where the math struggles a bit is the pricing of new cars in Nigeria, the absence of any robust car financing options, and basically pricing in the risk.
With the car priced at N9 million, the cheapest interest rate I could find on cars was 20% (Alt Drive by Sterling). When you realise that the company has to also price in the risk of the loans, it makes the maths a lot more difficult- I think about it a lot like the retail lenders. Most digital lenders have high interest rates because the majority of the population can’t access loans. It makes the argument that most of these loans are subprime.
So what gives? Much like the retail lending sector, there need to be more (and bigger players) that offer auto-financing. GTBank’s QuickCredit for instance, crashed interest rates to an industry low 1.33% monthly, eventually forcing others to have fairly reasonable rates. We’re still some way off, but you get the sense that there’s progress in that sector. I feel much the same way about Moove’s model; the risks are high, the cost of financing is likely equally high, and drivers will always feel taken for granted given how long and hard they have to work to repay weekly in the middle of biting inflation.
That’s about it for this week!
What I’ve been reading
Klarna posted a loss of $1 billion in 2022, its highest ever
Nigeria’s wonky currency redesign policy stalls growth
A tale of shipwreck, murder and mutiny
See you on Sunday!