Who will save Nigeria's small business owners?
Who will save Nigeria's small business owners?
Opening a business account in Nigeria is the 9th wonder of the world
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Nigeria is the land of the side hustle. I could hit you with stats about the number of small business owners in the country, but I don’t think that will do. If you live in any Nigerian city, anyone and everyone has a side hustle, even the people whose salaries are your prayer points. On one level, it speaks to the economic uncertainty in Nigeria and how side hustles are some kind of insurance. But on a broader level, an unemployment rate of 33.3% means people start small businesses to survive.
These days, it’s impossible to check Whatsapp stories, Twitter or Facebook without half your contacts/friends trying to sell you something. My customer is on your timeline. But here’s the thing; getting people to buy anything from an online business in Nigeria can be tricky, even if you’re Jumia. One of the problems is that it’s difficult to know if an online business is reliable or real. Let’s not even get into quality control, customer service or logistic
One workaround for trust is if these small businesses have corporate accounts. If these small, often online-only businesses are registered and have corporate accounts, they earn an extra degree of credibility.
This kind of thinking should translate to more businesses accounts. Yet, one report says that only 51% of small business owners in Nigeria have business accounts.
Have you tried to open a corporate account in Lagos?
Nigerian banks when you want to open a corporate account
Trying to open a corporate account in Nigeria is difficult and complex. You need references, forms, and requirements longer than your arm. In a cursory online check, I found one legacy bank that asks for 13 documents before you can open a business account. When you have those documents, you will likely need to “know someone” in the bank to expedite the process, and that may take 2-3 weeks.
“Almost any business owner will tell you that business banking is broken. Legacy banks provide an outdated, underwhelming user experience.” -Jesse Gansah, CEO of Float
I rarely agree with the criticism of legacy banks by fintech startups because it often feels like part of a narrative, but every jab at business banking provided by banks is spot on. Look, you can climb Mount Everest three times in your lifetime and still think that opening a business account in Nigeria is an actual strongman test.
The upside to all of this dysfunction is that fintech startups are now offering business banking solutions. Brass offers current accounts as a standalone offering, with their website saying that it takes 1-3 days to set up said account. They also say they only need four documents. Prospa, which says only a tiny portion of its business is banking, still has interesting offerings for small business owners. The company raised $3.8 million this week. It’s also curious that some of the startups offering these simpler, easier to open business accounts are built off the backs of commercial banks.
It makes you wonder: if banks can provide commercial banking as a service to fintech startups, why isn’t it something they’re offering to their millions of customers? It feels like banks are about to miss a PiggyVest moment here.
More Nigerians are embracing digital services and with MTN and Airtel expanding their 4G capabilities, this figure will continue to rise
For years, banks have given negligible returns on savings to depositors, and today, Lord knows I never leave more than monthly spending money in my bank account. I’d rather use a Cowrywise/PigygyVest to get some fair returns. If I can’t beat 18% inflation, I might as well reduce the speed of my losses.
The bottom line for me is that there’s a big opportunity here. It might not be as glitzy as savings, but it’s an opportunity nonetheless.
Speaking of big opportunities, let’s talk about Jumia…
Should Jumia make a BNPL play?
In August, I wrote about Jumia’s dark secret and how it might be the game-changer the company needs now that its primary focus is grocery delivery. This doesn’t mean that Jumia no longer sells laptops, electronics and more expensive items. It only means it will not provide those famous big discounts on said items.
“In Jumia's early years, they were big on advertising phones, laptops and other tech stuff. They were especially focused on selling smartphones and even got into a price war over said phones with their rivals, Konga. In the end, that rivalry had only one winner, Transsion — you know them as the people who make Tecno, Infinix and itel. Seeing as the “let us sell Trassion phones at massive discounts” strategy didn’t translate into the market dominance Jumia was hoping for, it was time for a change.” - Me quoting myself, what a flex.
Today, Jumia has enough cash to be around for years, so I think it’s smart for the company to make some sensible experiments. One of those experiments can very well be the Buy Now Pay Later (BNPL) model. BNPL has become the talk of town after Affirm, a BNPL giant, bought a payments platform, Returnly for $300m.
Let’s back up a little: I’ve always thought Nigerians need decent asset acquisition loans. Every year, students go to university and buy laptops by paying in full, missing an opportunity to start building their credit score. If you argue that these students may not have sufficient pocket money to make this practical, how about the army of workers in major cities like Lagos and Abuja? To be sure, some companies offer this service, but they’re usually expensive - I'm looking at you Carbon Zero and AltFinance. CDCare is one of the exceptions to this pricing problem, but I haven't gotten around to using them yet.
Back to Jumia, the company started offering loans this year, and one source tells me that the digital lender, QuickCheck partners with them to make those loans. I've always wondered what offering loans could do for Jumia, but with 6.9 million users (2021), and all the data it has on those customers, it should be easy to offer asset acquisition loans.
Why give payday loans or trouble yourself with unprofitable discounts when you can use useful data points to provide something more valuable?
It seems so straightforward that I fear I'm missing something here, so please let me know in the comments the issues I may be overlooking. I'll be picking a comment at random and sending the person one of our t-shirts for free.
Bonus: Last week Friday, I asked, are the big dogs slowing down? That question was because the H1 results from Zenith showed that growth was slowing. This week, Stanbic Ibtc's H1 2021 results showed that profit after tax was down by 50%, and the Orange Bank also reportedly saw a 15.7% dip in profits for the same period.
That's enough reporting for one day, let's talk about what I've been reading. This week, I've read a ton of interesting things, and it was a bit of a struggle to pick the top five…
What else I'm reading
Brazilian Butt Lifts (BBLs) have become really popular despite their risks. Why do people keep getting the procedure?
Slack is one of my favorite work tools, so it was incredible to find this memo that was sent to the team that created the app in 2013
Nigerian legislators, who earn anywhere from N8-N13 million monthly are reportedly fleecing their legislate aides who earn as little as N200,000 monthly.
I found this beautiful profile of Michael K. Williams and his struggle to kick his drug habit. RIP Omar.
T.B Joshua was one of Nigeria's most popular pastors, yet his preaching was simple to the point of being crude. How did he amass such a following?
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Have I got Friday plans, you ask 👀
I'm still taking a deserved alcohol break so no shenanigans for me this weekend. I'll be watching reruns of Ted Lasso or Seinfeld, two of my favorite shows. See you on Sunday!
Chief, big fan and promoter here.
I'd bet Jumia's next play is an online payments one across all 11 countries they are in.
Where make I put address for the merch? 😜
Hello there. A new reader of your newsletters from Twitter. Just clocking this can also be a social space for interaction on insightful topics like this, and it's nice, it's on a lighter note.
Ok, now to my comment proper. Take it from a guy who works in an Equipment finance startup. Typical Nigerians would go to any lengths to default/evade repayments.
Also considering the FX impact on the prices of phones and devices (and inflation). The markup to cater for that would be a high interest rate for the end user.
Lastly deploying asset recovery officers to customers locations would be too tedious to manage, seeing that Jumia have also outsource logistics, but if they outsource the recovery operations entirely, they could keep a lean model (hmm)
In a nutshell, with a good model to mitigate these aforementioned risks, in a sane country, it should be a success, but Nigerians still part of Nigeria's problem. So....