Investors update: Nigeria abandons currency peg in major policy shift

Nigeria abandons currency peg in major policy shit

Highlights

• Nigeria’s central bank allowed the naira currency to drop as much as 36% on the official market on Wednesday, days after President Bola Tinubu suspended the central bank governor who oversaw much-criticized multiple exchange rates.
• A web of multiple exchange rates under Godwin Emefiele had led to foreign currency shortages and made it difficult for investors to take money from Africa’s biggest economy.
• The regulator had removed trading restrictions on the official market, which drove the naira to a record low of N750/$1 on the official market, down from Tuesday’s low of N477, Refinitiv Eikon data showed.

Source: Reuters

Our Takeaway

Tinubu took over a weak economy with high debt and decreasing oil production. However, he has pledged to revive the economy and requested public support for difficult choices. Foreign investors considered forex restrictions a major obstacle to investing in Nigeria, the largest oil producer in Africa. The new president’s primary goals were to unify the exchange rate and eliminate an expensive subsidy and accomplishing these tasks within the first two weeks of his presidency has pleased the markets with the stock market soaring to its highest level since July 2008 this week.

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Kenya’s Peach Cars raises $5M in seed investment

Highlights

• Kenyan automotive marketplace Peach Cars has closed a $5 million seed round led by Japan-based The University of Tokyo Edge Capital Partners (UTEC).
• Other angel investors, including Shintaro Yamada (founder and CEO of Mercari), Peter Kenevan (VP, Head of Japan at PayPal), and Hiroaki Ohta (general partner at Japan’s Waseda University Ventures) participated in the round.
• The startup, founded in 2020 to democratize car ownership in sub-Saharan Africa, starting with Kenya, will use the money to grow the business, hire more talent and double down on R&D as it expands its tech solutions.

Source: TechCrunch

Our Takeaway

With about 50 million cars on African roads, the continent accounts for just 1% of global vehicle fleets. More so, the majority of vehicles are passenger cars and second-hand, that is, not brand new. Like every populous developing region, the large market for used cars, which is dominated by unorganized dealers and classifieds, has attracted players looking to digitize sourcing and distribution. Peach Cars is similar to Autochek and Moove but they differ in that the latter two are more on the asset financing and management side with B2C or B2B2C models, while Peach is a pure C2C marketplace like Jiji.

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Pezesha partners Kyosk to provide inventory credit to merchants

Highlights

• Kenyan fintech startup Pezesha has partnered with the retail distribution platform Kyosk App to enable Kyosk merchants in Kenya – and soon in Uganda – to access affordable inventory credit. 
• Founded in 2017 by Hilda Moraa, Pezesha offers a B2B digital lending infrastructure focused on providing affordable working capital to financially excluded SMEs in Sub-Saharan Africa. 
• Through the partnership, Kyosk merchants will enjoy the convenience of placing inventory orders on the Kyosk app and leveraging stock financing to pay on credit enabled by Pezesha.

Source: Disrupt Africa

Our Takeaway

Access to capital remains a significant barrier to the growth of many small businesses in Africa—available data shows a $330 billion financing deficit for the small enterprises that make up 90% of businesses on the continent—and it’s a problem several startups and foreign investors are particularly keen to address as it promises attractive returns. Pezesha claims to have extended loans to over 100,000 businesses; its partnership with Kyosk should ensure a steady cash flow for the merchants, allow for increased supplies, and enable them to meet the high demand for goods from their customers.