While the Central Bank lifted a directive restricting banks from “dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges” in December 2023, it began asking banks to block the accounts of p2p traders by May 2024. 

On August 23, 2024, a high court in Uyo, Nigeria, denied an application to unfreeze Patrick Okon’s Kuda bank account. The restrictions on his account were directly linked to crypto payments. In April, the Economic and Financial Crimes Commission (EFCC) asked a court to block over 1,000 bank accounts over crypto links. 

In March 2024, Nigeria’s financial regulators blocked prominent fintechs from onboarding new customers for five weeks as a currency crisis worsened. It moved against Binance on claims that the platform allowed for manipulation of the naira and detained two of the company’s executives. 

While the case against the detained Binance executive Tigran Gambaryan drags on, the CBN compelled fintechs to block any account believed to be trading crypto. The SEC, which issued last week’s crypto licences, also held several meetings in May suggesting that exchanges should block p2p transactions out of patriotism. 

These policy flip-flops make it likely that banks and fintechs will continue to distance themselves from crypto-related activities. 

“Crypto is still persona non grata. The CBN has not openly accepted it yet,” one bank executive who asked not to be named told TechCabal.

Banks are ignoring the provisional licences the Securities Exchange Commission  (SEC) issued to Quidax and Busha, said highly placed executives at prominent fintech startups.  

Omotimi Agama, the SEC’s director-general, insisted to TechCabal that “the CBN has lifted any ban.”

While Agama’s position is accurate, banks and financial institutions prefer to play it safe with the Central Bank, always choosing caution. 

“The devil is in the details,” a top executive at one of the fintechs told TechCabal.  “The [guideline] is confusing, and the processes are challenging.”

Chike Okonkwo, the founder of Gamic, a blockchain startup, that claims to have been speaking to the SEC since 2019, understands the banks’ position. 

“If that circular [greenlighting] the banking of crypto firms is binding, why can’t retail traders freely add crypto to the description of their banking transactions?”

Busha, one of the new licensees, is more optimistic and anticipates a better relationship between banks and crypto companies. 

“The issuance of the crypto licences is a critical step in maturing the industry. It means that users can engage with operators with increased confidence, which should generally deepen the market,” a spokesperson for Busha said. The company also claims that it is ready for whatever “tight but effective regulations” are deemed necessary by the CBN.

Until then, banks and fintechs will continue sitting on their hands in understandable fear of the CBN’s hammer. 

“Nigerian banking laws are not customer-friendly,” a highly placed fintech executive told TechCabal, adding that “Financial institutions [retain] the right to freeze any account they have reasonable suspicions about any infraction or illicit activity.”

Are crypto trades illegal? Two new licences and the CBN’s December 2023 directive say they’re not. However, one operations manager at a commercial bank states, ” We can only acknowledge the license after receiving instructions from the CBN, our regulator.”

According to a securities filing seen by TechCabal, the gross proceeds from the sale amounted to $99.6 million. The filing suggests an average share price of around $4.95 per share, slightly above Friday’s trading price of $4.90. On Monday, TechCabal reported that liquor and wine maker Pernod Ricard bought 1.27 million ordinary shares valued at around $6 million.

At least one Wall Street analyst estimates that Jumia will lose $65 million for the full year 2024 and in Q2 2024, its cash position stood at $92.8 million. 

Raising $99 million will significantly improve Jumia’s cash position. 

Jumia did not immediately respond to a request for comments. 

The e-commerce giant will use the funding to finance ongoing efforts to acquire more customers, and expand its supplier base and logistics network. It will also invest in improving the technology that supports its vendors and marketing vertical—a value-added service that it has been extending to its customers since 2021.

Despite missing its revenue targets in Q2 2024, investors remain bullish on Jumia’s ability to crack Africa’s e-commerce market. The company will need all the conviction it can get.

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Four people with knowledge of the matter told TechCabal that the downtime was caused by a problem with the website’s domain name system (DNS) configuration. 

“They had issues with their domain name registration, and they had to make some changes or move it to a different domain name service,” a Chief Technology Officer (CTO) at one of Nigeria’s biggest fintechs told TechCabal. He asked not to be named so he could speak freely.  

Those comments suggest that GTBank forgot to renew ownership of its domain name. It may have presented an opportunity for unknown persons to buy the domain name in the hope that the company would be willing to pay a significant amount. 

“If GTBank has already patented its [website] name, they simply need to report the matter to the domain host, and after a few processes they can retrieve the site,” said a web developer who asked not to be named. “It is not a matter that can be simply resolved in a day. It will take time.”

GTBank did not immediately respond to a request for comments.

Lapses in renewing a company’s domain name are common. In 2015, Google missed the deadline to renew ownership of “google.com,” and a former employee bought it for $12. Google, which also owned the domain service provider, Google Domains, quickly reversed the transaction.

Microsoft also forgot to renew ownership of the hotmail.co.uk website in 2003.

“The custodian of the email tied to the domain name may have simply stopped working at the bank and didn’t hand it over to someone else,” one developer told TechCabal. He also suggested that the bureaucracy involved in vendor payment may have delayed the renewal.

At the time of this publication, some GTBank customers could access the website while others couldn’t. The problems with access could be linked to DNS propagation, which refers to the time it takes for changes to the domain record to take effect across all servers.

It could also be caused by a security feature called HTTP Strict Transport Security (HSTS) that forces browsers to connect to the website only over a secure encrypted connection. Banks use this feature to secure customer information.

It is unclear at what price the global spirits seller bought the new shares, but Jumia stocks (JMIA) traded at $4.68 on August 6, the day Pernod Ricard made the purchase, according to an SEC filing by Jumia.  At that price, Pernod Ricard would have paid $6 million.

Pernod Ricard is a long-time Jumia investor and once held an 8.2% stake. The retailer issued more shares between 2020 and 2021, diluting Ricard’s position to 6.4%.

Jumia did not immediately respond to requests for comments.

Pernod Ricard confirmed the investment but did not provide additional details.

The share purchase shows the liquor maker’s faith in the African e-commerce giant whose share price dipped after it missed revenue estimates in Q2 2024. There were also concerns about share dilution from secondary sales. 

In July 2024, Jumia’s share price rose 252%, reaching a market capitalisation of $1.3 billion. Investors cited increased cash efficiency and a rejig of the business as the basis of their optimism.

In February 2023, the retailer laid off 900 employees and cut executive compensation. In December 2023, it shut down Jumia Food, a food delivery business that was burning cash. The company’s 2024 Q2 report shows its efforts are paying off, as losses narrowed to $19 million, half of its Q2 2023 loss.

Its 2024 financials also show that its number of orders has increased to 4.8 million despite cutting advertisement costs. Jumia credits SEO optimisation and customer relationship management for the 6% increase in users of the platform which currently has 2 million active users quarterly—a bankable metric for Pernod Ricard which distributes its drinks on Jumia directly and through third-party sellers who use the platform across Africa.

Two people with direct knowledge of the matter claimed that at least 120 employees, including full-time and contract staff of First Bank’s large operations department, were given termination letters in July. The head of transactions at the time was also fired. 

Those employees were accused of laxity in carrying out their duties and were told they should have spotted the fraud earlier. First Bank’s management team believed it was impossible for a fraud of that scale and timeline to have been executed without the knowledge of Adeyinka’s superiors.

“The CEO said there will be zero tolerance for supervisory negligence,” said one First Bank employee who asked not to be named so they could speak freely. 

TechCabal first reported the alleged fraud in May, showing how Adeyinka, who was the final line of authorisation on his team, carried on his scheme unnoticed for two years. When the incident was discovered in March, the bank tried to keep the matter under wraps, suspending several operations team members indefinitely. However, First Bank became more aggressive after the fraud became public.

Several employees were questioned by the Nigerian Police Force (NPF) and detained at the Lion’s Building for at least six hours, one person with direct knowledge of the incident said. Those employees needed to post bail before they were released. Restrictions have been placed on all their personal accounts except their First Bank accounts. 

First Bank did not immediately respond to a request for comments.

The blast radius may have extended farther. First Bank’s CEO at the time, Dr Adesola Adeduntan, abruptly resigned in April, eight months before the end of his tenure and less than a month after the fraud was uncovered. Adeduntan, who led First Bank for nine years and “left to pursue other interests,” was initially replaced as CEO by First Bank’s board in April 2021. 

The Central Bank blocked that move, claiming First Bank’s board acted without regulatory approval. It paved the way for Dr Adeduntan to serve an unprecedented third term. One publication claimed concerns over his tenure led to his resignation in April.

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Chowdeck currently delivers around 20,000 orders daily and is looking to more than double that number before the year ends, said one person with knowledge of the business. “[Chowdeck] will expand to other states in the South-South, safe regions in the North and the South-East,” that person said.

If Chowdeck hits its ambitious daily order target, it will make its ad business, even more popular. 

Chowdeck declined to comment for this story. 

Guaranty Trust, one of Nigeria’s top banks, advertised its share offering on Chowdeck’s app this week on a banner that has previously displayed ads for three other prominent brands. The food delivery company charges ₦250,000 per week for those ads, said one person familiar with the pricing. 

“[The company] can put a lot of ads up there,” said one person familiar with Chowdeck’s advertising.  If four ads are on the banner, the company can earn ₦3 million weekly without incurring additional operational expenses. The company is also working on personalising ads; “the adverts someone in Lagos will see are not the same someone in [Abuja] will see.”

Those slide–show banners aren’t Chowdeck’s only ad offering. It also offers push notifications ads that cost ₦250,000 per notification and ads on its famous brown delivery bags that cost ₦3 million for 10,000 bags, according to a rate card seen by TechCabal. 

It is unclear what the sales team, led by Kennedy Offor, has set as the revenue target for those ads. 

Finding advertisers is now part of the KPIs of the sales team, but they have not “aggressively started selling ads.”

If Chowdeck expands its ad business, it will be a boon to a startup that is also profitable after delivery, per a 2023 report. 

Mbagwu has over 15 years of experience in the financial services sector. He was previously head of business support at Unified Payments, a prominent payment infrastructure provider, and head of service operations at Access Bank.

According to Jumia’s 2023 filing, PalmPay is one of JumiaPay’s biggest competitors. 

Jumia did not immediately respond to requests for comments

JumiaPay is integrated as a payment method at the checkout of online platforms like Jumia—it processed about 39.5% of Jumia orders in 2023. It also has a standalone app that lets users make bank transfers, bill payments, loans, and merchant payments. One person familiar with the company said JumiaPay’s biggest customer is its parent company. 

JumiaPay processed $192 million in payments for 8.4 million orders in 2023, a figure that pales compared to the $5 billion monthly transactions that Palmpay reported in 2023.

Mbagwu will report to Sunil Natraj,  the CEO of Jumia Nigeria.

Mbagwu’s appointment comes as Jumia intensifies its focus on profitability. The company has laid off staff and shut down its food delivery arm to save costs and increase revenue which stood at $186.4 million at the end of 2023, per its SEC filings. Some of those moves have resonated with investors with its share price rallying to $12.16 at the time of writing this article, nearly four times what it began the year.

Raenest, Leatherback, and Vesti are pitching to several founders seeking new banking partners to park millions of dollars in operating capital, several executives at those companies told TechCabal. Some founders have proactively contacted those fintechs.

“My LinkedIn has been blowing up since the announcement, even without any moves from my marketing team,” said Ibitade Ibrahim, CEO and founder of Leatherback, who said they are already engaging 50 startups looking to create U.S banking accounts.

Raenest and Graph have pushed marketing campaigns on social media and prominent tech publications. 

“We also offer perks like same-day onboarding with two free USD cards and no charge on international transfers within the first two months,” Victor Alade, CEO of Raenest, told TechCabal on a call.

While some of these perks are compelling, some startups have switched to Brex, another US-based banking provider, over reliability concerns.

These African startups must deposit funding from investors and draw on those deposits to settle operational expenses. Other startups make frequent international payments and must stay connected to platforms like Stripe and PayPal.

“It is more of an access issue for us. I chose a bank that can keep the lights on,” said an e-commerce founder who switched to Brex when Mercury initially halted transactions on the company’s account ahead of the offboarding.  “We cannot afford to abruptly lose access to our accounts.”

Fintechs like Leatherback and Vesti tell founders that, just like Mercury, they directly partner with U.S-based banks with whom they have cultivated deep relationships that leave no room for unpredictability.

Ibatide claims Leatherback is regulated in about seven countries and has 60 partnerships with local banks in America and India. “With Community Federal Savings Bank, one of our local partner banks in America, we spent two years demonstrating that we have the  standard KYC and KYB processes and transaction monitoring process, giving them enough comfort.”

While some startups have begun to switch from Mercury, which gave them 30 days to close their accounts, some executives in Mercury alternatives who spoke to TechCabal say it may be too early to determine whether affected founders have favoured local options.

While Olaleye had offers from friends to put in money to keep the business going, he turned them down; he was spent. “I have lost faith in the food delivery business,” he shared. Yet he has not lost his entrepreneurial drive and is raising money to fund ShopNowNow, a new grocery delivery business. The new direction will put him in competition with well-funded competitors like GoLemon, PricePally, and Chowdeck.

“The grocery delivery will focus on large orders, with a minimum threshold of ₦25,000,” he said. It’s a different sort of beast from ChopNowNow, where the average order value was ₦1,000. The new grocery business will schedule deliveries in batches and will not be pressed for time like a food delivery service. 

Hard lessons from food delivery

ChopNowNow began as a traditional dark kitchen with one primary location to deliver affordable food quickly in the business districts of Lekki and Victoria Island. A dark kitchen meant it made food and could control inputs and quality. But it later included a dine-in option as it had space to spare.

With free delivery as one of its value propositions, this was the standard low-margin play that needed volume to break even. “The typical margin for restaurants like ours that sell meals at a low price was 30%.”

The promise of free delivery was the charm. “It worked like magic,” Olaleye recalls. ChopNowNow also used influencer marketing to reach its target audience, and at one point, the comedian, Mr Macaroni, was one of its influencers. The company grew from three delivery motorbikes to thirty within three years and expanded its distribution channels to other food delivery platforms that used an aggregation model.

The restaurant was listed on Jumia Foods, a food delivery platform that shuttered in December 2023, citing thin margins worsened by intense competition. ChopNowNow was also listed on OFood—an Opay-operated food delivery service that was once part of a super-app play by the fintech giant—and Glovo where it was a customer favourite. Business was good, and Olaleye who had recouped his initial investment in the bootstrapped business with some profit was optimistic about the future. 

Inflation pulls a fast one on ChopNowNow

The economy was about to pull a fast one on business. Food inflation, which began to rise during the COVID-19 pandemic, had worsened to 19.5% by mid-2022. As consumer purchasing power came under pressure, more people began classifying food delivery as a luxury. 

“Whenever we called customers, many said they had begun cooking at home.” 

The first thing to go was free delivery. ChopNowNow limited free delivery with its in-house fleet to areas within Victoria Island, where it had the most customers. As it withdrew the free delivery it had always promised, customers moved to newer discounted competitors. 

“There’s no loyalty in this market. You expect that after spending years acquiring users, the customers would stick around.” 

“They always run to the food delivery platform that can outspend others [in discounts and food delivery.]”

Like many restaurants that compete on price, ChopNowNow struggled to adapt to rising input costs. No matter how sharply the cost of ingredients rose, the restaurant was reluctant to pass on those costs to price-sensitive customers. Cost-cutting was the company’s only option.

Olaleye believes the circumstances would have been different if he had started targeting high-end customers or had a warehouse to store produce and absorb the shock of price fluctuations.

The arrival of food delivery apps intensified competition, with more restaurants coming online. The company remained at its current location and began selling off assets.

Today, Olaleye rejects the unique proposition that once helped him attract thousands of customers. He tells anyone willing to listen that free delivery is not the way to find loyal customers.

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“Due to recent changes in how we determine account eligibility, we are no longer able to support accounts for businesses with associated addresses located in these countries,” according to emails seen by TechCabal. With the new prohibitions, African startups incorporated in Delaware cannot open Mercury accounts unless the founders live in the U.S.

While Mercury cited those concerns, it has not helped that some affected countries have been on the Financial Action Task Force (FATF) Greylist since 2023. Countries on the list are subject to additional scrutiny because of deficiencies in money laundering and terrorism financing regulations. “Greylisting adds another layer of risk and complexity to businesses that already perceive Nigeria as a high-risk country for anti-corruption and other financial crime risks,” according to a 2023 KPMG report. 

Burundi, Cameroon, Central African Rep, DR Congo, Congo, Liberia, Mali, Mozambique, Nigeria, Somalia, South Sudan, Sudan, and Zimbabwe are the thirteen African countries affected by the restrictions.

“Mercury is going zero tolerance on banking companies in sanctioned regions. It is easier to close all Nigerian accounts than to spend extra effort on verifying legitimacy,” an executive at a Nigerian fintech who asked not to be named so he could speak freely, told TechCabal.

The restrictions follow the regulatory crackdown on commercial banks in the US that often partner with fintech startups like Mercury, in the wake of insolvency or ledger issues at fintechs Silicon Valley Bank and Synapse.  

In December 2023, Choice, one of Mercury’s banking-as-a-service providers, overhauled its KYC process due to concerns that partner fintechs like Mercury had lax user onboarding processes and breached money laundering or terrorism financing laws. 

“About 18 months ago, one of Mercury’s partner banks limited transfers to a ton of countries (including Nigeria, of course) to a $10k limit. So if you wanted to send $300k to Nigeria, you’d have had to do 30 transfers, which would be flagged,” Tomiwa Aladekomo, a media tech startup founder who uses Mercury, told TechCabal.  “So the new rule is likely because one of its partner banks has insisted. ”

In 2022, without warning, Mercury restricted the accounts of over a dozen tech startups, including those backed by notable American accelerator Y Combinator.  At the time, the bank told some users their accounts had been flagged and placed under review by its compliance team due to  “unusual activity.” 

Banks like Mercury have become very important to Nigerian tech startups that raise dollar funding from foreign and local investors.

“For startups, if you’ve received capital in the US, it’s easier to keep your capital in dollars in the US and only bring what you need for your operational needs to Nigeria,” Aladekomo said. 

“You can pay any of your foreign workers directly from the US, which is an easier place to do business with the world from. You can also do treasury management in the US (i.e. earn interest on whatever portion of your money you’re not using) in a relatively predictable economy.”

Alternatives for affected startups include Brex, Ramp, Wise or fintechs like Leatherback, Raenest and Graph.