What is your NEW business model for a changed Nigeria?

There will be few dominant companies. The power of the state will fade because collective tax revenue will drop to handle many projects. That is typical when GDP growth stalls even as population increases. The evolving Russia in the collapsing USSR comes to mind. Yes, a time when enterprises controlled by some become super-eminent. 

When a Sokoto businessman buys petrol at N2,000/liter and another businessman in Lagos spends N600 for the same product, you can see that Nigeria is evolving and emerging at a scale not many understand. If that playbook continues, you  will have many things decoupled across regional lines.

We expect inflation to stay up as the government prints money to make up for corporate tax revenue shortfalls.   The question for you as a business leader is this: what are your plans? Do you need to change your business model?

Nigeria will print money because it needs to find ways to make up for these corporate losses, and as it prints the money, it will also offset the apex bank’s monetary policy of rate hike which is done to tame the economy, hoping to cool inflation. But with Ways and Means (flooding the economy with magic money) it will cancel out the impact of those hikes by the Central Bank of Nigeria with one result: inflation stays high and misery scales in the land.

Yes, despite everything happening, Nigeria presents GREAT opportunities. But to unlock the opportunities, builders must invent new business models. OPay is now bigger than three of Nigeria’s largest banks combined on market cap, according to Techcabal; “In early 2023, its stake increased to 9.4% after it sold Nanobank, its Asian fintech subsidiary, to OPay in return for equity in the company. Following the transaction, Opera told investors its 9.4% stake in the fintech was valued at $253 million, according to an April 24 filing with the US Securities and Exchange Commission (SEC). It implies OPay has a valuation of $2.7 billion, compared to its previous funding round which valued the startup at $2 billion.”

What is your NEW business model for a changed Nigeria?

LinkedIn Summary

Nigeria has changed and is also changing as I write. The next few quarters will be a season of new business models. Most of the things we have been doing have expired. Yes, with no petroleum equalization fund, be aware that many regions are now disconnected and disparate at scale. If a factory buys petrol at N2,000/liter in Sokoto, and another pays N600/liter in Lagos for the same product, you will agree that many vectors have moved.  

Hello, regional autonomy is already loading before any legislation! Why? If petrol costs controlled by the center could be non-unicorn, across states, many other things will follow.

This era will produce few dominant companies, and if you understand how to build, opportunities remain.

Comment 1: I’ll speak solely on the “valuation” of the banks since it’s my area of expertise. Now when it comes to Fintechs you should know since you’re in the ecosystem that with venture capital or private equity investments, they are now a valuation game based highly on raised capital and certain metrics not used by traditional banks. With that being said, Opay being worth what it is against traditional banks is nothing new. Even in the UK, Revolut is worth £30b same as Barclays. Revolut was founded in 2015, Barclays 1690. This will keep happening, Monzo is ‘valued” at £5bn and they are even younger. This isn’t some new model, it’s certainly not limited to Nigeria. This was expected and will continue to happen.

My Response: You made the point. If you want alpha, make something new, just as OPay did in the fintech space. In other words, it may seem there is no opportunity, but if you invent new business models, you can create value. That is the message.

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