Business Archives - Page 15 of 20

The Beginning of New Things

Something magical happened last week – the average man on the street didn’t even notice or cared but then it would probably have more influence on the fortune of this country than anything else that ever happened to us.

Well, GEJ didn’t resign – that’s too obvious. BH didn’t declare cease fire – that probably won’t happen anytime soon.

The dudes who wanted to buy our electricity infrastructure finally plunked down the balance of the money to buy hope and faith. Of the 15 consortia itching to have some electric shocks bring us back to life, only the folks gunning for the Enugu Distro couldn’t pay up. That’s sad because all they need do was ask me, I could have extended some cash advance, after all, this is for Nigeria. Ok, that’s a joke. If I had that much cash, I wouldn’t have to endure many things day after day.

Now that they have paid up, GEJ will hand over PHCN to private sector and we believe that this would be the beginning of good things in Nigeria. I’m so giddy with excitement. Imagine even 12 hours of uninterrupted power each day and then gradually they upgrade to 24/7. Think of how much we would save from not buying diesel and petrol to fuel generators? Think of how much it even cost to get those damned generators in the first instance?

Cost of business would drastically reduce for everyone. Businesses would flourish. More cash means more things to buy. The middle class would resurge. Maybe if life is easier for everyone we would be less easy to bribe to elect stupid officials, which is maybe.

But what happens to the folks that bring in generators to sell? Demand would nosedive – same happened to the importers of motorbikes when Fashola pulled the plug off Okadas. Demand for petrol and diesel would also bottom-out.
There would always be losers and gainers. In this instance, probably more gainers. If GEJ could pull this through, his name would be written in gold. I’m dead serious. I’m not praise singing him but electricity is the biggest problem we have in Nigeria, after mediocrity.

Blackberry's Lunch Up for Grabs

About 3 years ago, I predicted that Blackberry would eat Nokia’s lunch. It wasn’t a prediction that required too much clairvoyance, it was apparent that Nokia was running down a slippery slope. Too bad, Blackberry ate not only the lunch but also the dinner. As far as Nigeria is concerned, Nokia is going through a time of famine. Nigeria is not the aberration; Nokia is actually next to dead; a permanent lodger at the business ICU for the past few years.

But then the story is going around full circle for Blackberry. You would wonder if this is not stale news considering that Blackberry is now getting unearthed in archeological digs in the US and other places. Well, in Nigeria the story is different.

Blackberry has been on the decline year after year for quite a while but the performance in Nigeria has been different. Because the Blackberry was the easiest and cheapest means of going online for the average folks, the sales was huge. Despite that RIM (before becoming Blackberry) treated Nigeria with contempt. No regional office, no full warranty for devices sold here.

BBM was a nice feature – you could chat all day long without additional cost of SMS. Mobile web, when available, was also nice. Most people access their emails and other things via the BBM only. Some even got a workaround on BB service on Airtel where the BB device becomes a mobile hotspot. MTN’s too mean; they never allowed that.

While I don’t know any Nigerian without a phone, it got to a level where I didn’t know any middle class folk without a Blackberry. There is even a movie about the darn thing; the movie was as crappy as every single Blackberry service.

Then Samsung and others discovered the Nigerian’s love for everything shining. For the last few months, S3 and S4 have been flying off the shelves as quickly as they could be stocked. The telcos also wised up; now there is plethora of data plans every Johnny can sign up for. Unlike the BB service where the data limit is uncapped, the mobile plans have Fedoras on them, you browse hard it finishes fast.

Why are guys dumping Blackberry? Because it is the crappiest phone you could have. It is slow; buggy; dies on you without a care; no local warranty. So you are practically on your own. Try to reboot a BB device and you would see a child grow up into an adult before it comes by. Everyone thought the Z10 would provide redemption, but alas, it didn’t.

So once again, it is swan song for another device. Blackberry would be way of the Dodo by December this year. Mark my word.

Do I feel bad for them? Not at all! I hardly feel bad about anything.

POS is a Screen-door on a Nigerian Submarine

Sometimes I find it humorous seeing banks wring their hands at the disastrous investments made in POS. As the CBN was hell-bent on dragging each off us across the generational divide of cash versus electronic payment, it found willing allies in banks.

Don’t get me wrong, I’m all for electronic payments or commerce. It is faster, cheaper and more difficult to hide or do frauds. Frauds do exists, like it does even at your church parish, but it is way easier to trace although someone also said it is also easier to lose the shirt on your back.
That’s that for the digression.

What riles me is the apparent lack of thought on how these POS would work. The emphasis on POS, just another means of payment, was unhealthy. Unlike ATMs whose utility can be easily seen, POS can much dodgier.

And they don’t come cheap. Even after rebates, extensive bidding war and all that, a single box can settle you back as high as N70K. Since these are physical electronics items, the bean counter always insist to depreciate them fully over four years which comes to about N1,458 a month.

These tiny little beauties need more care and attention than an over pampered prima-donna. You could expect at least N2,000 spent on visitation, network connectivity and paper roll in a month. So for a single POS to breakeven, it must make income of N3,458 every single 30 days. Or is it? Not at all!

You see, in the POS business, like the proverbial Hong Kong Triad Mafia Warlord Jinja, almost everyone takes a slice of the commission made to be surrendered by the hapless merchants or mama oloja. But then only the bank that deploys the POS is made to pony up the investment upfront. But they only get to see 57.5% of the commission if and only if the acquirer is also the terminal owner. That is not most of the case but for the sake of argument, let’s imagine it’s so. So for our dear bank to make money, it must find a way to ferret out at least N6,014 worth of revenue from the transactions. So how much actually transactions would the POS do to make the merchant part with this? As commissions are fixed at 1.25% of value, that POS must grace N481,113 worth of successful transactions.

That sounds easy until you consider how treacherous the networks have been. That little POS darling sitting on the table must constantly dial home over GSM or internet. GSM is very common but dubious while the internet is expensive. You wouldn’t even smell any of that for N1,000 a month. So most often than not, the POS doesn’t work, cardholders are frustrated and many a merchants have used POS as a basketball or even squashed a roach with one.

The industry today has about 110,000 POS deployed across town with only about 14,000 seeing active duty. The rest are simply having fun and sipping Piña colada in some random warehouse. The active ones were able to push out about N11B (March 2013 – verify the number, I could have made it up) in total but the average income across the whole POS portfolio is just a little north of N1,200. There goes the POS investment.

So is there hope for POS? Yes but not the way we currently run it. Even then there seems to be another channel doing way better than POS.

Right now, I need to lay off ranting a bit. I will discuss the sexiness of web in another post soon.

Nigeria has 17M Internet Users, More or Less

Some people have been throwing some fantastical numbers about Nigeria having 43 million internet users.

I really don’t know who cooked up this ultra-sloppy data but no wonder the over-creamed salad of consultancy advices smell like rancid skimmed milk.
If Nigeria has 43 million internet users then I probably have a pink elephant, with wings, prancing around my backyard.

So how many do we have? Judging from MTN’s latest financials (2012), they have 3.8 million smart devices (those that can consume internet without choking up – actually MTN is so parsimonious that not even a 12K US Robotics modem can choke on it) and 201,000 dongles. That comes to 4M internet devices (many being fondle-slabs). Since MTN has 47.5% market ownership, we can extrapolate 8.42M internet devices. If we are optimistic, can we argue that 2 people use a device (Nobody shares my phone with me though). Maybe 17M users. Far cry from 43M.

Why this 43M magical number is apparently not wrong to smart pant consultants baffles me.

Crashing the Cost of Banking: The Bitter Sweet Experience

The Central Bank (of Nigeria, if you really want to know) has been at the fore-front of financial inclusion, and oh, at the forefront of cashless economy.

Obviously they decided to mash the two together.

Kudos can be given to CBN for forcefully yanking our sorry backside from comfortable banking to make things really cashless. Considering that government and regulators are not known for speed or innovation, this is extremely commendable.

So, the CBN started the cashless thingy, did a million road shows and I guess the people we hardly see, the real banking customers, complained about the cost of everything. CBN came back and said, “From December 17^,2012, thou shalt not demand for N100 when your customers use other banks ATMs again!”

What?

You see, the N100 from ATM is almost synonymous with N20 collected by Askaris. You can’t dodge it. But then it cost money, I mean real money – mostly in Benjamins, to make the ATMs and other e-things work. Nothing goes for nothing.

The NCC came around and said, “From February 2013, thou shalt not collect more than N4 from SMS sent within Nigeria.” That is going to hit the pretty backside of SMS alerts. That itself is a story for another day.

Well, the CBN is not done yet – there wouldn’t be any minimum balance any minimum balance anymore. By this time, bankers are looking around bewildered.

Ok, so where do this all lead to? Simple English: Financial Inclusion.
The reality is, the cost of banking could be a barrier to quite a number of customers. Better put, most customers. Take the annoyances – COT, minimum opening balance, minimum balance, ATM fees, transfer fees, bla bla. Customers simply run for the gates. By crashing the fees, CBN is making sure no one has a real excuse for not having an account.

I can see this game evolving over time – I expect that CBN might banish some other fees, put a max on interest that can be charged on loans, a minimum percentage that must be lent to SME (wait, what happened to that 10% of PBT to be invested in SMEs?). Some even think the days of COT are numbered.

The take from everyone is this – in the short term, there would be a dip in revenue but with rapidly growing number of customers flocking to the banks and e-channels, the revenue and potentials will pick-up. This happened in telecoms, I hope and sincerely pray it happens in banking.