Nigeria’s indefinite Twitter ban and other recent policy moves by the government are threatening to destroy one of the country’s fastest-growing industries, its Fintech sector, experts have told VICE World News.
“Like most people, I heard about [the ban] for the first time on Twitter, which is where it was announced, and the next morning when I woke up, it just wasn’t working anymore,” Oche, a communications director with one of Nigeria’s leading Fintech companies tells VICE World News. The decision on the 4th of June to ban Twitter was initially met with disbelief, closely followed by outrage, and now, what looks like acceptance, as most users have adopted VPNs as a way of circumventing the ban.
While Twitter had over the years become a tool of social change for young Nigerians, Raymond explained that for small business owners and entrepreneurs, it also functioned as a marketing base.
“The first three jobs I ever got were from seeing tweets or retweets of job ads,” Oche, who spoke on the condition of anonymity to speak openly, says. “And right now, I don’t think any company will be coming on Twitter anytime soon to share information on a job vacancy.”
On the 4th of June, Nigeria announced a total ban on Twitter, disconnecting over 30 million of its people from one of the world’s most popular social media platforms. The ban came after Twitter deleted a controversial tweet from President Muhammadu Buhari that appeared to threaten violence against separatist protesters. The Nigerian government described the move as “capable of undermining Nigeria’s corporate existence”. But many view the suspension as a direct response to the deleted tweet as well as the platform’s role in the anti-government #EndSARS protests of 2020.
This isn’t the first time decisions by the Nigerian government have inadvertently undermined the country’s nascent Fintech sector. In recent years, with startup and innovation culture finding success across the continent, Nigeria has undoubtedly become one of the most attractive investment centres. According to a report by consultancy McKinsey, Nigeria’s Fintech sector raised more than $600 million in funding between 2014 and 2019.
The Nigerian tech scene, buoyed by a large pool of talent and increasing mobile phone penetration, has often found innovative solutions to fill gaps overlooked by traditional banks and the state. Across the board from education to agriculture, young Nigerians have used technology to solve unique socio-economic challenges, with financial technology enjoying the most exponential growth among all tech-related solutions.
Flutterwave and Paystack – two Lagos-based money transfer platforms – have recently secured sizable foreign investments. Flutterwave received $170 million from a consortium of foreign investors, while Paystack was acquired by US payments giant Stripe for $200 million.
These deals have validated tech as a viable career path in a country where 62 percent of the population is under 25. “We believe the digitisation of financial markets in Africa has created a real, lasting impact in the lives of everyday people and businesses within Africa, and beyond,” Ima Ekpo, Brand Manager at Chaka Technologies tells VICE World News. “We’ve created more access to financial services, hereby fostering more financial inclusion and capital market participation than ever before.”
The unquestionable growth of Nigeria’s tech space is, however, being threatened by structural and political roadblocks. This was highlighted in a fDi Intelligence report which showed that although Nigeria had the highest volume of startups on the continent – over 750 – they raised only $64.1 million (£46 million) in funding in 2020, in comparison to South Africa’s $241 million (£175 million). The report also says that Nigerian entrepreneurs “must contend with stifling government policies, infrastructural issues such as poor internet speed, access and connection, and a host of other systemic challenges.”
On the 5th of February, a directive issued by the Central Bank of Nigeria (CBN) announced a ban on the exchange of cryptocurrency, going further by asking banks to immediately close accounts that had exchanged cryptocurrency.
Nigeria has the world’s second-largest peer-to-peer (P2P) bitcoin market and the largest in Africa, with crypto trading increasing yearly since 2015. Earlier restrictions made by the CBN on foreign spending led some banks to limit monthly foreign transactions to as low as $100 a month, driving the crypto market’s growth with users tapping into cryptocurrency as a payment and trading tool, as well as a hedge against the falling value of the Naira. Furthermore, unsatisfactory customer service, exorbitant rates and exploitative practices also knocked Nigerians’ confidence in the country’s banking sector.
Although the CBN justified its new directive by citing a high risk of fraud in the crypto market, John Colston, Chief Marketing Officer of Yellow Card Financial, a popular crypto exchange platform with 50 percent Nigerian users, says, “there are many tools and software in the market that can be used to track and audit vast amounts of chain crypto data, making it almost impossible to successfully get away with crypto fraud.”
“The people talking about this have just refused to research the issue,” says Financial analyst and crypto market expert, Paul Obinna. “According to a report by Chainalysis, in 2020, illicit activities from crypto-related transactions were at 0.34 percent. This was a drop from 54 percent in 2019. Crypto exchanges are investing in a lot of measures to curb this. KYCs are stricter, with transaction limits on customers who haven’t done their KYC are restricted.”
In any case, Nigerians are finding ways to trade in the crypto market despite the ban. Tamilore, a crypto enthusiast who also works with one of Nigeria’s biggest commercial banks, Guaranty Trust Bank (GTB), tells VICE World News that the ban has ironically caused a surge in crypto adoption. “The ban makes it harder to purchase, but the truth is, there is no Nigerian who wants Crypto who can’t get it,” Tamilore, who spoke on the condition of anonymity to speak openly to discuss a matter sensitive to his job, says. “Every Nigerian knows someone who knows someone who can help them get into the market. They just have to ask.”
Months after the ban in February, the government took several further measures which experts say may endanger the growth of Nigeria’s Fintech scene.
In April, the government stopped Fintechs from offering Bank Verification Numbers – a security measure against money laundering, fraud, and other forms of corruption – as a service. In the same month, the Securities and Exchange Commission of Nigeria (SEC) warned Nigerians against investment technology platforms such as Bamboo and Chaka that allow users to trade in foreign stocks.
The government has presented these policies as a way to strengthen the nation’s economy, but there are lingering questions about whether the government is cracking down on a sector that played a key role in recent anti-government protests.
Beyond its contribution to e-commerce, just like Twitter, the Fintech sector played an instrumental role in supporting the protests through financial donations, crowd-funding, and by raising public awareness. For example, at the height of the movement, Feminist Coalition, a women-led organisation that helped raise money for the protests, announced it was shifting to bitcoin as a way to source for donations after several of the group’s bank accounts were suddenly frozen.
Now, in a bid to avoid future run-ins with regulators, most Nigerian Fintech companies – including those who openly supported the protests – have been relatively quiet about these regulations, and for good reason.
As the Nigerian government continues to push for a seat at the table of digitisation, the mercurial nature of its policies raises concerns for both Fintech startups and foreign investors.
“Everywhere in the world, investors like predictability,” Oche says. “So, the moment an environment becomes volatile, it becomes difficult to find or keep investment. The more erratic our government is perceived to be, the more difficult it would be to attract money.”