Here are three key stories from the African business landscape to keep in mind this week.
A fuel subsidy palliative
Niger has received a $750 million loan from the World Bank to support its social programs as the country prepares to phase out fuel subsidies. The loan comes ahead of the Nigerian government’s plans to phase out fuel subsidies, a move that has drawn mixed reactions from citizens. Proponents argue that the subsidies are expensive and inefficient, while opponents fear that removing the subsidies will lead to higher fuel prices and further economic hardship for ordinary citizens.
Africa’s largest economy has set aside $7.3 billion (3.36 trillion naira) to spend on gasoline subsidies through mid-year this year, after which it has made no provision for the cost. This money costs more than it spends on health care and education. The new palliative fuel subsidy scheme aims to improve social safety nets, provide access to better healthcare and education, and promote job creation in Nigeria. Meanwhile, receiving yet another loan from the World Bank has raised concerns about Nigeria’s rising debt levels and the country’s ability to meet its long-term debt obligations.
Another gloomy forecast for Africa
The World Bank has predicted a slowdown in Sub-Saharan Africa’s economy to 3.1% in 2023, below the global average growth rate. a report disclosed by the bank attributes the sluggish economic growth to several factors such as the ongoing COVID-19 pandemic, high inflation rates, rising debt and low commodity prices. According to the main bank, the slow growth will have an impact on poverty reduction and employment in the region.
The report further highlights that the sub-Saharan Africa region will face major challenges in the coming years due to limited fiscal space and mounting debt. The report urges governments in the region to prioritize policies that promote long-term economic growth, such as investment in education, infrastructure and technology.
Technology finance in Africa is slowing
Dates from Disrupt the latest report from Africa showed that funding for African tech startups fell 57% in the first quarter of 2023. African startups raised a total of $300 million in the first quarter of 2023, a steep drop from the previous quarter, when they raised $1.1 billion. The decline was sharpest in the fintech sector, which has been a major recipient of funding in recent years. Fintech startups only managed to raise $100 million in funding in the first quarter of 2023, compared to the $800 million raised in the previous quarter. Funding also fell in other sectors, such as healthcare, e-commerce and education.
The Big Deal also has its report recently, with the same pattern — down 52% year-over-year. In March, investors closed deals worth just $66 million. To put it plainly, we haven’t seen such a bad March since 2020 ($39.6 million – an outlier year due to the COVID-19 pandemic). It’s also down 91% from February, when startups raised $696.3 million. It also shows that investors closed fewer and smaller deals in 2023. In 2022, Nigeria and Kenya closed five and six rounds above $20 million in the first quarter, respectively. But this year neither of these two closed a deal over $20 million. The decline in funding has been attributed to several factors, including political instability, economic uncertainty and cautious investor sentiment.
ICYMI: Market overview
The market opened for four trading days last week when the Federal Government of Nigeria declared Friday, April 7 and Monday, April 10, 2023 as public holidays to mark Easter celebrations.
The NGX All Share Index fell 2.28% from last week to close at 52,994.13 points. The biggest winners were Nigerian aviation holding plc (20.99%), Axamansard insurance plc (15.79%), CWG plc (14.94%), Linkage assurance plc (11.63%) and Lasaco assurance plc (9. 09%). The biggest fallers were Eterna plc (-19.12%), Multiverse mining and exploration plc (-18.83%), Associated bus company plc (-16.22%), Royal Exchange (-15.38%), UACN ( -10.99%).
The naira ended the week at N462.25/$ on Friday at the window for investors and exporters.
Brent rough ended the week at $85.12, while US West Texas Intermediate (WTI) Crude Oil closed at $80.70.
The global cryptocurrency market cap stood at $1.18 trillion, as of 7pm Sunday, April 9, Bitcoin stood at $28,131.46, up 0.56% from last week, Ethereum gained momentum during the week by 4.13% to trade at $1,856.27 and the Binance coin was up 0.07%, to trade at $331.91.
shuttlesa Nigerian shared mobility company that enables individual and corporate passengers to ride multiple bus routes via an app has raised $4 million in a new funding round led by a Pan-Africa-focused venture capital firm Verod-Kepple Africa Ventures. The round welcomed participation from follow-on investors, including VestedWorldSheEquity, CMC 21 & Alsa, en EchoVC.
Egypt based Camel companies launched a $16 million venture capital investment vehicle called Camel Ventures for Investment I aimed at financing Egypt’s growing fintech startup ecosystem.