In this interview, Chief Executive Officer, Kora, Dickson Nsofor, speaks to Temitayo Jaiyeola on the Central Bank of Nigeria’s digital currency, popularly known as eNaira, cost of remittances, and the African regulatory environment
How does the gap between the official naira rate and the parallel market rate affect remittance inflows into the nation? Do you think diaspora Nigerians would be motivated to send their money through official channels?
It is quite unfortunate that there is such a huge disparity between the official naira rate and the parallel market rate. Of course, there are a lot of bad actors taking advantage of the situation, and for most people abroad, they would be highly motivated to use the parallel market rate. Naturally, people tend to lean towards where they get more value, and in this case, I would guess that more diasporans are remitting their funds via unofficial channels.
Diasporan Nigerians spent about $2.94bn to send $34.8bn home between 2020 and 2021, according to the World Bank. This is one of the highest rates in the world. How can the nation lower remittance costs?
One of the best ways to reduce the high cost of remittance is to encourage healthy competition. Currently, we have the incumbent players taking market share. There is a high tendency for lower fees when several players are in the space.
For example, the fees Kenyan diasporans are charged to send money back home are lower than the fees Nigerian diasporans are charged to send money to Nigeria. This is because there are several remittance competitors in Kenya. The country has one of the most advanced fintech infrastructures. Therefore, the major way to solve this problem here is by encouraging healthy competition and having more players join the fintech space and wrestle to serve customers at a better price.
One of the promises of Central Bank of Nigeria’s digital currency is that it would boost remittances. Do you think this is realistic? If yes, how will that happen?
On the one hand, the Central Bank of Nigeria’s digital currency has its strength, and I think CBN has done a fantastic job in ensuring a cashless policy. On the other hand, CBDC is still new and may pose a different type of risk, but I’m confident that the CBN will find a solution to manage the cashless economy effectively.
Travelling across Africa is a tale of trying to change money into multiple currencies. How can Africa ease cross-border payments?
The major problem with Africa is the lack of interoperability across different countries. With fragmentation in the payment space comes loopholes and business malpractice. If we want to make transacting in Africa seamless, we need an infrastructure connecting all of Africa as though Africa were a country.
That’s precisely what we are doing in Kora. Kora is building a pan-African payment infrastructure that will enable local merchants go global and global businesses go local. Therefore, the ease of cross-border payments in Africa is dependent on an all-in-one infrastructure that can cater to the continent.
Mpesa in Kenya has shown how mobile money can drive financial inclusion in a country. But no other African country has been able to replicate that success completely. Why do you think this success has not been replicated and how can PSBs in Nigeria drive financial inclusion?
I believe every country has its cycle of growth in technology. Of course, Kenya might be ahead of most African countries, but other African countries are catching up fast. For instance, in Ghana and some other West African countries, we’ve seen the likes of MTN Momo, Tigo, and Vodafone Cash become so penetrative in the everyday transactional life of the people. So, for PSBs in Nigeria, I think it’s just a matter of time before we all catch up.
What state would you say Nigeria’s payment ecosystem is? And how does it compare with other African countries?
I believe Nigeria has one of the most robust payment systems in the world. The Central Bank of Nigeria and the payment department in the CBN is made up of top-tier professionals. Systems like NIBSS, Interswitch, and Kora exist because of the robust framework and policies designed by the CBN. Now, we are positioned to leapfrog every technology cycle, especially in the payment space.
What are some of the challenges of running a tech company on the continent? Secondly, KoraPay recently had an issue in Kenya, could you throw some light on that?
Running a highly regulated business in the payment space in Africa will always have regulatory risks. In our case in Kenya, we’ve been vindicated of all charges, and we have government-issued documents to show for it, which we will release shortly. Regulatory risks are part of the kind of business we operate.
Nigeria recently passed its Startup Bill, which is now an Act. How do you think this will impact the nation’s tech ecosystem?
I must commend the regulators for considering startups as major contributors to our internally generated revenue. The Startup Bill is the first step to many more developments to come. I believe the bill is a work in progress and a significant first step in recognising our importance to the nation’s revenue.
Tech investments into the continent has begun to dwindle, causing a rippling effect in the industry. How do you think startups should navigate this period?
Tech investments are an excellent stimulation to grow the ecosystem. However, startups should not forget the basics, which is growing revenue. It is not only African startups that are affected by the contraction of investments. Investment sentiments globally are currently not at their best. Entrepreneurs in Africa should focus on growing revenue to take care of their expenses. At the end of the day, a promising startup will always attract investment, whether in a good or bad market.
The CBN, through the NIBSS, recently announced plans to launch a domestic payment card. Do you think this will improve the payment landscape in the nation?
Of course, every effort made towards cashless payment drives and increases the adoption of financial technology in the country. Hopefully, this will cater to the unbanked and increase the penetration of online payments.