Week 1: Curated insights from a restless market observer
So this year, I committed to writing a piece a week. Why?
Partly to get over my perfectionist edge which waits unproductively for the ‘perfect moment’ or ‘perfect voice’ before releasing anything. But more importantly, it’s also the realization that deep thinking isn’t linear but more cyclical. (Read → appreciate new information → Write → comprehend wider implications of new information → …and the cycle repeats) With each cycle nudging me closer to a deeper level of insight.
This year, I’ve vowed to do less of mere information ingestion and more insight-seeking. Hence, each week, you can expect to hear a little something from me. My sphere of interests range from: Macroeconomics, African Development, FinTech, Emerging Markets, Business Strategy etc
Right now, it’s right about 11:12pm WAT, my cousin’s new puppy has finally ceased barking, so no better time than now to pen this and release it into the deep blue sea of the internet.
Nuggets of Insight from week #1:
- In Africa, Distribution is a NIGHTMARE. Service providers find it pretty darn hard to trickle down their services across demographics as fragmented as ours. It’s even worse in our many densely populated cities, which we have a lot of given that Africa boast some of the highest population growth rates in the world. In more developed markets, there are mechanisms that naturally cluster people in a way that makes distribution less tedious. Example: a centrally managed national identity scheme. When I lived in the US, every job I applied for on my University campus would always ask “Can we see your Social Security Number?” In Africa, a combination of poor governance and weak institutions means that the agencies tasked with creating these robust ‘people clustering’ systems just don’t have the capacity to do so. So to get through to the masses, you are either stuck serving just a very narrow slice of the market or inefficiently serving different slices of the market and draining your already lean operational budget while doing so.
Exhibit A: ‘Public Transportation’ — How many medium sized buses do you spot trying to ferry commuters in this logjam traffic on a busy workday in Lagos?
Answer: Way too many…
Exhibit B: ‘Water Distribution’ — Depending on where you reside in Lagos, it’s likely your water supply depends on a bunch of very unreliable water tank drivers who drive around in semi-functional trucks to get water to homes. How many of these dilapidated water trucks do you think it takes to serve the entire city of Lagos — all 15.3 million people, in a single day?
Answer: My brain will rather not fathom it.
But what does this imply for companies building all the cool financial B2C products for Africans? Understanding this fact about the way African societies are fundamentally organized is critical for understanding why Banks alone have thus far failed to achieve widespread financial inclusion across Africa. And who will be the true heroes of financial inclusion (or shall we say ‘financial distribution’)? Well the semi-literate storekeeper or informal trader that are a dime a dozen in every neighborhood, street corner, open market, mosque etc. This whole idea of how ‘Embedded Finance’ via retail agents is the only path for Africa to achieve true financial inclusion is very well laid out by Ope Adeoye in this piece
2. What do Australia and Nigeria share in common? Uhh…absolutely nothing? You’re not alone if those were your first instincts, I got stumped on the parallel me-self!
A bit of context: Beyond wondering why flights from Lagos to Melbourne cost 3 years’ worth of wages, I’ve never really had cause to do any kind of research into Australia. This week, however, I watched a short documentary on the nation. I was intrigued by the reference the narrator made about its economy, describing it as a ‘Dirty economy’.
The reference comes from Australia’s economic dependence on Mining exports (64% of exports are mined minerals!). This dependence means its local currency (Australian Dollars) is subject to the shifting tides of the commodity market. You so much as whisper the word, ‘FX volatility’ in a room of foreign investors and you will have them scrambling for their lives (and money). And so while Australia boasts one of the highest income per capita (21st on the 2017 global country rankings — just below Sweden and above Belgium), it has still struggled to attract Foreign Direct Investments when compared to its developed peers.
That’s where I paused the video to dwell on a parallel I began to draw between Australia and Nigeria.
My Reflections: Nigeria has also faced challenges with attracting FDI due to the currency volatility resulting from our oil-based economy. But yet Australia ain’t no Nigeria. So what’s been Australia’s saving grace? Some may argue it but I do believe that having two service sectors, Tourism & Education, as strong export drivers did play a role — it brought in enough foreign money to employ regular Australians, and provide them with an enviable standard of living. When I refer back to Nigeria’s own case, there are 2 key service sectors that we can credit for alot of domestic job creation over the past 2 decades: Telecommunications & Financial Services. But here’s the catch → Much of the output from these two sectors have generally been for local consumption AKA serving mostly Nigerians and thus making earnings in unstable ol’ Naira. So now you sort of get why Nigeria ain’t no Australia and Australia ain’t no Nigeria?
My Takeaway: When we talk of expanding Nigeria’s capacity for exports, the focus is typically on ramping up production capacity to ship physical goods to our international trading partners. But especially now that the Internet has lowered barriers to accessing foreign consumer markets, we need to explore how we can become a service-based economy oriented for exports.
Lingering question: The question I leave you with as you doze off to my mini rant: “What local service sectors would be most advantageous for us to scale up export capacity?”
It is now 11:57pm and mother nature beckons on me to obey the call of sleep…
See you next week!