Question: “We have noted that Tekedia Capital has not invested in any renewable energy solar company especially in Nigeria. Can you explain why?”

Our response: We understand that energy is a big  opportunity in Africa. However, the solar-based model with retail customers is not something we are open to explore at this time. This is not because of the usual challenges of manufacturing and selling hardware systems. Our real concern is that some of the major investors in these markets are actually international oil companies. (The largest investors in this sector are funds related to or connected with major oil companies, where the oil majors are not investing directly.)

We posit that these oil firms are not necessarily investing in  these companies for direct financial profits, rather, they are investing to have companies they can use for carbon credit transfers. In other words, if you flare gas in the core operation, you can also zero that out, via carbon credits, from a solar-based energy provider you invested in. That model is cheaper than going to Tesla, forest reserves, etc to buy carbon credits. 

Consequently, for Tekedia Capital, it is going to be challenging to fund firms with capacity to beat that oil company-supported solar energy provider, as generating carbon credits is more important for the firm, than making direct financial gains. That is why we have avoided this sector because the competitor could be structured to be loss-making, even as it ramps up carbon credits to funnel to its major backers. 

Of course, there are investors who do not care. But for us, we look at the terminal enterprise value and how this vector could affect our support system to make that investment worthwhile. Some investors do have those capabilities; we do not, and that is why we are not investing in the sector today.

As always, feel free to check what we fund here https://capital.tekedia.com/startups/ . Of course, we welcome new members as the next investment cycle will open in Oct 2024, and we have great companies coming https://capital.tekedia.com/course/fee/

This is the best way to understand the magic in Niger, Mali and Burkina Faso: ‘These guys want the butter, the money of the butter, the milk and a kiss from the dairy woman. Recently, I was at the Dakar airport [Senegal] with a flight coming from Niamey [Niger Republic]. One Senegalese  immigration officer laughed at a Nigerien passenger: “You guys left ECOWAS but your passports are still ECOWAS passports, and we don’t request a visa for you to enter Senegal.”’ – Olivier Malinur commenting on this piece.

Good People, that explains everything. So, Niger, Mali and Burkina Faso are still using ECOWAS passports, even after exiting ECOWAS. This explains why nothing has affected their trades since they can travel and move around ECOWAS without any restriction.  Possibly, the Port of Lome – West Africa’’s busiest port – is still moving the cargoes for the 3 countries within the ECOWAS commerce treaty and tariff system.

I truly admire the maturity ECOWAS has shown here and I apologize for my ignorance. Until this morning, my assumption was that Mali, Burkina Faso, and Niger exited ECOWAS and dropped all ECOWAS rights, including the use of ECOWAS passports. So, my welfare model was that to travel into the ECOWAS region, visas would be required from their citizens. But here, ECOWAS just allowed them, and has continued to beg their leaders to return to ECOWAS. That is showing a big brother heart, and that is indeed commendable from ECOWAS. And I hope ECOWAS does not cancel those passports; this is a family issue!

Mali, Niger and Burkina Faso: if you are still relying on ECOWAS passports, think over these issues again. Understand that if ECOWAS cancels those passports, you can imperil trade routes which have evolved over centuries, and that could be devastating. [A case: getting a Nigerian visa is not easy!]  The fact that ECOWAS still allows you guys to enjoy these benefits despite the attitudes shown by the trio is something you must consider on this matter.

The Illusion of Single Currency and the Traps in Mali, Niger and Burkina Faso

There is something very unusual happening in Africa, and that is what Mali, Niger and Burkina Faso are doing. These are largely landlocked countries which posits that they have inherent geographical disadvantages in international trade. But since they disconnected from ECOWAS, pockets of uncommon visions have emerged.

For everything done, I am concerned about the plan for them to have a currency union with their own currency. As I write, the 3 countries remain members of the West African Economic and Monetary Union (Uemoa), a currency union, behind the CFA franc, which is issued by the Central Bank of West African States (BCEAO).

My secondary school Commerce teacher, Mr Udeagu Jr, explained that BCEAO does deposit foreign reserves in Banque de France and the French nation is the guarantor of the CFA franc. But today, the issue is that the trio wants to create their own currency. Good People – they have done many things including a rumoured turning down an IMF loan, but this new currency will not be an easy one.

I have written extensively in the African Union working papers on the perils of currency union within heterogeneous economic structures. A supranational bank serving these three countries could be in real troubles, and that could trigger welfare losses in the countries. The relative economic stability they have right now must not be compromised with a haphazard pursuit of economic purity, which here, is absolute disconnection from France. 

Personally, I am not a big fan of a single currency because it will not remove the rascality of spending politicians in Africa. And when you lose autonomy on the national central bank to use macroeconomic tools to deal with some economic challenges, many bad things could happen. So, instead of pursuing a single currency, the trio and other African nations must work to build trade infrastructures like roads, railways, seaports, etc. 

My position is that building infrastructures and using tech to eliminate currency friction, across borders, should be prioritized.

Indeed, in Nigeria, we use the Naira but without the rail networks, the level of trade between Maiduguri and Aba has gone down. And the one between Ovim (my village in Abia State) and Enugu has collapsed. The old Ovim Railway Station served more than nine local governments, linking communities to opportunities. We continue to use Naira but with no railway system, trade has faded, destroying rural-urban linkages.

So, it goes beyond having the same currency. Jumia does not deliver packages to Ovim, even though Ovim uses the same currency as Lagos. The issue is this: the currency of commerce and the operating system of trade – supply chain – is limited in Nigeria. That is the currency we need to have in Africa and stop the illusion that because I can pay you with the same currency, all core problems will disappear.

Yes, the trio can develop their markets via infrastructure linkages and leave the currency alone, for now. The risk of a currency mess is huge.