Let us have a conversation on the soul of the market system within the framework of entrepreneurial capitalism. Who is a monopolist? How does monopoly come? Is monopoly desirable?

Good People, when you start a company, the most strategic objective is to fix the frictions of customers, and if indeed your desire is to do something big, you must have modeled that current providers of the required services have unserved customers (yes, opportunities). In other words, there are opportunities in the market which remain unlocked, and your thinking is that your business will go there, solve the problems, and be rewarded by customers.

Ideally, that “opportunity”, no matter how small, gives you a “monopoly status” since you desire to go there and unlock something latent. Indeed, every business is inherently a monopolist because you think no matter what others are offering in the market, you have an opportunity which remains unsolved. Going into that opportunity is the essence you have mobilized factors of production, to create products and services, for the market. 

If you innovate and set a new basis of competition, creating an orthogonal path which is totally different from what everyone is doing in the market, you become disruptive. And disruption anoints you the title of a category-king company which means you are the leader. Of course, once people see that you are making tons of money in that “area”, they will quickly come, imagining an unmet need within the space as they desire to create their own “monopoly” within the category or sector.

If all players play within the tenet of free market, even and fair regulation, being a monopolist is desirable, and must not be seen as bad.  Where monopoly is bad is when it comes through asymmetric means, outside the rules of the universal market system.

Where am I going? If Nigeria which has zero steel capability has a company like Dangote Steel come into it, that firm falls really out of the sphere of monopoly even though there is nothing wrong being one, provided it has come via free market ethos.

Google is a monopoly. Amazon is a monopoly. Nvidia is a monopoly. Microsoft is a monopoly. And those are celebrated. 

Sustained monopoly is a feature of market success. Today, I challenge you to go and build a monopoly business and be ready to defend the territory when others come after you!  My desire is to become a “monopoly” in the provision of Mini-MBA programs in Africa, and there is no apology there.

The Central Bank of Nigeria (CBN) has reported a notable 39% increase in inflows through International Money Transfer Operators (IMTOs) for the first quarter of 2024 compared to the same period in 2023.

This surge is attributed to recent reforms implemented by the CBN aimed at attracting more dollar supply through IMTOs. The boost in remittance inflows is seen as a crucial development for Nigeria, particularly as the country grapples with declining foreign exchange (FX) inflows due to reduced oil output and revenue generation.

According to the quarterly statistical bulletin of the CBN, the increase in inflows has been substantial. In January 2024, inflows stood at $383.04 million, marking a significant rise of 30% from $295.21 million in January 2023. This upward trend continued in February, with inflows reaching $322.83 million, representing a dramatic 65% increase from $195.23 million in February 2023. March 2024 saw inflows of $363.70 million, reflecting a 30% rise from the $279.79 million recorded in March of the previous year.

The total inflow for the first quarter of 2024 amounted to $1.07 billion, marking a 39% increase from the $770.23 million recorded in the same period of 2023. When comparing Q1 2024 to the last quarter of 2023, which saw total inflows of $965.82 million, there is an increase of about 11%.

Impact of CBN Reforms

In January 2024, the CBN issued a circular that removed the previous cap on exchange rates quoted by IMTOs. Before the circular, IMTOs were required to quote rates within a permissible range of -2.5% to +2.5% around the previous day’s closing rate of the Nigerian Foreign Exchange Market. By the end of January, the CBN further released revised guidelines for the operations of IMTOs, which included several significant changes.

The application fee for an IMTO license was increased from N500,000 in 2014 to N10 million in the revised guidelines, an increase of about 1,900% in about 10 years. The CBN also established a minimum operating capital requirement of $1 million for foreign entities and an equivalent amount for local IMTOs.

Additionally, IMTOs were previously barred from purchasing foreign exchange from the domestic market to fulfill their obligations, but this ban has been lifted with the recent circular, allowing IMTOs to trade on the official market.

The CBN also reached an agreement with IMTOs to set up a Collaborative Task Force to double remittance inflows into the country. This task force reports directly to Yemi Cardoso, the Governor of the CBN. Additionally, the CBN recently granted 14 new Approval-in-Principle (AIP) to IMTOs, according to the Bank’s Acting Director of Corporate Communications, Mrs. Hakama Sidi Ali.

The Central Bank’s reforms have included streamlining processes, onboarding more IMTOs, and enhancing measures to ensure an increase in the supply of foreign currencies. These measures are believed to be paying off, as evidenced by the substantial increase in remittance inflows.

This surge in remittance inflows is crucial for Nigeria’s economy, providing much-needed foreign exchange and supporting household income. The increase in dollar supply through IMTOs not only helps stabilize the naira but also supports various economic activities dependent on foreign exchange.

The CBN has been counting on diaspora remittances to boost FX inflow, which has been on the decline due to reduced oil output. With the decline in oil revenues, remittances have become increasingly vital in maintaining Nigeria’s foreign exchange reserves and overall economic health.

The recent reforms and efforts to attract more inflows through IMTOs are part of the CBN’s broader strategy to mitigate the impact of reduced oil revenues and ensure a steady supply of foreign currency.

This trend is expected to continue, contributing positively to the nation’s economic outlook and helping to stabilize the FX market amid declining oil revenues.

Today, we will continue our conversation on the mechanics of market systems as our Faculty, Afolabi Olamide, of Touch and Pay Technologies Ltd (YC W22), the creators of Cowry card in Lagos, comes to Tekedia Mini-MBA Live. How do you grow from 1000 users to close to 5 million in less than four years?

What do they do? They digitize small payments like N200, N300, etc, making sure that revenue is assured for merchants, owners, vendors and companies. And the vision has worked, maximally: if you take care of the kobos, the Nairas will take care of themselves.

With more than 99% system reliability through a closed network, they made customers to become FANS, and when fandom happens in markets, you thrive. And it is contactless which means the card lasts longer in the rain, sun, and harmattan.

Olamide will speak, and we will learn from him on why design wins markets. The market players include danfo owners, bus drivers, shops, etc, who upon deploying their solutions see bigger revenue. Yes, when leakages are blocked, revenue increases.

Zoom link in the classboard here: discover how to grow that SME revenue.

Tekedia Institute Mini-MBA – our product is knowledge.