OPay, a payment company, began with a business strategy I have termed the Invisible Layer Strategy. Simply, the company started by subsidizing transportation services by making ORide (motorcycle ride hailing), OBus, OKeke, etc,  very affordable. It used that to acquire a  massive user base for its paytech unit. The plan was never to run those transportation units because their margins were small, and also scaling was an issue. But they provided one thing: they forced users to download the OPay app to get those free or discounted rides.

In this piece, I posited that even though OPay may be losing money in the transportation unit, it has a promise on the payment one under a Double Play Strategy which I have written extensively in Harvard. Simply, OPay will make money for the business even though ORide, OBus, etc may not.

One day, OPay hit one million users and that was the inflection point. One by one, it exited, and closed ORide, OBus, etc and then focused on the payment which was the original vision.  To evaluate this strategy, you have to consider what it would cost OPay to use advertising to onboard one million users in that sweet segment it has pursued (people who pay, withdraw, pay making it easier to capture value via fees).

What are you doing to acquire customers?

Design Thinking And Zero-Fee  Banking

When you pay that bill from your bank account, you pay a bank charge. But when you pay with one fintech’s app, connected to the same bank account, you do not pay any fee. How did that fintech execute that invisible layer strategy? I explain:

I will explain what OPay is doing at the technology layer within a well orchestrated design thinking framework. Consider the possibility that OPay has bank accounts in all banks in Nigeria. If a customer ( paying for DStv) pays through it, it will simply receive money from the customer to the specific corresponding bank account it maintains in the customer originating bank. At the same time, it will pay the merchant to the merchant’s bank account using its (OPay) funds in the same bank as the merchant’s. 

Because wallet-to-wallet transfer in Nigeria does not attract a fee, this two-sided intra-bank transaction (inflow and outflow) does not cost OPay and its customers any transaction fee.OPay, relying on bank APIs, automates this protocol. This is Option 1. There are other options on how to execute this including having a holding quasi-entity.

Indeed, this also makes its confirmation fast and seamless since no inter-bank settlement takes place at scale. The only drawback is that funds may not be efficiently utilized (not actively working for you) as you must have funds reserved for settlements. Needless to add that you have to be loaded (yes, have funds) to execute this playbook.

How can you save your customers money? No better growth strategy than that in Nigeria in this season of many fees and charges. Use design thinking and invent a new business playbook for that company.

Comment on Feed

Comment 1: I just saw this post after concluding a transaction with Opay. I don’t understand the intricacies of their business, but whatever it is, they should keep it up. My only regret is why I didn’t start using the app earlier, especially during the cash scarcity. Their transactions are swift, free and seamless.

My Response: They run a settlement fee system across all banks in Nigeria which means they have no connection to NIBBS. With that, they pay no fee.

Comment 2: Prof, isn’t it possible that Opay didn’t actually have Fintech in mind from the outset but simply began to focus on the sector after they’d found its huge potential?

My Response:  On Day 1 when OPay company launched ORide, the uniforms the riders wore did not have ORide, OBus, etc. Everything was branded OPay. If you saw their riders, everything was OPay. The app was OPay, not ORide, OBus. That was a clear indicator that right from Day 1, the destination was OPay

Editor’s Note: This has been debunked; no license was issued to Dangote Refinery according to the government.

The Nigerian National Petroleum Company Limited (NNPCL) has issued a license to the Chairman of Dangote Group Aliko Dangote, to import petroleum products, weeks after Dangote Refinery was commissioned.

Energy Times reports, citing sources at the presidency, that the license will see Dangote importing refined Premium Motor Spirit (PMS) into Nigeria. According to the report, the imported fuel would be discharged at the Dangote barge, where it will be pumped into tanks from.

The decision, which is understood to be born out of Dangote Refinery’s unreadiness to refine petroleum products, will likely shift the sole importation of PMS from the NNPCL to Dangote. PMS imported by Dangote is expected to sell at a market-dictated price to marketers as work continues at the refinery, per the report.

Dangote Refinery, with the world’s largest production capacity of 650,000 barrels per day, was commissioned last month in Lekki, Lagos. Dangote promised during the launch, which was led by former President Muhammadu Buhari and graced by dignitaries from across Africa, that products from the refinery will hit the market by the end of July or August.

“Your excellencies, distinguished guests, our first product will be in the market before the end of July or beginning of August this year,” Dangote had said during the commissioning. “We have built a refinery with a capacity to process 650,000 barrels per day in a single train which is the largest in the world. We have selected the best plants, equipment, and the latest technologies from across the world.”

However, the promise appears unrealistic as the Dangote Refinery still has a lot of work to do to function at full capacity.

Findings revealed that the refinery was at the 88% completion stage with some equipment still being expected to be delivered by their manufacturers while those that have been fitted were yet to pass the integrity test at the point of commissioning, according to Energy Times. The report added that in addition to the above-mentioned backdrop, works on production lines, including electrical works, are largely behind schedule.

“With equipment still being expected and an integrity test yet to be conducted, I don’t see the refinery coming on stream until March 2024, the main reason why Dangote was granted a permit to import fuel pending the completion of work on the refinery,” Energy Times quoted the source as saying.

The $19 billion Dangote refinery boasts of 4.742 billion liters storage capacity, the biggest in Africa. The refinery’s 1,100 kilometers pipeline infrastructure is said to be the largest in the world, with the capacity to handle three billion standard cubic feet of gas per day.

Nigerians are largely counting on the refinery to mitigate the cost of PMS, following the removal of fuel subsidy by President Bola Tinubu last month which shot the prices up to N570 per liter. Thus, the report that the Nigerian people will have to wait until next year for the refinery’s products has dashed the hope of many.

As an alternative, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has been called upon to issue importing licenses to companies and individuals with the capacity to import petroleum products. The NMDPRA said last month that it is ready to issue licenses to interested companies. The move, which will ensure competition in Nigeria’s oil market and dismantle the NNPCL’s importation monopoly, appears to have been impacted by the newly-issued Dangote’s PMS import license.

The NNPCL has served as Nigeria’s sole importer of petroleum products for some years now, which suggests that issuing a Dangote petrol import license means handing the monopoly over to Africa’s richest man.

According to Energy Times, Dangote was chosen to bring in the product due to NNPCL’s 20% minority stake in the refinery. The Nigerian National Petroleum Corporation (NNPC) is investing $2.76 billion in the plant, with the first payment being made in cash.

The second payment will be made through crude oil sales, while the final payment will come from the profits generated by the company.

Approximately one-third of the payment will be made through the supply of crude oil, with a deduction of around $2 and some cents. The remaining one-third, amounting to $850 to $900 million, will be paid from the business’s profits.