As the Central Bank of Nigeria (CBN) policy of Naira 4 Dollar Scheme kicks off tomorrow, we would be looking at how the policymakers  respond when live data begins to arrive. I have called it a “quasi-devaluation” of the Naira, but with the understanding that it is a short-term experiment, we should wait for the data to hit the CBN headquarters. But before that happens, this is what I expect to happen across most countries: remittance  inflow will improve but most may not be real! 

The Central Bank of Nigeria (CBN) needs US dollars desperately to help cushion the nation’s balance of payment, and fight deterioration of the Naira, and is going to Nigeria’s best export: the diaspora community. Yes, the apex bank has unveiled a really ingenious scheme called “Naira 4 Dollar Scheme”. Largely, if you wire US dollars to Nigeria via the approved IMTO (international money transfer operators) like Western Union, the payout bank will pay your recipient N5 per $I besides the recipient receiving the full amount you wired in US dollars. The CBN Governor mentioned in a Diaspora Series organized by Fidelity Bank Plc.

Yes, expect someone to wire $10,000 from New York, gets paid $10,000 in Lagos, and then the N50k bonus. The cost of wiring that money is never going to be more than N50k ($120); the cost to wire $10k from US to Nigeria is $17 via Western Union. Some do think they can use peer-to-peer platforms to move that $10k back to New York, and send it back again for another N50k in Nigeria. This loop can continue, and they will rip big bonuses from the Nigeria treasury!

But note one thing: CBN is aware of this potential risk and that is why it has this requirement that people use the approved IMTOs like Western Union and MoneyGram. Those entities most times will not allow anyone to wire more than $10,000 in a month. And by the time you start shopping for who to help you make extra N50k on your $10k, you can lose that $10k entirely! Yes, a snake can swallow that money, big time, even in New York.

I do think  that this policy is designed to incentivize Nigerian diasporas to send money home. It is too early to know if that will improve remittance over long-term; I mean after the program ends later in the year.  Personally, my choice,  as I noted in my Fidelity Bank presentation, would be to offer a seamless tax holiday on all profits through a special fund vehicle I called Diaspora Growth Nation Fund. 

Yes, if you invest in SMEs, startups, real estate or other productive areas, via official channels like banks, all taxes on profits over 5-10 years would be waived! That is a better way to get people to unload US dollars and hard currency on Nigeria. I am not sure people with many benjamins will care that $1 will add extra N5! That is a distraction! 

And if CBN is not careful, it could have a ponzi scheme on its hands with USD for Naira, being round-tripped, outside international money movement ordinance. Yet, the good news is that the bad guy will have to beat the US, UK in addition to Nigeria. And that is why I think abuse will be limited. But it is good to experiment and CBN is doing that which I think is good. It will see data and over time decide on what works.

Consistent with the global trend, Nigeria aspires to ensure that remittance flows and diaspora investments become a significant source of external financing. #Emefiele

— Central Bank of Nigeria (@cenbank) March 6, 2021

On Friday, I invested in a downstream technology sector of the oil, gas & renewables sector. It is a California-based startup. We will bring visibility on how people buy refined crude products & renewables, orchestrating demand and supply into a more optimal equilibrium, through reduction of information asymmetry. From finance to logistics to payment, we want to uber the downstream sector! And that downstream includes renewables.

I will make a proper announcement within the week. We need to digitize the energy sector.

The conversation on the latest Central Bank of Nigeria (CBN) policy – Naira 4 dollar scheme, i.e.  extra N5 is paid by the apex bank for every remitted $1 into Nigeria –  has generated many opinions in our platforms. While I truly welcome the opinions, let us not be personally attacking elected or appointed officials. Make your point, challenge their policy choices, but do not insult them.  If you check, we are saying the same thing and we know that the mess in Nigeria did not start today. Nigeria used to have tons of dollars that we were looking for countries to pay their bills!

The Central Bank of Nigeria (CBN) needs US dollars desperately to help cushion the nation’s balance of payment, and fight deterioration of the Naira, and is going to Nigeria’s best export: the diaspora community. Yes, the apex bank has unveiled a really ingenious scheme called “Naira 4 Dollar Scheme”. Largely, if you wire US dollars to Nigeria via the approved IMTO (international money transfer operators) like Western Union, the payout bank will pay your recipient N5 per $I besides the recipient receiving the full amount you wired in US dollars. The CBN Governor mentioned in a Diaspora Series organized by Fidelity Bank Plc.

Godwin Emefiele cannot fix this overnight. Obasanjo cannot fix it overnight. Jonathan cannot fix it overnight. Buhari cannot fix it overnight. I cannot fix it overnight. You cannot fix it overnight.  We know one thing: unless we produce things in Nigeria, all the financial engineering will fail. Factories and warehouses hold Nigeria’s future, not CBN HQs working financial model with Naira! Sure, we hope the policies provide the path to have those factories and warehouses; the Policies should be the focus, not the persons.

We must challenge these men and women but we must do so with civility. The number of registered voters for Lagos and Kano States were 6.5 million and 5.4 million respectively for the 2019 presidential election. Out of that, about 1.1 million  voted in Lagos while Kano had 1.9 million. Simply, 5.4 million people in Lagos where many of us live registered but did not vote. This number does not include qualified people who did not even bother to register.

Run the number and you will see the same pattern across the nation. Simply, nothing is unpredictable: that we stay home and allow party faithfuls to run the show, only to complain later, will not change the outcome.  Yes, if there were Candidate M who could  have received all the votes of those who registered but did not vote, from state to federal to presidency, that Candidate M would have WON all positions in Nigeria. So, the power is in our hands but we do not use it.

This is what happens: the extremely motivated party faithfuls go out and vote and elect their members. You who stay home or out of the system, come only to complain after the outcome. We need to be real in Nigeria! Insulting those elected officials or their appointees will not change anything because you gave up your rights to help Naira! Sure – challenge their policies but do not think you are not part of the problem.

After completion of my study with Y-Combinator’s startup school in 2019, I have tried and failed severally to figure out how to launch that next big startup that hopefully, will one day turn into a unicorn. This plunged me into further research and despite my young age in the world of startups, funding, VCs, etc., I stumbled on a concept that hopefully if done right, can actually create that next unicorn.

The concept is called a “Power Law”. According to Wikipedia;

A power law is a functional relationship between two quantities where a relative change in one quantity results in a relative change in the other quantity independent of those quantities. In order words, one quantity varies as a power of another. It is also interchangeably called the scaling law.

An example of this formula is when you double the length of a side from 2 – 4 inches, automatically, the area will quadruple from 4 to 16 inches squared. There are a lot of real mathematical formulas at play here but I am no mathematician. So, I won’t dwell on that angle.

It’s a very simple (yet complex) term. It basically hovers around the possibility of moving from zero to one and subsequently, larger in time. It’s a concept that focuses on how very tiny changes can have disproportionate results for your startup. It is more like compounding interest. Understanding this concept will help you determine if your startup will be successful or not and if you should go ahead to seek funding or not. It’s basically the indirect stuff VCs look at before funding your startup.

Let’s examine the Pareto Principle (it perfectly describes the power law) which stipulates that for many outcomes, roughly 80% of consequences come from 20% of the causes otherwise called the 80/20 rule. E.g., 20% of Nigerians actually own 80% of companies. In order words, the relationship between inputs and outputs is NEVER balanced. How does this align with startups and VC funding? I’ll explain more below.

Now as we all know, every VC or moneybag as often called by Francis Oguaju, a tech advisor, often invests in startups with potential for early growth spurts so that they can profit as quickly as possible. There will be many startups or companies, but a few will achieve exponential growth more than the others. And these few are the targets of VCs. For your startup to get funded, it means your company is actually playing with the power law howbeit, unknowingly to you. Fortunately, most VCs do not also see the power law at play but they see growth or the potential for growth which is all that matters.

Since the power law is almost invisible to notice or see, so how do you position yourself as a startup to align with it? It’s actually very simple. Read on.

Brands can last for a very long time especially in tech – if nurtured. This isn’t a secret but I’m sure most founders don’t get it. If you can achieve 100 customers (happy customers), you can achieve 500 customers. Achieving N100,000 ARR can transition to N3million the next year and noticing this exponential growth and leveraging (investing) on it can make your startup grow to become a unicorn. What am I blabbing about? Simply, go long. If you start something and it’s working, keep going. Go longer. Power laws don’t manifest in a short-term plan. You feel the impact when you invest a few more years building on what works.

When you get a happy customer, identify what worked, invest more in it, and you’ll start noticing an exponential growth pattern which again, will reveal itself in the long run. In a nutshell, valuation usually compounds vis-a-vis an impressive impact over time. Look at Hubspot for example which IPO’d at a $750million valuation some few years ago and is now valued at $20 billion. When you present this record of disproportionate growth to VCs, guess what? They’ll give themselves a hi5 because they’ve seen a startup worth investing in. This process might take you a few months to achieve or a few years. In fact, let me still break it down.

When you launch your startup, you are bound to start getting customers. One thing worthy of note is to pay attention to customer segmentation. Do not make the mistake of treating all your customers the same way. Make use of the 80:20 Pareto’s rule to improve on your customer acquisition. The first step is to understand that all customers aren’t equal. Work out who the 20% of your customers are, then use the data to find more like-minded customers. If you understand Facebook advertising (lookalike audience marketing) you will understand this concept. Spend the majority of your time on these 20% customers – the category that is responsible for 80% of your revenue. Focus on EVERYTHING about them and you’d be surprised at how you’ll start acquiring more customers like them. What does this mean? Your ARR (Annual Recurring Revenue) might actually jump from N100,000 this year to N3 million next year.

Congratulations, you have achieved exponential growth – you know, the process that increases quantity (revenue) over time. This means you have begun riding on the Power Law and have now positioned your startup to get funding and hopefully, become a unicorn someday. There are many ways to understand and implement the power law for your startup growth. However, I focused more on the multiplicative process – rapid growth where a result can be multiplied by another which equals exponential growth. There are other concepts like preferential attachment, etc.