This Week In Nigeria Capital Market: Insights From Telcos, Falling Interest Rates, Inflation and GDP

This Week In Nigeria Capital Market: Insights From Telcos, Falling Interest Rates, Inflation and GDP

This week’s series (Nov 18-22, 2019) features insights on listed Telcos (MTN & Airtel) and a possible debate on how you can plug-in into their growths. We looked at the falling yields on government securities and how that could affect the debt capital of your business. Also, we examined inflation and how it affects your investment and business decisions. We wrapped up with the growth in GDP as reported by the National Bureau of Statistics.


The great-great-grandfather of Airtel, Econet birthed GSM services in Nigeria in 2001 and ruled the kingdom. Since then, several companies have taken the rein of Management to establish themselves as Heir to the Board, with little or no success. Econet-Vodacom-Vmobile-Celtel-Zain then Airtel came in, like a lion King, roaring to the telco thrown. Can Airtel ever rule the land again?

If you think it’s impossible for any Telco to take the reign from MTN, you may want to look at the growth trajectory of Airtel in the last 5 years.

Airtel has added 23.4 million customers in the last 5 years to record over 92% growth, compared to MTN’s 6.9 million and 11.8% growth in the same period. As of September 2019, Airtel had 48.9 million subscribers and MTN, 65.3 million subscribers.

How it concerns you: if you have to choose a business partner between Airtel and MTN, which will go for? The one that currently leads with numbers or the one with huge growth potentials and greater positive momentum?

Your solution: remember, this is Professor Ndubuisi Ekekwe’s MBA Class of wits, everyone is good enough, let’s have your take on the question? If you need more points to make your case, read on …

Mobile money will decide the future, it will decide the battle.

Nothing arrests our optimism in Africa these days more than the massive opportunities provided by mobile financial services (fintech), the conquerors of that ecosystem will rule the future. Unlike Kenya, in Nigeria, there are two opposite ends of the mobile money spectrum, “…You have a telco-led model and a bank-led model,” Iyinoluwa Aboyeji.

Unlike the Banks that serve just over 39 million bank accounts, the telcos have a potential clientele base that doubles the accounts the banks serve. Currently, MTN has the advantage over other telcos, aside from its clear lead in subscriber base, MTN is also the leading telco as far as fintech strategy is concerned. As a telco, you need two licenses to fully spread your fintech gospel, Super-Agent and Payment Service Bank (PSB) licences, both from CBN, MTN has one in the bag already.

On the 25th of July 2019, MTN’s subsidiary, Yello Digital Financial Services Limited (YDFS) obtained a super-agent licence from the Central Bank of Nigeria (CBN) which would enable it to build an agent network and accelerate the growth of its fintech business.

The commercial launch of the agent network (MoMo) was done on the 29th of August 2019 in Abuja, Nigeria. MTN reported in its 30th September financials that it had registered 66,000 super agents since the launch of its super-agent services in August, 2019, and grew fintech revenue by 21.7%.

Airtel has filed for Payment Service Bank (PSB) and Super-Agent Licenses with Central Bank of Nigeria (CBN) and will likely get one before year end, compared to MTN, that’s no biggy. What thrills me most is Airtel’s aggression even before receiving the licences, the following partnerships are in place already:

  • Mastercard Partnership: On 9 October 2019, Airtel announced a partnership with Mastercard which will give Airtel Money customers the ability to make online payments globally via a virtual Airtel Money Mastercard.
  • Ecobank Partnership: On 21 October 2019, the Company announced a partnership with Ecobank which will allow Airtel Money and Ecobank customers across Africa to improve their access to mobile financial services and carry out a variety of mobile transactions.
  • FINABLR partnership: On 22 October 2019, Airtel announced another partnership with Finablr which will enable Airtel Money customers to receive money directly to their phones, in their Airtel Money wallets, from more than 160 countries around the world.

On 14th November 2019, Airtel acquired additional spectrum to expand and strengthen its LTE services across the country.

Across its other African markets, Mobile money continues to be Airtel Africa’s fastest-growing business segment, delivering revenue growth of 46.5% in the first half-year, and slightly above 50% in Q2.

Exciting times ahead in the mobile money space, fintech war is looming.

Back to our earlier question, which telco will you partner with, MTN or Airtel?

Let’s dive into recent numbers:

Year-on-year (i.e comparing same period this year to last year) performance of MTN and Airtel based on their 30th September financial reports:

Financial Highlights (MTN):

  • Service revenue increased by 12.1%
  • Voice revenue by 10.1%
  • Data revenue rose by 34.9%

Operational Highlights (MTN):

  • Active data users grew by 8% to 22.3 million
  • Data traffic volume increased by over 68%
  • Data contributed 18% to service revenue (Q3’18:15%)
  • Voice remained the key contributor to service revenue at 73.5%

Financial Highlights (Airtel):

  • Revenue increased by 23.2%
  • Voice revenue grew by 13.1%
  • Data revenue was up by 75.7%

Operational Highlights (Airtel):

  • Data customer base increased by 20.8%
  • 4G data usage increased by almost 20 times
  • Data revenue now accounts for 31% revenue

The data war during the period under review was characterized by significant investments in 4G infrastructure and expansion.

  • 62% of Airtel’s sites are now 4G while it’s 35% in 64 cities for MTN.
  • Airtel grew its data customer base by 20.8% while MTN did 7.7%.
  • Data now accounts for 31% of Airtel’s revenue while it’s 18% for MTN.

The shares of Airtel is currently priced at 298.80 and MTNN at N120.00.

If you have built a business model that will leverage on the business of telcos, you should be cheerful because the goodies you see now is nothing compared to what’s coming.

Data, mobile money and everything that comes with it feel like a goldmine….

The question is: on which side will you be when exploring the Goldmine? Airtel or MTN?

YIELDS ON TREASURY BILLS AND BONDS ARE FALLING, INTEREST RATES ARE ON THEIR WAY DOWN TOO. Get your business plans ready, the banks and finance houses are coming to beg you for business.

Like an Emperor, the CBN Governor is stamping his foot on the monetary system with order-based monetary policies, whether we like it or not it’s working and growing businesses, at least for now.

At the last T-Bills Primary Market Auction (“PMA”) on 13th November 2019, the CBN successfully offered N125.2bn worth of instruments across 91, 182 and 364 Days tenor at respective stop rates of 7.998%, 9.00% and 10.00%, this is the lowest rates we have seen in 3 years.

On 20th November 2019, the following week, successful bids for FGN Bonds were allotted at the rate of 12.0000% for the 5-Year, 12.9300% for the 10-Year and 13.3900% for the 30-Year Bonds. Those rates indicate a significant decline from the rates at which the Bonds were issued at the October 2019 FGN Bond Auction.

Coupled with CBN LDR directives that have forced banks to increase their loan to customers, and at doing that must meet a minimum target of 65% by December 2019 (simply put, all banks must achieve a ‘B’ grade in their loan to customers). The combined cash that will be forked out by Banks in the process is estimated at over a trillion naira.

Smaller finance houses who have been supporting SMEs with decent rates and leaner loan requirements are now feeling the pressure of the excess loan money from banks, they are telling our clients to return our loans and come for theirs at cheaper rates. To retain our clients, we have been cutting rates too. Clearly, the supply of loans is now heavier than demand, basic economics tells you price will fall, the price here is interest rates!

Business Lesson: if you have a decent business plan and the banks have been chasing you away, this is the time to go back. If you already have a loan with a bank and you want more for business expansion, this is the time to go back. If your current loan with your bank is at 30%, this is the time to go back and negotiate the rates down to 25%.

If you need advisory on any of those lessons, feel free to reach out.

Finally, on this beautiful monetary policy regime, someone should remind the government that this can only work for long in the short-term, it cannot fix things permanently. You cannot use monetary policies to force growth when fiscal policies are not commensurate.

In perspective, imagine you got a cheap loan at 16%, that’s awesome right? But you still have to spend 4 hours is traffic and only 5 hours to stay on the generator in order to save cost, all because of the huge infrastructure gap, how much growth can you have in your business despite the cheap rates? We need aggressive fiscal policies to fix infrastructure, that’s where the real growth is.

In the meantime, enjoy the cheap rates and grow your business.


Earlier in the week, the National Bureau of Statistics (NBS) released inflation figures for the month of October 2019, inflation is now at 11.61%, the highest in 17 months.

Here is the implication, if inflation were to stay at 11.61% rate for the next 12 months and you invest N100,000.00 in fixed income security (or any other business) to earn 12% annually, after 12 months, your precious N100,000.00 will effectively worth N100,390.00.

Don’t mix it up, your bank or investment house will credit you with N112,000.00 after 12 months but effectively, that 112,000.00 is now worth N100,390.00. Inflation just robbed you off N11,610.00.

As you have seen above, any investment in T-bills at the moment will come back with zero real returns. This erosive impact of inflation on investments makes it particularly important to find ways to potentially boost the returns on your long-term savings and investments.

Lesson: whatever you are putting your money into must earn you some reasonable premium above the inflation rate.


On 21st November 2019, the National Bureau of Statistics (NBS) published GDP numbers for Q3’19. According to the periodic report, real GDP expanded by 2.28% year-on-year, better than what we have seen all year. It is expected that the current policies of the government, especially monetary, will keep growth rate at around the same 2%. This is still below the current population growth rate of 2.6%, effectively, no growth.

Apparently, government along with the CBN are doing everything to grow the economy, we saw the results again in improved GDP figures except that Nigerians too are doing everything to grow the number of their families.

In perspective, if you are promoted at work with a 25% increase in salary, then you go ahead to add another child that will increase the family running cost by 26%, have you really been promoted?

Here is where we draw the curtain on this week’s series.

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