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Why 2022 could be a boom year for Nigerian retail investment apps

A towel printed like a Nigerian 1,000 naira note hangs in the middle of a road in a market
Reuters/Akintunde Akinleye
A weakening naira drives up interest for dollar-denominated investments in Nigeria
  • Alexander Onukwue
By Alexander Onukwue

West Africa correspondent

Published Last updated

Anu Opafola wants to retire comfortably, or at least not have to work everyday, by the time she turns 40. An aspiring financial analyst, Opafola has to invest consistently over the next 15 years to stand a chance of achieving this dream. Last year, she bought shares when South African telecoms company MTN made its shares public to retail investors in Nigeria.

But Opafola is skeptical about the local stock market. “I don’t know if the naira is going to meet up to the dollar anytime soon. I love my country but let’s be realistic,” she says. So she’s come to a conference organized by one of those startups that offer Nigerians access to dollar-denominated stocks, to get more knowledge for her ambition.

Events like this in Nigeria are usually free but Risevest charged a 5,000 naira (about $12) entry fee for its “moneyrise” conference. The full hall of enthusiastic listeners (about 300 people, by my count) at the Civic Centre in Lagos suggests strong demand for financial advice and retail investment opportunities, one that fintech startups plan to take advantage of.

Investment apps step up competition a year after crypto ban

Risevest’s event was held on Jan. 29, almost exactly one year after the Central Bank of Nigeria (CBN) barred commercial banks from doing business with startups or customers that trade cryptocurrency. The move directly affected local crypto exchanges but also apps like Risevest that enabled users to invest in crypto coins. “We killed that when the policy changed,” CEO Eleanya Eke said during a panel session at the conference.

Eke said his team is thinking of ways to offer crypto investments to Risevest users outside of Nigeria. But the focus within the country is on providing access to stocks of companies like Tesla, Apple, and Microsoft, as well as real estate and fixed income assets.

Robinhood-esque apps started popping up in Nigeria a little over three years ago. In the period since, Trove has raised a six-figure amount from a syndicate of local angel investors, while Chaka became the first startup in the space to be licensed by Nigeria’s Securities and Exchange Commision (SEC) last June. Bamboo announced today (Jan. 30) that it has raised $15 million in a round led by US firms Greycroft and Tiger Global. (Chaka raised $1.5 million last year.)

Though there are some differences in what each offers, these startups are really pitching to the same bracket of users, namely smartphone-enabled millennials and Gen Zs that want to protect their earnings from Nigeria’s inflation that was over 15% in December 2021, and grow wealth in dollars (the dollar’s official exchange rate is N415 but exceeds N560 on the street.) Bamboo says it has 300,000 users, and plans to launch in Ghana where 50,000 users are on a waiting list.

I don’t know if the naira is going to meet up to the dollar anytime soon. I love my country but let’s be realistic.

Stemming a wave of scams and helping potential migrants

Risevest says it has over 100,000 users, which may not be unique from Bamboo’s or other apps’ users.

But for CEO Eke, the turnout at last weekend’s event speaks to an appetite for clarity around legitimate investments especially after a flood of recent scams. Chinedu Udeze, a user experience designer at a commercial bank, says he is taking personal finance more seriously this year with his children’s future in mind, but also because he has “had experiences,” his facial expression alluding to encounters with fraudsters.

In one instance last year, a 21-year old self-styled ‘investment maestro’ allegedly defrauded 500 people of N2 billion ($4.8 million.) Another at-large ponzi scheme operator made away with N171 billion ($417 million.) “There is a lot of misinformation out there and people want to learn how to do investments properly,” Eke told Quartz. Nigerian lawmakers are proposing a law that would imprison promoters of ponzi schemes for up to 10 years.

Chidinma Okoli, an analyst at a private equity firm, thinks the interest in retail investment may also be connected to growing middle-class migration from Nigeria to developed economies, encouraged by uncomfortable conditions like police brutality and the government’s response to protests about it. Relocation is expensive—it costs at least $13,000 to move to Canada, for instance—so young people seek out apps that will help them save over time to afford it, Okoli says.

Retail trading apps must increase user confidence

Whatever users’ motivation may be, there appears to be a market to be served by existing and future investment apps, as long as Nigerians continue to express low confidence in the naira.

But these startups still have to convince users that their services are secure, easy to use, and will exist for years to come. Last year, authorities froze bank accounts belonging to Risevest, Trove, Bamboo, and Chaka, causing some users to worry about the security of their deposits.

The court order for the freeze has since been rescinded, and the startups have gone on a marketing offensive. Tapping into a rising trend, Risevest signed Teni, a leading female musician, to be its brand ambassador. At the conference, she performed and pledged $1,000 to open a Risevest account for one attendee’s toddler.

Uyoyo Ogedegbe, an aspiring startup founder, thinks using celebrities could help startups with reach and credibility beyond Lagos to places where startup’s are unknown no matter how much VC money they raise. “You can Google Risevest and you see Teni endorsing them. That gives a sense of legitimacy.”

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