Towards the end of last year, the Central Bank of Nigeria (CBN) announced a new policy that restricted how much owners of cards issued by Nigerian banks can spend outside the country. Under the new rule, Nigerian cardholders can only spend $500 monthly abroad. The apex bank also announced new restrictions to wire transfers which makes it even more difficult for anyone to move money out of the country. In the tech space, these new laws have been said to be negatively impacting operations of some ventures especially those that travel abroad to shop for goods that are brought to Nigeria to be sold online.
Take a fashion ecommerce platform like Ella.ng as a case study, if the company wants to ensure that it has top quality female dresses and accessories on its platform, it would have to be shopping at the major stores in Paris, Dubai, London and New York. But with the new CBN law, they cannot get much top quality products for $500. The ecommerce giants, Jumia and Konga, may also be in this category. But there is a Nigerian ecommerce that is benefiting immensely from the CBN rule, it is MallforAfrica.
MallforAfrica allows individuals in Nigeria to buy stuffs from leading international stores including Amazon. On the surface, they ought to be the worst hit since shoppers are paying to shop at foreign stores. But the startup’s strategic payment method, the MallforAfrica webcard has proven to be the panacea to the headache caused by the CBN’s policy.
This is how the payment method works. Initially launched to provide payment option for those that are reluctant to put their credit card details online, the ‘webcard’ allows individuals to walk into any of the participating major Nigerian banks to load any amount of money they want to spend online on the card. They will now use the card to shop on MallforAfrica. Luckily for the startup, the CBN law is in no way affecting it and based on this, more online shoppers are using the service.
Speaking to Innovation Village from California USA, Chris Folayan, co-founder of MallforAfrica said the impacts of the CBN policy on their operations were not what anyone predicted or would have expected.
“There has been difference but not in the way you will expect. According to the CBN rule, you can’t spend more than $500 a month on international transactions, corporate cards are banned from all international transactions. CBN has put many rules into place that regulate how people use their credits online and abroad. So now if you want to travel to US with GTBank, you are bound by a monthly fee and yearly maximum that you can spend. Because of these, people are saying why travel? There has been a big reduction in people travelling abroad because even if they have the money to travel, they can’t spend it on credit cards,” he said.
“There are also several new wiring restrictions as well as new Forex rules. Because of that, people now use our platform to make way more purchases than before. The CBN rule, interestingly enough, has been an advantage for platform like ours because you can go to GTBank, Zenith, Skye Bank and any of the major banks. Load your MallforAfrica webcard with Naira and use it on our platform to purchase in Dollars. You loaded with Naira but you can spend the dollar equivalent – even as high as $15,000 if that’s what you want. You can spend that and you will still be fine,” he told Innovation Village.
He said they’ve seen an increase in people using the platform to make purchases because instead of shoppers getting on a plane to travel only to find out they could only spend $500 to buy what they need when they travel, they can just do their shopping on MallforAfrica.
“Why do that when they can just buy on MallforAfrica where they are not restricted to $500 because they can spend $10,000 (Naira version) on the MallforAfrica platform,” he said.
“We’ve actually seen a significant increase in number of people using our platform and those spending on our platform. We’ve done a little bit of research and we found out these are people who have decided not to travel abroad because if they do so, they wouldn’t be able to spend the money anyway, and they can’t wire the money anywhere – so they use our platform,” he told Innovation Village.
Weak Naira
Even though tech founders are not publicly talking on the state of the Naira, Chris said the industry would have to wait until the currency stabilizes before adjusting appropriately.
“You know it, everyone knows it. The Naira has been weak. We’ve been through many ups and downs as a country and the Naira is stabilizing and I predict that once the Naira has stabilized, there will be lots of transactions going on throughout Nigeria. We just have to get the Naira stable.
“There is a lot of uncertainties in the market because of what is happening to the Naira but once the currency is stabilized, people’s buying power will improve. The Naira went up to N280 but we’ve been recording steady drop. In the next month or so, we should know the fate of the Naira and everybody will adjust to the new Naira value and everything will go back to normal eventually.”
