2023 Wrapped
Hello Readers,
Before we go on and on about what 2024 would look like, here’s a little retrospect. Our forecasts for the year 2023 hinged on interest rate hikes, inflation, VC funding slowdown, policy outcomes of elections in Nigeria, South Africa, and Ghana. The year has been thus and more.
Macroeconomics
The earlier part of the year saw disruptions in economic activities and a liquidity crisis caused by the redesign of the Naira and policies surrounding cash withdrawal limits. This was followed by the eagerly anticipated 2023 election process that spurred political tension and the rise of policies that we can say were hard pills to swallow, from fuel subsidy removal to the amalgamation of exchange rate windows.
Interest rates were adjusted up to 4 times in the first six months of the year to 18.75% by July 2023, we witnessed leadership changes in the CBN that paved the way for more policy adjustments. One spectacular one came in shortly before jingle bells and fireworks, the reversal of the crypto ban. In 2021, the CBN banned crypto transactions through banks but has now reversed that ban and taken a positive posture towards digital currency assets, issuing new guidelines to financial institutions for crypto transactions.
Nigeria also faced significant fiscal bumps as public debt and debt servicing hit an all-time high like it wasn’t already high enough. Well, maybe we’d write about it in another piece.😉😉
Private markets
VC funding did slow down and valuation cuts were rampant. An interesting metric we came across highlighted by ventures Africa is that for every 1% increase in interest rates by central banks there was a 3.2% decrease in venture capital fundraising. This simply illustrates the opportunity cost from an investor’s perspective, with every increase in interest rates, it becomes more reasonable to invest in bonds than the risky pool of venture. The interest rate hike did not only reduce the availability of venture funds but also made turning to debt financing less appealing, hence startups and ventures found themselves in a fundraising pickle or what many reports have called a fundraising winter.
Amidst the winter, the top 5 fundraising deals by Nigerian startups are:
Moove raised $76 million across equity and venture debt.
Sabi raised $38 million in Series B funding.
LemFi announced a $33 million Series A round.
Helium Health raised $30 million in a Series B round.
Nomba raised a $30 million pre-Series B round.
Nigerian startup M&As that shaped the ecosystem:
Risevest and Chaka
Moniepoint and Kopo Kopo
Bitmama and Payday
Fairmoney and Payforce
Notable startup shutdowns across Africa:
LazerPay
54gene
Pillow
Pivo Africa
Vibra
Public markets
The stock market! Whoosh 🔥. The Nigerian Stock Market closed the year with ~46% gain despite inflation and depreciation. What were the key drivers of this stellar gain? Increased money supply and significant investments made by some high-profile billionaires, including Femi Otedola, Abdulsamad Rabiu, Tony Elumelu, and Aliko Dangote.
Transcorp Hotels topped the charts with over a thousand per cent in gains and companies with dollar holdings and dollar-denominated incomes had much to gain from the currency depreciation. The banking sector (Banking All-Share Index) impressively returned 115%, Seplat recorded a 110% return.
2023 was tumultuous to put it lightly, the year saw a confluence of economic factors that tested the strength of Nigerian businesses and individuals. The factors that drove these pressures continue into the new year and we will be exploring how we think they will play out for 2024 in our next article.
In the meantime, let us know what you think! What stood out to you in 2023? and what’s your on your “watch-out” list for 2024?