BAXI — MFS Africa’s Nigerian homecoming

There is a saying Yoruba people around the world like to throw around every now and then: “Eko ni le”. It means: “Lagos/Nigeria is Home”. You may be meeting in São Paulo. You may have been born and bred in Benin like I was, but Nigeria will always remain significant.

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That’s why expanding MFS Africa’s footprint to include Nigeria has occupied us at MFS Africa for some time.

Why is Nigeria home?

When Africa is being discussed as a market in power rooms around the world, it is common to see it divided into four blocks: 1) Nigeria, 2) South Africa, 3) Egypt, 4) The Rest. As unfair as it might sound, it is hard to argue against (Though I trust the Kenyans to do so, still 😉).

As a company, MFS Africa has so far set its eyes on wiring up The Rest. We have done that very well. Better than anyone else. And we plan to continue to invest in expanding our MFS Africa HUB so that ultimately, it fully covers The Rest. We have also known all along that we cannot ignore the NES (Nigeria, South Africa, Egypt). To truly bring instant digital cross-border payments to Africans and African businesses, we need to deepen our payment network’s reach in these markets, starting with the most strategic of all for us — Nigeria.

Lagos is indeed fast becoming the fintech capital of Africa, confounding early naysayers. In typical Naija style, they played by their own rules and are overtaking early contenders like Nairobi, Johannesburg, and Cape Town. Nigeria is also home to the largest SME market on the continent. We cannot be serious about putting the MFS Africa Hub to work for SMEs if this excludes Nigerian SMEs.

When it comes to intra-African remittances, the country dominates: a third of the $15bn in remittances sent between African countries annually ends up in Nigeria. The Cameroon to Nigeria corridor alone accounts for over $2.3bn a year.

But… Despite all its glorious promises, Nigeria has been a “A game of almost” for many in the fintech sector in the last decade. For mobile money operators, our traditional entry partners in any market, the continent’s biggest economy and the most populous country has long presented a conundrum.

Why did it take us so long?

It may be home to Africa’s largest unbanked population, but facts and conjectures about who got, who will get, whomay get, who will never get the mobile money licenses have plagued Nigeria’s mobile money potential for years. During that time, traditional banks and a number of daring founders have taken it upon themselves to fill a space dominated by telco-led ventures everywhere in Africa.

MFS Africa’s modus operandi in entering a country is to work with relatively large telco-led mobile money operators in the country and offer them to join our network. Doing so instantly allows their customers and SMEs in the market to make and receive cross-border payments with customers and SMEs already on our network outside that market. And the network effect plays out beautifully. Well, almost…

It did not play out exactly like that in Nigeria, so we had to rethink it.

The answer was in the box.

So, we went back to first principles. In a country where 36% of adults remain completely financially excluded, how were Nigerians sending money to each other?

The answer was glaringly obvious. If you walk through Nigeria’s crowded markets, cities, and towns you won’t have to go far before you see it: every few meters, a point-of-sale terminal sign will pop up.

The Cash-in-cash-out (CICO) agents operating these terminals act as ATMs for people in places where cash machines are simply unavailable. They use connected point-of-sale devices to create a vital link between the unbanked and the larger financial system. This is where money was getting digitized in Nigeria.

It is, of course, just another example of the ingenuity and hustle of local entrepreneurs across Africa, who make a way for consumers in the vacuum created by the regulation. And when one looks closely, it is a variation of what nearly 5 million mobile money agents have been doing across The Rest for the past decade. Nigerians would say an “evolution”, and most of us will sigh…

One particular CICO network came back in focus for us late last year: Capricorn Digital, known as BAXI. BAXI was founded by Degbola (Dee) Abudu and Folu Majekodunmi in 2012. I met Folu when I moved to South Africa in 2006, and he introduced me to Dee in 2013 after they have started BAXI. Dee was the CEO and we stayed loosely in touch over the years; we meet in Lagos or Joburg every now and then when one of us was visiting; we spent time comparing notes on the funding market and exchanging tips on how to live with rejection while keeping our dreams alive. In late 2019, few years after we started investing in other FinTech’s through MFS Africa Frontiers, Dee approached me, and we considered joining a funding round he was trying to put together. Ultimately, we decided against it and chose to focus on the Beyonic acquisition instead. A year later, I received a new pitch deck from BAXI for a much larger round. The business has grown tremendously, and I started connecting some dots; I called Dee to learn more; we got talking, and the more we spoke, the more I realised that this was the answer we have been looking for our own Nigeria Conundrum. The rest is now history…

The answer was in the box.

Hello Nigeria.

The answer was in the box.

At the media briefing held in Lagos this week about the deal, a journalist asked me: “How did you decide to do this; it is such a bold move”. It got me thinking.

And here is the truth: I would probably not have been able to summon up the courage to make such a decision and follow it through without everything and everyone who came before.

Not without the initial whispers and guidance from Kaede Kotsui to match the size of our ambition with the size of the bets we place. Kaede joined our Board in 2018 as the Series B Round lead investor representing LUN Partners Group, a global investment group specializing in FinTech. He has been an incredible advisor on the BAXI deal, even when we disagreed.

Not without the calming counsels of Wim van de Beek and Mo Cassim.

Not withouth the unyielding support of Goodwell Investments, LUN Partners and our entire shareholders base who not only agreed early on to fund the transaction but have demonstrated time and time again their committment to our vision of making borders matter less.

Not without Filip Nilsson and Frannie Tyner, the flawless execution and the staying power of both teams, working through hundreds of issues, knowing that any one of these issues could have kept us from seeing this day.

And certainly not without the layers of trust built over the years that Folu, Dee and myself brought to the deal.

So, it took a village to make this bold move. And bold it is. It is also the right one.

It is what is needed to build a digital payment infrastructure that will cover the entire continent and last 100 years. It is what is needed to solidly anchor that infrastructure in the fabric of the largest economy on the continent. BAXI Agents are SMEs themselves that serve as essential links to other SMEs and consumers in Nigeria. As they continue to grow in numbers in cities and villages across Nigeria, we will connect a growing number of Nigerian and Nigerian businesses to the rest of Africa and beyond. And as part of the broader MFS Africa digital payment network, BAXI will play a critical role in removing the borders that still limit what so many of us can do in Nigeria.

Eko ni le. We are here at last. And we no go carry last.