BD Insider: CBN’s bold push for eNaira

In today’s midweek update, we look at:

• Central Bank of Nigeria to expand eNaira adoption
• CFO of Africa’s largest smartphone maker detained amidst financial challenges
• M-KOPA ordered to pay taxes in Kenya

Central Bank of Nigeria to expand eNaira adoption

For many Nigerians who either weren’t aware the country had a digital currency or thought the eNaira was no longer functional, the Central Bank of Nigeria (CBN) is working hard to change that.

In a bid to boost the adoption of eNaira, the CBN has outlined new initiatives in its latest monetary policy guidelines. These include allowing government payments through eNaira and enabling Ministries, Departments, and Agencies (MDAs) to use the digital currency for payments to vendors and beneficiaries.

Users will be able to make payments into government accounts using their eNaira wallets, while MDAs can initiate payments to vendors and beneficiaries via the same system.

Zoom in: The CBN is also set to launch eNaira version 2.0, which aims to increase the involvement of deposit money banks in promoting eNaira usage. Additionally, the apex bank plans to collaborate with federal and state governments to push for wider adoption of the currency.

Context: While the eNaira was initially launched in 2021 to drive financial inclusion, its uptake has been sluggish. eNaira wallet downloads among retail users have seen limited growth, according to the International Monetary Fund(IMF). 

As of March 2024, eNaira accounts for less than 1% of Nigeria’s total currency in circulation, according to Nairametrics. Despite this, Nigeria remains one of the top three countries leading the charge in Central Bank Digital Currency implementation, alongside the Bahamas and Jamaica.

By focusing on government transactions and rolling out new features, the CBN hopes to significantly improve eNaira's adoption and make it a more accepted part of the country’s financial system.

CFO of Africa’s largest smartphone maker detained amidst financial challenges

Transsion Holdings, the largest smartphone company in Africa, known for its Infinix, Tecno, and Itel brands, is having a tough time. Their Chief Financial Officer, Xia Yonghui, has been arrested in China. 

While the company has assured that operations will continue unaffected, the incident has raised concerns about its internal governance and financial stability.

Xia's detention comes at a time when Transsion is facing several challenges. The company's share price plummeted by up to 8% following the announcement, reflecting investor anxiety about the potential impact on its leadership and financial performance. Xia, who has been instrumental in Transsion's growth and expansion, has been under investigation in Dandong, northeast China.

Context: Despite reporting strong revenue growth in the first half of 2024, Transsion has been grappling with negative operating cash flow, raising questions about its liquidity. This financial strain, coupled with Xia's detention, has heightened investor concerns.

Zoom out: Xia's detention is part of a broader trend of investigations targeting financial executives in China. Several other CFOs have recently come under scrutiny, indicating a crackdown on financial misconduct. The lack of transparency surrounding Xia's case has contributed to investor uncertainty.

In addition to the CFO's detention, Transsion is facing other legal challenges. The company is embroiled in high-stakes lawsuits with major technology companies like Qualcomm, Philips, and Nokia over patent violations. These lawsuits could have significant implications for Transsion's sales in key markets, particularly India.  

 M-KOPA ordered to pay taxes in Kenya

M-KOPA Holdings has lost its tax battle in Kenya. The company had appealed against a $6.8 million tax demand for the years 2017 to 2019, arguing that it shouldn’t have to pay taxes in Kenya because it’s based in the UK, citing the Kenya-UK Double Taxation Treaty. But the government didn’t buy it, and neither did the Tax Appeals Tribunal.

The tribunal dismissed M-KOPA's appeal, ruling that the company's key management decisions are made in Kenya, making it subject to Kenyan income and capital gains taxation. The tribunal found that M-KOPA had failed to provide sufficient evidence to support its claim of being managed and controlled from the UK.

The ruling is a major victory for the Kenya Revenue Authority (KRA) and could have implications for other companies operating in Kenya while claiming foreign tax residency. M-KOPA must now adhere to Kenyan tax laws and pay a portion of the $6.8 million tax bill.

Context: Kenya is M-KOPA’s biggest market, followed by Nigeria, Ghana, and South Africa. The startup offers products like solar power systems, smartphones, and electric bikes, which customers can purchase through small installment payments. In 2023, M-KOPA raised $250 million in debt and equity funding to fuel its expansion across Africa.

By the Numbers

42%

Transsion Holdings, Africa’s largest smartphone maker, holds 42% of Africa’s smartphone market.