Onafriq: Baxi Nigeria Exit Due To High Operating Costs

• Onafriq is discontinuing its Baxi agent banking operations in Nigeria due to economic pressures and market shifts.
• Key factors include rising operating costs, significant Naira depreciation, and intense competition in the fintech sector.
• The rapid adoption of instant account-to-account transfers also reduced the viability of POS-based agent transactions.
• Onafriq entered the Nigerian agent banking market in 2021 by acquiring Baxi, also known as Capricorn Digital Limited.
• Despite the shutdown of its agent banking unit, Onafriq will continue its other payment services in Nigeria, including its network and card issuing.

This development underscores the significant operational challenges within Nigeria's agent banking sector, prompting a reevaluation of business models and risk exposures for fintechs operating in the region.

Onafriq, a prominent pan-African payments company, has announced the cessation of its Baxi agent banking business in Nigeria. This strategic decision, communicated via an email to PUNCHOnline, is attributed to a confluence of factors including escalating operating costs, the significant depreciation of the Nigerian Naira, and an increasingly competitive market landscape. The company clarified that this move specifically targets its offline payments operations and does not signify a complete withdrawal from the Nigerian market.

The shutdown of the agent banking unit follows a comprehensive review of the long-term strategy and the sustainability of these particular operations. Onafriq confirmed that the closure will impact employees directly associated with the agent banking business. However, the company has committed to consulting with all affected staff, ensuring fair treatment, and providing support throughout the transition period. Agents previously onboarded through the Baxi payments platform have reportedly been transitioned.

The decision to implement the Onafriq Baxi Nigeria exit stems from profound changes in Nigeria's economic environment, which have made the agent banking business increasingly difficult to sustain. Onafriq highlighted that trading conditions deteriorated significantly from 2024 onwards, with the depreciation of the Naira and broader macroeconomic pressures fundamentally altering the financial viability of running the business. These factors directly contributed to rising fintech operating costs Nigeria, making the traditional agent model less profitable.

Furthermore, the rapid adoption of instant account-to-account transfers has played a crucial role in reshaping the market. This shift in consumer preference has changed the mix of transactions processed through agents' point-of-sale (POS) terminals. Coupled with increased competition within the sector, these developments have exerted considerable pressure on transaction margins, further weakening the business model for Onafriq agent banking Nigeria.

Onafriq initially entered Nigeria's agent banking market in 2021 through the acquisition of Baxi, also known as Capricorn Digital Limited. This acquisition was part of a broader strategy to expand its footprint in the country's dynamic payments industry by leveraging a robust network of point-of-sale agents. The company continued to invest substantially in the business through 2023, aiming to grow the network and promote digital alternatives to cash-based transactions across the nation.

Despite the Baxi Capricorn Digital Limited shutdown, Onafriq's commitment to the Nigerian market remains firm. Dare Okoudjou, Founder and Chief Executive Officer of Onafriq, acknowledged the difficulty of the decision, stating that while they entered Nigeria with conviction, they did not achieve the desired outcome. He emphasized that Nigeria remains central to the company's mission, and it will continue to serve the market as a Payment Solution Service Provider through its broader Onafriq payments network and card issuing services.

This development underscores the significant operational challenges within Nigeria's agent banking sector, prompting a reevaluation of business models and risk exposures for fintechs operating in the region. Agent banking networks are vital for financial inclusion, providing access to services like cash withdrawals, transfers, and bill payments through third-party outlets equipped with POS terminals. Their commercial viability is intrinsically linked to transaction volumes and the margins earned after covering agent commissions and operational expenses.

The Onafriq Baxi Nigeria exit serves as a stark indicator of the Nigerian fintech market challenges, particularly how the Naira depreciation impact fintech operations by inflating costs and eroding profitability. As more consumers embrace electronic transfers, the traditional reliance on POS activity for agent networks faces increasing pressure. This scenario necessitates that fintechs and compliance officers reassess their strategies, considering the evolving digital payment trends and the persistent macroeconomic volatility that impacts fintech operating costs Nigeria.

This development signals significant operational challenges within Nigeria's agent banking sector, prompting lawyers advising fintechs and compliance officers to reassess business models, risk exposures related to currency depreciation, and the impact of evolving digital payment trends on traditional agent networks.

Source: Original reporting via PUNCHOnline