Flutterwave, Africa’s leading fintech startup has announced the launch of Swap, to digitise the foreign exchange process for Nigerians. This initiative is made possible with the backing of the Central Bank of Nigeria (CBN), a strategic partnership with Wema Bank, and Kadavra BDC, the Bureau de Change (BDC) firm.
The introduction of Swap is happening at a time when Nigerians and businesses face difficulties accessing foreign currencies. This has caused problems for individuals and businesses wanting to do things like international transactions and investments. These currency challenges have also affected the country's economy and people's financial goals, making it hard for them to take advantage of global opportunities.
In recent years, Nigeria has encountered various foreign exchange (FX) issues. One of them is a $10 billion FX backlog, which the CBN aims to resolve within two weeks. This backlog comprises requests for dollars from manufacturers, importers, business and personal travel allowances, as well as medical bills incurred abroad.
The CBN has tried different approaches to stabilizing the FX rate and clearing a backlog of demand requests for the USD. Previously, CBN tried to use a $3 billion loan secured by the Nigerian National Petroleum Corporation to inject liquidity into the foreign exchange market but the plan fell through as investors developed cold feet, leaving the African Export-Import (Afrexim) Bank as the sole provider.
CBN’s ability to offset the backlog of FX demand would boost investor confidence in Nigeria and bring stability to the FX rate, which is very important to investors. However, in an attempt to float the Naira in June 2016, the market rate quickly shot up from $1/₦347 to $1/₦750 by 2023.
In June 2023, another float announcement shot the naira to as high as ₦920 to ₦1,000 on the parallel market. If an investor took a loan at the former rate, they would have to pay back a higher amount in Naira to repay the same amount in dollars. This rapid devaluation has led to severe economic difficulties and is hitting startups that raised money in dollars hard, with some founders saying that most businesses might shut down as a result.
According to the acting Governor of the CBN, Folashodun Shonubi, Swap will address two critical issues plaguing Nigeria's foreign exchange market: the lack of synergy among financial institutions and a heavy reliance on cash transactions.
He stated that no new licences were issued and that Swap will help stabilize exchange rates for BDCs while also distinguishing them from illicit black market transactions.
As a result of this partnership, Flutterwave will leverage its International Money Transfer Operator licence, granted by the CBN, to facilitate the influx of foreign currency. While Kadavra, utilizing its BDC licence, will handle the sale of foreign currency, and Wema Bank will provide comprehensive support throughout the process. This collaborative effort is expected to bring positive changes to the Nigerian foreign exchange scene.
This move will provide access to global currencies like Dollars, Euros, and British pounds and is only available on Flutterwave's web app and for registered Nigerian users. The company will introduce a card issuance system and 10 million of these cards to Nigerians from October 2023, This is going to be beneficial to Nigerians who require swift access to Personal Travel Loans (PTA)and Business Travel Allowances (BTA) to facilitate their educational pursuits, business endeavors, and diverse travel needs.
According to Olugbenga "GB" Agboola, Founder and CEO of Flutterwave, Swap represents a significant leap forward in how Nigerians will engage with foreign exchange.
"At Flutterwave, our dedication to innovation is matched only by our commitment to simplifying financial processes for endless possibilities," he said. "We understand the FX challenges individuals and businesses face, and Swap is our answer to those pain points, providing a seamless and efficient platform for currency exchange. We are honored to have secured regulatory approval and the trust of our partners Kadavra BDC and Wema Bank to bring this life-changing solution to Nigerians".
Cynthia Onyinyechi, who is the CEO of Kadavra BDC said "Swap is a step in the right direction for solving major FX problems for Nigerians and has simplified the process for accessing foreign currency at the click of a button".
"As a bank that is committed to digital innovation, we are proud to be on this journey with Flutterwave because we believe a product like Swap will have a major impact across all sectors," Moruf Oseni, managing director at Wema Bank, said.