Onafriq's Naira Shock: The Brutal Truth About Building Pan-African Fintechs

When a company like Onafriq (formerly MFS Africa), a genuine powerhouse spanning over 38 countries, announces a 7% year-on-year revenue drop, you sit up. Especially when that revenue had surged from $7.9 million in 2020 to a formidable $85.6 million by 2023. The first instinct is to look for product failures, competitive pressure, or operational missteps. But the recent regulatory filings point to a different, far more insidious culprit: Nigeria's currency depreciation.

This isn't just a headline about one fintech's struggle. The interesting thing about this story isn't merely that a big player took a hit. It's actually a chilling, first-principles lesson for every founder, builder, and investor across the continent: your meticulously crafted operational growth and scaling efforts can be violently undermined by macro-economic instability, even when you think you've diversified your bets.

The Naira's Bite: What Really Happened

According to the filings cited by Condia, Onafriq's revenues fell to $79 million in 2024 from $85.6 million in 2023. The company explicitly attributed this revenue decline, and a significant impact on its total processed volume, to the depreciation of the naira.

Let's break this down with the builder's lens. Onafriq facilitates cross-border and domestic payments. Imagine you're running a major payment railway. A huge chunk of the traffic on that railway comes from, or passes through, Nigeria. When the naira takes a dive – and in 2023, it was a freefall – the USD equivalent of every naira-denominated transaction, even if the volume in naira remained constant or grew, shrinks dramatically when converted to your reporting currency (usually USD). It's like having your Gbagada workstation suddenly costing twice as much to power, not because electricity prices doubled, but because your income halved.

This isn't just an accounting trick. The impact on total processed volume (TPV) means fewer actual dollars (or their equivalent) are moving through their network. This could be due to:

1. Direct Conversion Loss: Simply put, more naira = fewer dollars.
2. Reduced Economic Activity: The naira's depreciation fuels inflation, reduces purchasing power, and generally tightens wallets. People and businesses transact less. That hustler in Onitsha sending money home or the Akure developer paying for a cloud service feels the pinch. The "sapa realities" become acutely clear, directly impacting transaction frequency and value.
3. Operational Headaches: Managing FX exposure, reconciliation across wildly fluctuating rates, and potential hedging costs become enormous burdens.

The Illusion of Diversification

Onafriq operates in 38+ countries. By all conventional wisdom, this should provide a robust shield against single-market risks. The fact that a single market's currency woes (Nigeria's naira) could cause such a significant dent across a multi-country operation speaks volumes.

It challenges a common assumption: that geographical diversification automatically inoculates you against macro shocks. The reality is that Nigeria, being Africa's largest economy and a significant hub for trade and remittances, has an outsized ripple effect. Its economic health, or lack thereof, can cast a long shadow across other markets, especially for platforms facilitating money movement.

For founders building pan-African solutions, this is a sober reminder. Your platform might be technically robust, your team brilliant, your distribution channels growing like wildfire. But if your key markets are built on shaky economic foundations, your entire edifice is vulnerable. It forces you to think about economic resilience with the same rigor you apply to technical scalability.

FOUNDER DIRECTIVE / ADVISORY

The Short Answer

Onafriq's revenue dip is a brutal lesson: even a widely diversified fintech can see hard-won growth obliterated by currency depreciation in a major market. Your operational excellence means little if your base unit of value erodes.

What Is Really Happening

Onafriq, a market leader in African payments, experienced a 7% year-on-year revenue decline to $79 million in 2024. This isn't a competitive loss; it's a direct consequence of Nigeria's naira depreciation in 2023, impacting both reported USD-denominated revenue and total processed transaction volume. This highlights how systemic currency instability, even in a single large market, can have a disproportionate negative effect on even pan-African businesses, challenging the efficacy of geographical diversification alone.

The Assumption I'd Challenge

"Operating in 38+ countries provides sufficient diversification against single-market currency risk." This is a comforting thought, but Onafriq's situation suggests it's often a false sense of security. While spread across numerous territories, the economic weight and interconnectivity of Nigeria mean its currency volatility can still heavily skew overall performance. The challenge here is to understand your true underlying revenue concentration by economic activity and currency exposure, not just by country count. A single market might still be responsible for a disproportionate share of value flow, directly or indirectly.

The Strategic Options

1. Aggressive Currency Hedging: Invest in sophisticated financial instruments to hedge against FX volatility, though this comes with its own costs and complexities.
2. Shift Revenue & User Mix: Strategically prioritize growth in markets with more stable currencies, or focus on services that can be priced in a stable foreign currency (e.g., USD-denominated SaaS fees, if applicable).
3. Dynamic Pricing & FX Surcharges: Implement systems that allow for real-time pricing adjustments or transparent FX surcharges on volatile corridors. This could protect margins but risks customer churn.
4. De-emphasize Volatile Markets: Reduce operational and investment exposure to markets with chronically unstable currencies. This is a tough decision, especially with markets as large as Nigeria.
5. Build In-House Treasury Expertise: Develop a robust internal finance function capable of actively managing currency risk as a core operational competency, moving beyond basic accounting.

My Recommendation

For Onafriq and any founder scaling across Africa, the smartest play is a combination of Option 2 (Strategic Shift in Revenue Mix) and Option 5 (Building In-House Treasury Expertise). You cannot simply abandon a market as critical as Nigeria, but you can be intentional about where you seek your next unit of growth and revenue stability. Simultaneously, treating currency risk as a primary operational challenge, not an afterthought, is no longer optional. The "no gree for anybody" execution spirit needs a "no gree for FX volatility" financial strategy behind it.

What I Would Do Next

1. Granular Revenue & TPV Breakdown: Immediately conduct a forensic analysis of revenue and TPV contribution by specific currency pairs and corridors. Understand the precise exposure to the Naira and other volatile currencies.
2. Stress Testing & Scenario Planning: Model the impact of further significant depreciation (e.g., 20%, 50%) in key volatile currencies on the entire P&L. What does a "worst-case but plausible" scenario look like?
3. Cost-Benefit Analysis of Hedging: Work with financial experts to understand the actual costs, complexities, and potential returns of various hedging strategies versus the current unhedged exposure.
4. Explore Local Currency Value Retention: Can services be structured to retain more value in stable local currencies or even partial USD components within Nigeria? What innovative pricing models could mitigate risk?
5. Develop a "Volatility Playbook": Establish clear triggers and predefined operational and financial responses for rapid currency shifts.

What Would Change My Mind

If robust evidence emerged that the TPV impact was primarily due to a catastrophic collapse in economic activity or user demand rather than just the FX conversion effect, then the focus would shift more heavily towards market diversification and product innovation rather than just hedging. Additionally, if Onafriq demonstrates a rapid and profitable pivot into new, highly stable markets that quickly offset Nigerian volatility, my emphasis on hedging might lessen, though the core lesson on currency risk would remain.

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