Bal-loons in Kenya 🎈

The Naira moves a step closer to reality


Our thoughts & prayers go to the people of Cote D’Ivoire who lost their prime minister during the week, days after returning from two months of medical treatment in France.

The Naira moves a step closer to reality

Earlier this week Nigeria devalued the Naira by 5.5%, from N360/$1 to N385/$1. A step closer to reality - the Nigerian Autonomous Foreign Exchange rate (NAFEX).

What it means

An exchange rate is the value at which one currency can be converted to another and this value/price is driven by the demand and supply of individuals such as importers, exporters, investors and speculators.

Typically, in developed countries, there’s only one exchange rate which is determined by the market (demand and supply) and it works fine but Nigeria has 3 foreign exchange rates: The central bank’s rate (formerly N360/$1), NAFEX’s rate (N385/$1) and Black Market (~465/$1). 

Why 3 different exchange rates? 

The Black market exists because people can’t readily get FX for their activities that are deemed non-essential by the government which is trying to conserve how much foreign currency it has to pay out since there’s little coming in thanks to low oil prices.

NAFEX, as the full meaning implies, is a free-floating exchange price that depends on demands and supply, mostly between importers and exporters.

The Central Bank rate is a fixed rate put in place to control the economy as the apex bank can’t solely rely on a free-floating exchange rate. Free-floating means things can go from 0 to 100 real quick.

What happens when a currency is devalued.

When there’s a drop in the value of currency imports become more expensive (think of paying N381/$1 instead of N360/$1 for foreign goods), while exports become cheaper (think of the US paying $0.00263/N1 instead of $0.00278 for Nigerian products).

The burden of more expensive imports has a positive spin to it as it means cheaper exports, which leads to more exports and an increase in GDP. But this only works out fine when the country is readily exporting products (not when there’s less demand for its major export i.e Oil) and not heavily reliant on imports for critical sectors (Manufacturing) like Nigeria.

Why it matters

For the government, it’s a good step. The unification of exchange rates is one of the conditions necessary for world bank/IMF loans and it puts foreign investors at ease. 

For Nigerians (most actually) who rely on the Black market for FX, this change means nothing.

We have a new rule

Egypt has recently passed a new rule that prohibits opposition from thriving, especially the ones from the armed forces.

Get this gist: The Egyptian parliament just passed a new rule that requires any military personnel who wishes to run for office to seek the approval of a high ranking military council headed by the president of the country, Abdel Fattah al-Sisi. 

More details: The Supreme Council of the Armed Forces (SCAF) headed by Sisi since his first tenure in  2014, is now in charge of checking and approving candidates before they are allowed to run for either presidential, legislative or local elections.

Does this sound like military control? Well, as a former director of military intelligence, Sisi reportedly rules an authoritarian regime where he has successfully controlled civil opposition. This has proceeded to unveil that the Egyptian ruler has garnered an unchecked power while trying really hard to achieve his dreams of becoming one of the greatest leaders of modern Egypt.

Before now: Members of the army were allowed to pursue political posts on the condition that they step down from the military or have completed their service and retired from the army. These conditions were so because serving members of the military were supposed to play reserved roles and not take part in any political activities.

So what changed? Nothing actually. The military has always been regarded as the ultimate protector in Egypt and has been in charge of the economic affairs of the country since its independence from the British colony in 1952. They saw a change when President Mohamed Morsi was democratically elected in 2012 and was removed by a military action led by Sisi in 2013. 

In a nutshell: In his bid to return for a second term in 2018, Sisi’s oppositions were either arrested and unlawfully detained or discouraged to run against the leader. It is believed that through this new law, Sisi is assumed to have taken advantage of the coronavirus situation and the state of the nation to seemingly expand his power to choose prospective leaders of the nation.

Bal-loons in Kenya

US company, Loon (a unit of Google parent company Alphabet) has recently launched its internet-delivery balloon project in collaboration with the Kenyan government and Telkom Kenya, the country’s third-largest telecom operator. The project aims to provide internet access where services are not available by beaming 4G internet from the solar-powered balloons.

So how does it work?

It's really not that complicated ;) Picture this. Rather than delivering connectivity from the ground through cell towers and cables, or from space via satellite, Loon claims to have built a third layer of connectivity in the earth’s upper atmosphere. 

The high altitude fleet of balloons essentially work as cell service towers that drift on currents in the atmosphere, moving constantly to maintain the target area coverage. The balloons are billed by the company as a more cost-effective way of expanding phone companies' coverage in certain areas.

Status of the Project

While it was officially launched on the 7th of July, Loon said its service has been undergoing significant testing over the past months, connecting over 35000 users to the internet. An internet speed test disclosed a download speed of 18.9Mbps (megabits per second) and upload speed of 4.74Mbps. The company plans to initially cover 50,000 square kilometres in western and central parts of Kenya and will continue to add balloons to achieve its target fleet size of 35 in the next few weeks.

Why it matters

Access to the Internet is a pretty big deal, it’s even a basic human right but still, nearly 3.8 billion people, or about half of humanity, don't have access to the internet. In Africa, only 28% of its 1.3 billion people have access to the internet. 

Between 2007 and 2018, the growth of internet access dramatically slowed from 19 per cent to less than six per cent. In contrast, the demand for connectivity is growing exponentially because of internet-connected devices that people increasingly rely upon and remote work behaviour, creating a market need for innovations in delivering internet service. 

What’s next?

For Loon: Expansion. Loon claims to be working with a number of commercial telecom partners to deploy its service in underserved regions, one of which is Vodacom in Mozambique.

For Africa: A new market. In our previous newsletter, we discussed how Facebook and other partners are building an undersea cable to deliver internet services on a large scale to the continent. We are curious to find out if other players are keen to explore this untapped market. 

Worth Reading 📚

Quote 💭

It is difficult to get a man to understand something when his salary depends on his not understanding it.

– Upton Sinclair

Thank you for reading this week’s edition 

Written by Daniel AdeyemiDamilola Amusan Bright Azuh