In a significant shift within Africa’s financial landscape, Egypt has surpassed Nigeria to become the leading revenue contributor for dLocal, a global payments company. The latest financial reports from dLocal reveal a dramatic growth in Egypt ’s revenue, driven by favorable market conditions and strategic expansion, even as Nigeria faces economic challenges exacerbated by a currency devaluation.

Impressive Growth in Egypt

According to dLocal’s first quarter 2024 financial report, revenue from Africa and Asia grew by 51% year-over-year and 5% quarter-over-quarter, totaling $59.0 million and representing 32% of the company’s total revenue. Notably, Egypt’s revenue surged by 11 times year-over-year and doubled quarter-over-quarter, showcasing the country’s rapidly growing market for digital payments. This exceptional growth was instrumental in offsetting declines in other regions, including Nigeria.

Declining Revenues in Nigeria

In stark contrast, Nigeria, dLocal’s previous African frontrunner, witnessed a steep decline in revenue, dropping by 73% year-over-year and 74% quarter-over-quarter. The report identifies three primary factors contributing to this downturn:

• Currency Devaluation: The devaluation of the Nigerian Naira in February 2024 led to a tightening spread between official and market exchange rates. This impacted dLocal’s profitability.
• Shifting Transaction Volumes: An increase in local currency (L2L) transactions and a decrease in total payment volume (TPV) were observed. This suggests a decline in foreign exchange transactions on dLocal’s merchant platforms, likely due to the devaluation.
• Devaluation Impact on Financial Services: The financial services vertical experienced a significant drop in volume following the devaluation, resulting in fewer foreign exchange trades.

Despite the challenges in Nigeria, dLocal’s Africa and Asia segment reported a 60% year-over-year increase in gross profit to US$14.4 million. This growth is primarily driven by the strong performance in Egypt, where gross profit surged fourfold. Similar to Argentina, dLocal benefited from favorable spreads and a well-developed liquidity position for cross-border payments in Egypt.

However, the positive performance in Egypt was partially offset by the 78% year-over-year decline in Nigeria’s gross profit, a direct consequence of the Naira devaluation. Sequentially, gross profit for the entire Africa and Asia region dipped by 4%.

dLocal’s operating income also reflected the regional disparity. The company reported a 32% year-over-year and 34% quarter-over-quarter decrease in operating income, impacted by both lower gross profit and a 60% year-over-year and 26% quarter-over-quarter increase in operating expenses. These expenses are attributed to dLocal’s ongoing investments in building its team, capabilities, and infrastructure to support future growth.

Regulatory Roadblocks in Nigeria

The report brings to light the ongoing regulatory challenges faced by fintech companies in Nigeria. dLocal’s Nigerian subsidiary, Demerge Nigeria Limited, played a vital role in facilitating the company’s operations within the country. However, a directive issued by the Central Bank of Nigeria (CBN) in December 2023 significantly impacted Demerge’s operations.

The CBN directive delisted several fintech companies, including Demerge, from collecting customer deposits. This move mandated commercial banks to cease utilizing the services of such delisted companies. The CBN justified this action by citing existing regulations that restrict non-bank entities from collecting funds.

While the status of this directive remains unclear, it has cast a shadow of uncertainty over the regulatory environment for fintech companies in Nigeria. Despite these challenges, dLocal stays committed to the Nigerian market, leveraging its platform to support over 50 million locally issued Verve cards and tokens. Additionally, the company’s acceptance of Verve cards across 21 African countries underscores its commitment to facilitating seamless cross-border transactions on the continent.

dLocal’s Global Reach

Founded in 2016, dLocal has carved a niche for itself in the global payments landscape. Through its user-friendly single-API platform, the company empowers businesses to tap into billions of customers worldwide. dLocal’s platform streamlines the process of accepting payments, sending payouts, and settling funds globally, eliminating the need for multiple processors or local entities.

Boasting partnerships with over 450 global companies across e-commerce, SaaS, online travel, and marketplaces, dLocal boasts a clientele that includes industry leaders like Amazon, Booking.com, Uber, and Zara.

dLocal expanded to Egypt in 2018 and Nigeria in 2019.