Global payments provider dLocal is experiencing notable growth in its African operations, even as it grapples with the challenges of currency depreciation in key markets like Nigeria and Egypt. The company, known for facilitating cross-border payments in emerging markets, faced significant financial headwinds in the second quarter of 2024 as local currency fluctuations cut into its earnings.
Africa remains a bright spot for the fintech giant. Gross profit from its Africa and Asia operations surged by 79% year-over-year, reaching US$16.3 million, with Africa accounting for a substantial portion of this increase. The region now makes up 23% of dLocal’s total gross profit, underscoring the continent’s growing importance to the company.
The expansion of dLocal’s operations in Egypt, as well as the ramp-up of its services in South Africa — particularly in the e-commerce sector — are key drivers of this success. South African merchants, increasingly reliant on digital payments, have fueled much of the company’s revenue growth in the region. This growth has helped offset some of the difficulties caused by economic instability in other markets.
However, dLocal’s performance in Nigeria, Africa’s largest economy, has been dampened by the devaluation of the naira. Despite healthy transaction volumes, the weakening of the currency has reduced the value of dLocal’s payments in the country, putting pressure on its overall revenue. While total payment volume (TPV) reached a record US$6.0 billion globally — a 38% increase year-over-year — Nigeria’s currency troubles have made it difficult to convert those gains into revenue growth.
The company’s revenues from existing merchants in Africa and beyond have also felt the strain, particularly in Nigeria. In the second quarter of 2024, revenue from existing merchants dropped to US$161.7 million, down from US$177.1 million in the previous quarter. While dLocal saw an 8% increase in revenue from existing merchants year-over-year, the currency devaluation in Nigeria took a toll on its bottom line.
The ongoing currency volatility has also impacted dLocal’s gross profit margin, which slipped to 41% in the second quarter of 2024, compared to 44% in the same period in 2023. Yet, the strong performance in Africa — particularly in Egypt and South Africa — highlights the region’s potential as a strategic growth driver for the company.
Looking ahead, dLocal continues to invest in technology and back-office capabilities to support its long-term growth in Africa. While short-term economic instability, particularly in Nigeria, remains a challenge, the company’s focus on emerging markets positions it for further expansion. By building on its growing presence in Egypt and South Africa, dLocal’s strategy in these markets appears to be navigating complexities and turning currency risks into opportunities for sustainable growth.
As dLocal strengthens its foothold in Africa, the region is set to play a critical role in the company’s future, helping to balance the challenges it faces in other emerging markets.