A Cluster of Startups Is Attacking the One Number African Businesses Hate Most: the FX Spread

A Nigerian importer paying a Kenyan supplier typically converts naira to dollars and dollars to shillings, paying spread twice and often waiting three days. The effective all-in cost, according to treasury data compiled by the Accra-based firm Sankofa Flows, runs between 4% and 7% depending on the pair and the size.

The startups attacking this are not building a better exchange. They are building netting pools — matching a Nigerian company paying into Kenya against a Kenyan company paying into Nigeria, and settling only the difference across the border. Where the match is good, no currency is converted at all and the spread collapses to a service fee.

"On the corridors where we have density, we are quoting 0.7% all-in and settling same day," said Sankofa co-founder Ama Adjetey. "On corridors where we do not, we are as expensive as everyone else and we say so. The whole business is a density problem wearing a fintech costume."

That density requirement is also the risk. Netting pools need balanced two-way flow, and most African trade corridors are structurally lopsided. The companies furthest along have started subsidizing the thin side of a corridor to build the book — an expensive strategy that works until a competitor decides to subsidize harder.