E-commerce makes strong resurgence in Nigeria

It has taken a long time coming, with many bumps in the road, but finally it seems that e-commerce has taken firm hold in Africa’s largest economy, Nigeria. The sector is already worth over $1bn per year and growing but a great deal still has to be done before the system can really take off. Finbarr Toesland has the details.

At first glance Nigeria may not appear to be a prime location for a rapidly growing e-commerce revolution, due to barriers ranging from poor infrastructure, relatively high internet access costs and online safety concerns to name a few. However, widespread innovation has led to unprecedented growth figures in the e-commerce sector in Nigeria.

Only three years ago the e-commerce landscape was very different in Nigeria. In October 2011, Naspers’ Kalahari.com.ng website closed down after trading for less than two years. The primary reason was simply because there was such a small number of potential online customers. But as we near the end of 2014, Nigeria is seeing a resurgence in e-commerce activities, with the market forecast to total $1.3bn this year. No single company has been responsible for this growth increase, but rather a diverse range of factors have worked in unison to make e-commerce more available, cost-effective and safe to the ordinary Nigerian.

Venture capitalists are taking notice of the e-commerce success in Nigeria and are actively seeking to invest in this market. The two most prominent examples of online retailers gaining substantial investments are Jumia and Konga.

Jumia and Konga are the largest online retailers in Nigeria, with Jumia currently selling over 100,000 physical items ranging from clothing, mobile phones, books to groceries. These items are mainly stored at a warehouse near Lagos and several smaller storage sites in other Nigeria cities they deliver to. The main way online retailers like Jumia and Konga quickly deliver to their customers is by moped or van, with Jumia owning a fleet of over 200 mopeds.

Naspers have re-entered the Nigeria e-commerce market with their investment in Konga, after their last foray ended abruptly with Kalahari.com.ng closing. Naspers first invested $50m into Konga in March 2013, with Swedish investment company AB Kinnevik also investing $25m early this year. The most recent $50m funding into Konga has been led by Naspers, who now control more than half of the company.

Jumia has seen a mix of investors; from financial giant JP Morgan to global media company Millicom and London-based hedge fund Summit Brothers. The $35m investment from Millicom and $26m from Summit Brothers is a ringing endorsement of e-commerce in Nigeria. This massive inward investment is indicative that the country is ready to do business on a global scale.

On a practical level these investments allow Jumia to ensure they are able to recruit the best talent, increase their product offering and deliver faster to remote areas.

The CEO of Jumia Nigeria, Nicolas Martin, says “e-commerce will be the next driver of Nigeria’s economic growth, with e-commerce expected to soon contribute about 20% of GDP, in terms of growth”.

Therefore, for Nigeria to fulfil its expectation to become one of the global ‘Next Eleven’ economies, the e-commerce sector must have a fully formed policy framework, backed by government, which encourages startups to combat the issues facing the industry. However substantially more investment will be needed to combat a number of issues that the Nigeria e-commerce market faces, from the lack of infrastructure to giving Nigerian e-commerce startups the capital and resources they need to hire the most qualified staff.