E-commerce makes strong resurgence in Nigeria

Barriers to growth

Nigerians are naturally cautious about making purchases online, which is not surprising, as cybercrime is becoming a bigger problem as more money is spent on online platforms. Nigeria has been ranked as the third most fraudulent country in the world. It is clear that a concerted effort will be needed to halt cyber criminals in Nigeria, if the growth in e-commerce is to be maintained.

The Nigerian government shoulders a great deal of responsibility in the fight against online fraud and theft. Currently there are no specific cybercrime laws in the country so, unsurprisingly, criminals are showing no signs of reducing their activities. There is also a need to increase technical knowledge and training at all levels, to ensure there is no risk of a talent deficit in Nigerian companies of the future.

E-commerce depends largely on a very reliable delivery system. But given the soft
infrastructure problems in Nigeria coupled with  its vast size and low population density outside Lagos, the system is in dire need of attention. The weak infrastructure is compounded by the lack of a fully reliable postal service in the country. The government-owned NIPOST is not able to guarantee arrival of items on time or handle post in large volumes. In order to meet the complex needs of their customers, many e-commerce companies are establishing their own independent distribution networks.

Jumia and Konga have both created a network of distributors by making agreements with local delivery firms and supplementing this service with their own fleet of vans, tuktuks and mopeds. Konga also runs sorting centres and delivery points in key Nigerian cities, but the increase in leasing costs has limited this expansion. The cost of creating such networks can be prohibitive, which in turn reduces the total area that e-commerce companies can deliver to.

Nigeria is growing at such a rapid pace that its physical infrastructure cannot be built fast enough to accommodate demand. The only way that e-commerce providers are currently able to reach customers that live in remote areas is on foot or by donkey, due to the varied terrain they encounter.

Another major problem is that although Nigeria may be the most populous country in Africa, with 174m citizens, the level of broadband penetration is in the single digits at 6%. This figure is all the more surprising, due to the recent $1.6bn investment in submarine fibre-optic cables that connect Nigeria to the world. However, Nigeria’s Communications Minister Omobola Johnson is hopeful that the level of broadband penetration can pass the 30% mark by 2018.

The lack of broadband speeds has created a great opportunity for mobile phone companies, with over 65% of the population having mobile subscriptions; total subscriptions were more than 120m by the end of last year. The rapid uptake of mobile phones in Nigeria can be attributed to lower prices for handsets and tariffs, faster network technology and increasingly easy to use devices. E-commerce providers can see many opportunities to reach a wider range of customers through smartphones, especially as it is estimated that the number of Nigerian mobile subscribers is expected to rise to almost 170m by 2017. Around 43% of web browsing in Nigeria is done via mobile devices, compared to only 14% in North America.