E-commerce makes strong resurgence in Nigeria

Culture of innovation

The ‘Flying Donkey Challenge’ is a prime example of Nigerian innovators developing a radical solution to a complicated problem, with the focus of the challenge being to successfully introduce unmanned aerial vehicles, or ‘cargo drones’, at a commercially viable price point.       

Flying Donkeys are a type of unmanned aerial vehicle that can be remotely operated and have the ability to travel at almost 80 kilometres per hour and carry loads that a donkey could, hence the term ‘Flying Donkey’. It may be many years before ‘Flying Donkeys’ are a regular sight in the Nigerian skies. However, academics at Afrotech, a future Africa initiative based in Switzerland at EPFL (the École polytechnique fédérale de Lausanne), are working on the world’s first commercial cargo drone route, expected to be up and running by 2016.

The unmanned aerial vehicles would be able to negate any issues caused by poor
infrastructure and in the process revolutionise the way e-commerce products are delivered. The potential of so-called ‘Flying Donkeys’ is huge, taking into account that the Nigerian e-commerce market was valued at $1.3bn earlier this year.

The recent re-entry of PayPal into the Nigerian e-commerce payment market is another strong vote of confidence for the online payments industry. Nigerians were quick to use the new service, with the number of sign-ups in the first week being in the tens of thousands. Over the six months that PayPal had been operating in Nigeria, items from the UK, US and China have been purchased using the platform. However, PayPal has not yet allowed local merchants in Nigeria to use the platform, so the largest online retailers Konga and Jumia are not able to accept PayPal at the moment.

However, SimplePay offers users both a web and mobile-based ‘e-wallet’ that can be used to pay for goods and services, such as taxes and mobile phone bills. This service allows any business or consumer with an email address and a bank account to securely, conveniently and cost-effectively send and receive payments online or through their mobile phone. All a user of SimplePay needs to do is sign-up for an account online, connect a bank account or credit card and then deposit money into the ‘e-wallet’ to be spent at hundreds of merchants both online and offline.

The founder of SimplePay, Simeon Ononobi, says: “Obviously e-commerce in Nigeria is in its infancy but there is tremendous room for growth and we hope to capture as much of that as possible”.

Even the very basic problem of obtaining power has been “a great hindrance to growth as we use a generator, which is costly”, says Ononobi, who also notes that finding the best talent is difficult in Nigeria, which shows how crucial educating the next generation of technologically literate Nigerians is.

Whilst it may be difficult to operate in the Nigerian business environment as a startup, the opportunities for those companies that are successful in gaining a foothold in the market are sizable. The value of Nigeria’s online payments has grown significantly, up from $314m in 2010 to $488m in 2012, with online payments expected to total $630m in 2013.

Cash-on-delivery is used by many as a payment method for online orders. This method may be an appropriate stopgap to make Nigerians more comfortable placing orders online, but it is not cost effect or scalable, which is why the innovative new payment systems are important.