Lagos ban deals blow to ride-hailing startups

Lagos has banned commercial motorbikes and rickshaws to prevent the transport chaos caused by illegal operators, but would regulation be a better solution than prohibition? Linus Unah reports

Authorities in Nigeria’s commercial hub of Lagos no longer want to see motorbike taxis and motorised rickshaws, commonly known as okada and keke, dominate the bustling city’s roads.

On February 1, a restriction on the operations of commercial motorbikes and three-wheeled rickshaws became effective, cutting off access in the majority of the city’s business districts and economic hubs. The ban, introduced in a bid to ease congestion and improve road safety, covers about 15 local councils, 10 major highways and at least 40 bridges, some connecting the boisterous mainland to the city’s skyscrapered island.

The state government says it wants to address “the chaos and disorderliness” caused by “illegal operations of okada and tricycle riders” but riders and bike-hailing startups are calling for regulation rather than an outright prohibition of their services.

Commuters struggle

On the first business day after the ban was applied, commuters struggled to get to work and some had to trek several miles to get to nearby bus stations or their office. Pictures showing hordes of people stranded along highways circulated across Facebook and Twitter as social media users lambasted local authorities.

“Commuting to work was easier when the okada and keke were there,” says Ezichi Ogbu, a development worker. “Now, with the ban, there’s the hassle of pushing through a crowd of bodies just to get a seat in the minibuses.”

But Lagos state officials are unfazed by the criticism. Instead the government has announced a raft of measures to accommodate the change in policy. First, it deployed a fleet of 64 additional buses and said it was expecting up to 550 more. Fourteen new ferry boats have been acquired to enable the state-run Lagos State Ferry Service (LAGFERRY) to help commuters beat traffic and decongest the roads. LAGFERRY now has a mobile app and hopes to cater to about 480,000 passengers every day.

Okada riders have often come under heavy criticism for flouting traffic laws, robbing commuters and causing road accidents due to reckless driving. Attempts to either regulate or ban their activities have become a regular feature among Lagos state governors since 2007. But Lagos’s notorious traffic jams have continued to push Lagosians to use okada.

The state’s Bus Rapid Transit is insufficient for the city’s estimated 20m population and construction of the first section of an urban rail network, which commenced in 2009, is yet to be completed.

The absence of a modern mass transit system led to the emergence of on-demand motorbike startups. MAX.ng entered the space in 2015, followed by Gokada in 2017. OPay, incubated by Norwegian-based global internet brand Opera, launched motorbike hailing operations in 2018.

Critics argue that the government should have spared organised bike-hailing startups like MAX.ng, Gokada, and Opay which train riders, track them and provide insurance and helmets for professional riders and customers.

Startups are ‘part of the problem’

The government thinks differently. In a series of posters produced to explain the ban, the government reasoned that these startups are “part of the problem” and are not part of the “Greater Lagos journey” to becoming a megacity. 

Commuters are becoming used to having the moto-taxis around, with Gokada and MAX.ng reporting that they have conducted more than 1m rides apiece. The growth of the app-based motorbike hailing services and their continuous appeal to traffic-clogged cities like Lagos has attracted investment. In 2019 alone, MAX.ng raised $7m in funding; Gokada amassed $5.3m from investors, while OPay received a total of $170m from two rounds.

With these investments in the bank, the ride-hailing firms had their sights set on expanding offerings, increasing their fleets and widening their coverage across other cities and countries within the continent. 

Gokada seems to be the worst hit by the recent ban in Lagos, where its services are primarily concentrated. A week after the restriction of motorbike taxis, tech-industry focused news platform Techpoint Africa reported that Gokada had dismissed up to 70% of its workforce. Gokada founder and co-CEO Fahim Saleh says the firm would likely diversify to delivery services and boat taxis known as GBoats.

By contrast, MAX.ng offers logistics and delivery services and has motorbike taxi services in three other Nigerian cities outside Lagos, including Ibadan and Kano. MAX.ng cofounder Adetayo Bamiduro told African Business that the firm is aiming to expand to 10 large cities in Nigeria and Africa.

For Opay, an array of offerings, including mobile payments and transfers, food delivery and app-based rickshaw hailing services across several cities in Nigeria, could help it weather the shock. The company reports that it has about 140,000 active agents in Nigeria who now process more than $10m daily.

‘Harsh policy’ towards startups

The ban in Lagos, which hosts one of Africa’s most vibrant tech scenes, will certainly “highlight the harsh policy and regulatory environment in Nigeria, especially Lagos,” says Victor Ekwealor, managing editor of TechCabal, a Lagos-based Africa-focused tech media organisation.

“This is going to signal to startups that this is not a place for us,” Ekwealor explains. “The market is still there, that’s undeniable, but there are going to be second thoughts and things are honestly never going to be the same.”

Despite the ban in Lagos, motorcycle taxis are fast becoming a common mode of transportation in some large African cities like Lagos, Nairobi, and Kampala. The African motorbike market is expected to grow beyond $10bn by 2022, according to a report by the New York-based global market research firm, TechSci Research. The report says that inadequate and unreliable public transportation systems, poor road networks, rising populations and thriving motorcycle taxi business will shore up sales of two-wheelers in Africa.

Seeking a solution

Bamiduro told African Business that Max.ng is in talks with state authorities “in the hope of reaching a solution that benefits everybody”.

“Lagosians still need to commute hitch-free and safe, so regulating instead of restriction would be a better consideration to tackle security concerns,” he said. “We understand the government needs to protect her citizens, however regulating the bike-hailing will not only provide safe, efficient and fast transportation for the masses, it will also ensure the government has direct control over commercial motorcycle operators.”