FROM MAGAZINE: E-commerce redefining Nigeria's economy

E-commerce has become a thriving global industry and Nigeria has also been sprinting to catch up with this global trade phenomenon. Despite challenges, the potential of its expansion in the foreseeable future is very high and perhaps for Nigeria it is time to look beyond oil for economic growth and development.

Roy Ezze

E-commerce is significantly changing the business and economic landscape of Nigeria. Nigeria has an intriguing scenario, where the extremely wealthy and the pathetically poor, all show voracious appetite for e-commerce despite limitations in the economy. The Nigerian Communications Commission (NCC) reveals that Nigeria currently has over 90 million internet users. Nigeria also has over 216 million connected telephone lines, out of which about 150 million lines are active. More users are expected to join in as more of Nigeria’s over 190 million population embrace wide-spreading information and communication technology (ICT) and conducting their businesses online.

Although, the presence of mobile phones or subscription to internet service does not necessarily translate to the conduct of e-business for several reasons like lack of trust, etc., it is however important to establish that there is a remarkable increase in the use of e-commerce among Nigerians in rural and urban areas. For online shopping for instance, while a greater number of individuals go for cheap android and feature mobile phones to connect and shop online, operators of online shopping platforms on their part seek ways to get the products to more buyers in more locations across Nigeria’s vast geographical area, given that existing infrastructure and facilities like electricity and road networks, etc. are largely not supportive to e-commerce in most parts of Nigeria.

In fact, the trend of mobile and internet technology is pushing relentlessly upwards driven mainly by Nigeria’s large youthful population. This is further complemented by the surge in importation of new and used mobile phones, computers, and other communication devices that are popular among Nigeria’s price-sensitive young population. More than half of Nigeria’s population is under age 30, while a greater number of the 190 million population fall within the ages of 14-54 years who are the most active online.

While Leo Stan Eke, the Chief Executive Officer of Zinox Group, a Nigerian computer manufacturing company that also provides other IT-based services, confirms that ICT is of huge interest to Nigerian youths, the World Bank says “Nigeria accounts for 47 percent of West Africa’s population, and has one of the largest populations of youth in the world.” Leading e-business entrepreneurs in Nigeria are agreed that this offers a potential that must be harnessed to empower the young population with IT-driven economic freedom, to lay a solid foundation for Nigeria’s future economy.

Nigeria’s over 190 million population and the country’s large economy, among other characteristics, offer huge potentials for e-businesses; and in the past 6 years, several e-businesses in Nigeria have achieved various levels of growth. For instance, supermart.ng is reported to have gained up to 35 percent average annual growth in Nigeria, while Jumia Nigeria has achieved up to15 percent growth. E-businesses in Nigeria have also largely thrived in urban areas where the lifestyle and infrastructure readily demand and support e-commerce.

There are, however, others affected by the economic recession in Nigeria and the crash of the Nigerian Naira, especially where pre-existing contracts with foreign collaborators and suppliers become more expensive to sustain given poor sales and thin profit margins. Overall, the recession reduced sales among price-sensitive buyers and encouraged the importation of cheap and sometimes inferior ICT products like mobile phones, gadgets, etc.

But more interestingly, the wave of e-commerce in Nigeria has made available online employment search platforms like Jobberman, online television especially for local movies such as Irokotv, online retail and maintenance of mobile devices by companies like Slot Systems and Computer Warehouse. There are also popular online hotels booking companies such as Hotelsng and Lamudi. There are also online travel booking platforms like Wakanow, among others. The CEO of Wakanow, ObinnaEkezie, seeks to provide technology-based and more seamless travel booking experience obtainable in advanced economies as well as promote Nigerian destinations.

Other internet-based service providers such as Paga, E-transact and Computer Warehouse, etc., in Nigeria offer innovative solutions to local financial institutions, with significant support to sustainability of small and medium scale enterprises (SMEs) in Nigeria to reduce poverty.

One interesting aspect of the evolutionary e-business landscape in Nigeria is the online shops which create unprecedented benefits and excitement. Researches like Broll Shopper Segmentation Report show a strong use of online apps to drive online shopping. Many more buyers in congested cities like Lagos now easily opt for online shopping and preferring reliable online shops to guard against poor quality and fraud, even though they may face delays of some days in delivery.

Online shopping is predominantly limited to cities even as online shops strive to break the barriers and reach rural and remote populations. And though rural-urban migration is rapidly increasing, Nigeria’s urban population is still about 91 million out of the country’s 191million population.

Thus, rural and semi-rural areas hold over 70 percent of Nigeria’s 190 million population that can benefit from online shopping. This poses a challenge to the fast spread of online shopping in rural Nigeria, where road networks, electricity and other infrastructure are a major challenge to distribution of goods and services. Austin Okere, Founder Computer Warehouse Group laments however the challenge posed by poor electricity supply to e-commerce in Nigeria.

Most, if not all, of the key e-commerce companies in Nigeria come with foreign collaboration or funding, which shows the gap in local capacity. There is however increasing effort in knowledge transfer embarked upon by companies like Computer Warehouse Group, etc., which could bolster the ICT and e-business knowledge base in Nigeria. However, the challenge of local funding lingers, which is why many foreign e-business related companies are in search of local collaborators to tap into the billion dollars e-business market in Nigeria.

Nigeria’s economic recovery so far in 2017 is boosting increased investments in e-commerce as demand is expected to rise on the back of the recovery. Investors and businesses are still cautious while the Nigerian Central Bank is pumping more dollars into the market to boost the Naira.

ICT and e-commerce are playing a significant role in the current recovery of Nigeria’s economy from recession. ICT is one of the fast-rising sectors driving Nigeria’s economy and contributing about 8 percent to the national GDP, as crude oil prospects tend to wane. Nigeria’s overall GDP growth rate is expected to rise remarkably from 0.83 per cent in 2017 to 1.9 per cent in 2018, according to experts’ projections.

Airlines are getting ready to bring more cargo, which will invariably include ICT products, to Nigeria from Asian and other markets as Nigeria’s economy recovers. Etihad, for instance, plans to add a new Saturday frequency to Lagos from early December 2017. Mohammad Al Bulooki, Etihad Airways Executive Vice President Commercial, states that “Lagos is one of our largest direct markets in Sub-Saharan Africa that is showing signs of strength as Nigeria recovers from recession.” And indeed, Lagos is the hub of e-commerce not only in Nigeria but West Africa.

Local e-commerce and IT-based companies now lobby government to provide infrastructure and other basic frameworks to empower micro-, small- and medium-scale enterprises in rural areas to be able to expand the benefits of e-commerce across Nigeria’s 356,669 m2 land area (923,768 km2).

The greater challenge, however, is to increase local manufacturing of alternatives to imported goods and distribute them via online shops in Nigeria. The CEO of Jumia Nigeria, Juliet Anammah, hints of the company’s efforts to drive local production and support the sale of these items on Jumia’s online shops.

“The popularity of local products also points to the significant role that ecommerce plays in stimulating local manufacturing. As businesses on Jumia gain greater exposure and access to a ready customer base, they also gain access to a steady cash flow and insight that enables them to respond quickly to the needs of their customers,” said Anammah.

The collaborative efforts of government, e-commerce solutions providers and the enthusiasm of Nigerian consumer would facilitate the penetration of e-commerce in Nigeria’s rural and hinterland communities, which would be a strong tailwind to the emergence of e-business in Nigeria. Looking ahead, e-commerce has the potential to help reposition Nigeria again as the largest and fastest growing economy in Africa.