Today we are going to give you an overall report about Nigeria’s e-commerce situation. According to the World Bank, Nigeria has a population of 182.2 million that increases every year and makes it the most populated country in Africa.
The economy of Nigeria has a big dependency on oil exportation which caused the entire country to suffer during the recent oil price drop since 2014. From that moment GDP growth prospects went down and recently, in the second quarter of this year, the economy entered into recession with a GDP decrease of 2.06% that followed the decrease of 0.36% in the first quarter of the year.
Regarding the e-commerce market, Nigeria has to face some issues that are well represented by the fact that the World Bank ranked the country 167 out of 189 countries by the Ease of Doing Business. In addition, until 2015 Nigeria’s government failed to develop a regulation framework for online transactions. As a result, customers lacked the confidence to buy online, since it was not clear whether their rights were going to be protected by any entity in case of issues related with online purchases. According to the CEO of Jumia, one of the most important e-commerce portals in Nigeria, they had many claims from users of vendors not respecting delivery time or even more importantly, providing substandard products that didn’t meet the specifications written in the product descriptions. Luckily, since Electronic Transaction Bill (ETB) 2015 was passed, Nigeria’s e-commerce is safer, though still struggling with the aforementioned issues, and more likely to grow, since at least now there is a law protecting buyers. But how big is Nigeria’s e-commerce potential?
Well, Nigeria has a great growth potential with its large population, and a real chance to increase its middle class. This may be what some international investors were thinking when they decided to enter into Nigeria’s e-commerce market. For instance, AXA invested €75 m for an 8% stake in the Jumia shares, a proportion of which are also held by Goldman Sachs.
Despite the fact that some sources place Nigeria as the 10 th country in the world by internet users, with a number of them between 69 or even more than 90 million, it seems that another area to improve is the internet adoption ratio. Especially regarding Smartphones, which penetration ratio has recently reached 30% but is far below the numbers of the developed countries. And even the general internet penetration seems not as good as we may think. The number of 90 million seems doubtful due to the fact that Facebook, the most visited page in the country, just has between 12 and 15 million users, a very low number for a country with more than 69 million users.
Looking at Nigerian uses, it caught our attention that Nigerian online customers prefer to pay by cash on delivery, something for which most transporters are not ready. Actually, according to Ope Adeoye from Interswitch there are only 200,000 active debit cards which, of course, is really bad news for e-commerce, considering the size of the country.
Besides, Nigerian Postal Service (NIPOST) is not covering the e-commerce entrepreneurs’ needs, forcing them to rely on other private transport businesses or even on the development of their own delivery system, which requires a great investment in money and workforce time due to logistics.
Is it time to invest in Nigerian e-commerce?
There are some experts, like Eghosa Omoigui from EchoVC Partners who states that Nigeria’s recession is just in the macroeconomic area and not affecting microeconomics. Actually, he says that now is a great time to invest and by not doing so, you would be missing an opportunity.
However, we think this may be the case for very big companies, but we believe there are some other countries that also have a great growth potential, are not so dependent on the devastated oil prices and have a stronger intention to adapt their infrastructures and regulations to e-commerce needs. For examples, you can read our report about the Indonesian e-commerce market or the Australian one.