Detailed analysis of the E-commerce sector in Nigeria; market profitability, market opportunities, consumer trends, an analysis of top market leaders, and finally some recommendation on starting a profitable e-commerce business in Nigeria.
There are over 25 e-commerce stores in Nigeria with market size of $17 billion. E-commerce in Nigeria is one of the fastest growing markets in the world with over 255 billion in revenue annually and a rapid growth rate of 25 percent. The industry makes it possible to engage in transactions from different parts of the world giving access to the product from the different market in different places. Also, it is a commercial activity dealing directly with the trading of goods and services and with other related business activities in which the electronic medium plays a crucial role. In addition, e-commerce grows at 25.8 percent in Africa with Nigeria being the fastest growing market in the continent compared to the 16.8 percent in the rest of the world. The e-commerce will continue to grow bigger with about 60 millions of Nigerians now enjoy access to the internet with the population dominated by youthful population. In accessing the opportunities, the rapid growth rate of mobile telecommunications of more than 170 million people, over 300,000 online orders are made every 24 hours.
One of the major if not the major constraint faced by online shopping markets in Nigeria is the increase in fraudulent activities online commonly known as cybercrime. Cybercrime is defined as any criminal activity done through the internet with the intent of defrauding people of their belongings. People have been defrauded of their e-wallets, hijacking phone numbers and use it to offer services illegally among others.
Looking at the competitive landscape, online shopping has to compete with local stores for the prices of goods and services and since most of the online stores often generate profits from delivery costs, in a situation where both offer the same prices there will be no use engaging e-trade.
It will be however recommended that industry should ensure and regulate that all firms should embark on PoD (Pay on Delivery) due to its impact on the number of online shoppers. It was discovered from a study that the majority of users are shopping due to the PoD practice.
In addition, the e-commerce industry should ensure a user-friendly interface while making orders and also a hitch-free delivery to harness consumers’ loyalty and trust.
INDUSTRY AND MARKET DYNAMICS
This involves how a market changes over time to interaction between the supply and demand of online shopping within the e-commerce sector, market or market segment.
E-commerce industry as already identified with a rapid growth rate and a growing market size of $17 billion in 2019 which also indicate a gradual adoption of the online marketplace by consumers. Consequently, Nigeria remains Africa’s largest mobile market with about 162 million subscribers in the continent and a penetration rate of 84 percent. According to the recent report by the National Bureau of Statistics (NBS), it was estimated that the e-commerce sector is expected to contribute about 10 percent (10 trillion naira) to the nation’s Gross Domestic Product (GDP) by 2018. Currently, the population of users is 67,101,452 with the penetration rate of 37.59 percent and GDP per capita of $5.911.
E-commerce is a fast-growing with an annual increase and opportunities to further increase as the rate of internet users increases. Of the identified market drivers includes:
- Third-party logistics
In any organization or industry, the effect of exceptional logistics can never be over-emphasized. Logistics plays a vital role in the creation of visibility in the e-commerce supply chain and determines the overall satisfaction of the customers, efficiency and service delivery. However, it is noteworthy that it requires a lot of expertise and a complex network of several small systems.
- The explosion in mobile internet penetration
As earlier mentioned, the adoption of the latest mobile technologies is playing a big role in the growth of e-commerce. When shopping, the structure must customers friendly and ease of use leading to the growth of the industry.
- Growth of big data
With the increased need to take up emerging challenges, big data analytics has helped to deliver more solutions for which the online shopping platforms are no exemption. Of the major drivers of the industry is the growth of big data which has helped delivered quality solutions in analyzing the target market, delivery solutions exceeding customer’s expectations. Big data analytics help to track the consumer’s online behavior and help consumers determine the needs, tastes and preference of the customers.
- Increased range of payments for unbanked shoppers
There has been high growth of online wallets and cryptocurrencies and other digital currencies that are making it possible to trade without worrying about the exchange rates and country-specific financial issues. The wide spectrum of options has made it easier for people to buy online.
- Payment on Delivery (PoD)
This has been at the forefront of the conversation around why buying and selling online in Nigeria is adopted. According to reports, it shows that a 300 percent increase in orders is a result of PoD. Thus, ensures the consumer’s trust and loyalty of the business. With online voting conducted by Jumia Nigeria, asking the best payment options, more than 67percentt chose to pay on delivery option.
The e-commerce industry in Nigeria is highly connected with the numbers of internet users via mobile phones and other platforms. With the 180 million citizens in Nigeria, more than 60percentt are youthful population owing to the fact that the youth are the most users of online shopping. The industry has had a tremendous impact on business transactions and influenced the economy greatly. With an improved trade activity providing a cost-effective method of connecting producers and merchants directly to customers, e-commerce market thrives. Consequently, the current market size according to a report by the Economist Intelligence Unit, London is around $13 million with an annual growth rate of 25percentt. Also, industry experts reported an estimate of the market size to rise to $50 billion in 10 years.
Majority of internet users are shoppers owning to the report of the National Communication Commission (NCC) that the mobile network coverage is currently estimated at 77percentt. In Nigeria, 89percent of internet users online shoppers while 24percentt are expected to do so in the future.
Some of the identified constraints that the industry might possibly face are as follows:
- Lack of trust: the online shopping platforms had suffered from consumer’s lack of trust coupled with the internet accessibility challenges.
- Cyber crimes: this is one of the major if not the major constraint faced by online shopping markets in Nigeria. This is a result of the increase in fraudulent activities online. Cybercrime is defined as any criminal activity done through the internet with the intent of defrauding people of their belongings. People have been defrauded of their e-wallets, hijacking phone numbers and use it to offer services illegally among others.
- Lack of acceptance: some online stores do not accept or allow transactions from Nigeria based on the antecedents of fraudulent practices creating a bad impression in the mind of customers and the prospective ones.
- Competition: online shopping have to compete with local stores for the prices of goods and services and since most of the online stores often generate profits from delivery costs, in a situation where both offer the same prices there will be no use engaging e-trade.
E-commerce in Nigeria and its potential is a vibrant source of economic growth and development expected to add about 10percentt to the nation’s GDP. Also, it impacts in the Micro, Small and Medium scale enterprises (MSMEs) towards job creation and wealth management can never be over-emphasized. With the increased growth, goods sold and delivered at affordable and competitive prices and sometimes cheaper than offline prices.
The e-commerce will continue to grow bigger with about 60 millions of Nigerians now enjoy access to the internet with a total population dominated by youthful population. In accessing the opportunities, the rapid growth rate of mobile telecommunications of more than 170 million people, there are over 300,000 online orders are made every 24 hours. Others are the ability to reach out to millions of people in different places at a point in time, a huge contribution to the economy, and an unfolding impacts in the consumption patterns in the economy.
Aella, A Nigerian fintech startup raises a $10m debt financing round from HQ Financial Group
Aella co-founders, Akanbi Wale and Akinola Jones (Source: Aella)
Aella has made a visible impact on the lives of more than 300k borrowers across its Employer Backed and Direct to Consumer Verticals, who now have access to simple financial products
LAGOS, Nigeria, February 10, 2020 – Focused on improving financial inclusion for West Africa’s low-income segment, a Nigerian fintech start-up, Aella has raised a $10m debt financing round, from HQ Financial Group (HQF), Singapore-based private company specializing in new material science, semiconductor and blockchain financial investments. This debt financing round is Aella’s second raise and will bolster the company’s commitment to serve the underbanked population in West Africa and other emerging markets.
Aella was founded in late 2015 by Akin Jones, CEO (right) and Akanbi Wale, CTO (left) in Lagos, Nigeria and has remained committed to building trustworthy credit for emerging markets with an initial focus on Nigeria and the Philippines, where the company is licensed to operate. Aella has made a visible impact on the lives of more than 300k borrowers across its Employer Backed and Direct to Consumer Verticals, who now have access to simple financial products.
For millions of poor and low-income households, entrepreneurs, and nascent businesses in West Africa without access to financial institutions, micro-lending fintechs like Aella provide a broader array of financial products — savings, insurance, payments and specialized loans, focused on lifting many out of poverty. Aella plans to use this funding to scale its lending operations and expand its product base into payments.
“Lack of access to credit and financial services has been the main impediment to MSME growth and poverty reduction in several emerging economies. Aella’s commitment to providing trustworthy credit to millions of people in the world’s emerging markets is improving financial inclusion, enabling MSME expansion and accelerating economic growth and this raise will allow us scale our expansion across Africa quickly”, said Aella CEO, Akin Jones.
Aella will also invest in new products including a blockchain-based lending market called Creditcoin, to build borrower creditworthiness and aid in the acquisition of one million additional users by the end of 2020, making it the largest blockchain backed financial services project that is currently operational.
“We are building a one-stop app for all transactions partnered with regulated industry leaders to help distribute products faster, better and cheaper to end-users in Nigeria and across the markets we plan to launch. This app will allow users access multiple financial services at low costs compared to what is currently available in market”, Jones added.
Sun Han Gyu, Chief Executive Officer of HQ Financial Group said “We are excited to announce our partnership with Aella Credit which will significantly aid in the proliferation of micro-loan services to the underserved African populations who are unable to access banking services. HQF is impressed with their outstanding growth with very low default rate in the micro-loan business in Nigeria and look forward, through this initial investment of $10m to new growth opportunities in Africa and South Asia”. HQF has deployed over $70m in investments since 2015.
Aella previously raised $2m seed funding at the US startup program, Y Combinator from seed investors including Micheal Seibel of Y Combinator, Brian Armstrong of Coinbase, Bill Paladino (former head of Naspers eCommerce), Tae Oh, Shawntae Spencer (former San Francisco 49ers Cornerback), VY Capital, 500 Startups, Gluwa and others, which enabled it invest in digitalization and technology.
Over the last two years, the company has achieved significant growth with a 2-year compound annual user growth rate of 674%, over 193% increase in revenue and maintained a single-digit default rate. Aella was also recognized by Amazon as one of the world’s leading financial organizations pioneering the use of facial recognition technology for customer authentication and credit scoring.
This raise marks the conclusion of the start-up’s evolution to a full-service lending and payments platform, poised to play a greater role in providing a wide bouquet of financial services across Africa. Aella is focused on expanding across Africa and South East Asia enabling users to access a wide range of fast, convenient, and secure financial services. The company’s application will allow users to have access to loans, invest safely and securely, affordable insurance plans, bill payments and peer-to-peer money transfers.
Africa Industrial Internet Programme: Young Africans benefit from General Electric $500,000 Scholarship
Africa Industrial Internet Progragramme (AIIP) Class of 2019 Graduation (Source: GE)
GE will give 10 full scholarships for the current cohort
PORT LOUIS, Mauritius, February 7, 2020- General Electric (NYSE: GE) and the Africa Leadership University (ALU) have announced the kick-off of the 3rd cohort of the Africa Industrial Internet Programme (AIIP) which is aimed at equipping young Africans with skills that will enable them to take part in the fourth industrial revolution.
The 2020 cohort has enrolled 35 students from 8 countries across Africa, drawn from Oil & gas, transportation, power, energy, manufacturing, healthcare, telecoms and aviation industries. Over the last two years, the rigorous training programme has graduated 64 students, of which 50 were fully sponsored by GE from a scholarship fund totalling US Dollars 500,000.
GE will give 10 full scholarships for the current cohort.
Launched in 2018, the programme has empowered participants with essential skills for building applications for the Industrial Internet, which enables machine-to-machine communication that results in systems that can collect, analyze, and deliver data in real-time. These features provide significant benefits such as predicting when a device will require maintenance, enhancing logistics management, enhancing quality and optimizing safety.
The training takes place at a time when spending on the Internet of Things is predicted to reach a trillion US dollars by 202 , with the total number of connected devices being projected to rise to 75.44 billion worldwide by 2025, a fivefold increase in ten years.
Commenting on the Programme, Farid Fezoua, President & CEO for GE Africa said, “As a digital industrial company, it’s exciting to see how over the last two years the AIIP has developed an ecosystem of digital engineers that utilise data science as an enabler for their work across industries, developing solutions for the most pressing challenges. Our partnership with ALU for the AIIP is a testament of our commitment to develop the next generation of leaders that will drive solutions made in Africa for Africa in this transformative digital age.”
The AIIP is designed using a project-based approach where participants get to apply their learning in real world contexts. The Programme includes regular assessments in each module culminating with a final project where participants are tasked with applying their learning to solve an existing problem either in their business or in a partner organization’s business operations. This is achieved through modules in machine learning and big data analytics, Industrial Internet of Things (IIoT) and Cloud-based Application Development. A unique aspect of the Programme is a deliberate focus on creating links to industry for participants by inviting industry experts to intensives to share case studies, projects of interest, trends and opportunities, through industry field visits and mentorship opportunities with data science professionals.
“African Leadership Group is thrilled to be partnering with GE to build a new generation of digital leaders for Africa” said Fred Swaniker, Founder of African Leadership Group, which includes African Leadership Academy, African Leadership University, and ALX. “We share GE’s passion for data, and what it can bring to the African continent and the world. The Programme enables mid-career engineers to build new skills in data analytics, data science, data engineering and data visualization. By leveraging the power of data, today’s engineers can significantly improve the performance of high-tech industrial machinery and processes, thereby increasing the bottom line for companies. The Africa Industrial Internet Programme is creating globally competitive, digital engineers right here in Africa, and we can’t wait to see their full impact on the continent”.
In 2019 five female candidates from Kenya, South Africa and Nigeria received the Jay Ireland Africa Rising Scholarship for women in tech in honor of GE Africa’s former CEO, Jay Ireland.
Speaking about her experience with the programme, Funmi Somoye a 2019 cohort graduate from Nigeria said, “More than Machine Learning and Data Science, I have learned more about myself, and what I am capable of doing. I can’t wait to change the world!
United Africa Blockchain Association optimistic about adoption of digital assets on the continent
The Bitcoin Party 2020 was recently held in Cape Town as a celebration of crypto adoption in South Africa which was in the top 5 countries with high cryptocurrency ownership among global internet users. Sentiment according to the United Africa Blockchain Association is that interest in digital assets like cryptocurrencies will only continue to grow.
Despite some local banks in South Africa looking to sever ties with cryptocurrency companies particularly exchanges due to perceived ‘risks’ and lack of regulatory certainty, interest in crypto has actually surged – moving South Africa into the top 2 countries in the world with the highest rate of Bitcoin searches after Nigeria according to the latest stats on Google Trends.
“What we are seeing in fact is an increasing number of people beginning to grasp the real fundamentals of blockchain technology and the different use cases particularly in financial services where Bitcoin for instance is seen as a solution to the redundant way traditional finance deals with cross border payment processing,” said the founder of Proudly Associated.
One of the first exchanges to launch in both South Africa and Nigeria was iCE3X back in 2013, founded by crypto pioneer Gareth Grobler. He believes the market in South Africa will eventually mature and is on a steady trajectory with huge growth potential. “As long as players in the space operate ethically, that will give credence to the idea of a self-regulating financial ecosystem that everyone can trust without overreaching regulatory oversight that could stifle innovation and slow adoption,” he said. “From the outset we took the necessary measures to ensure the platform is secure and offers users stable cryptocurrency trading. We’re still the only Kaspersky approved exchange in the world. As the internet currency industry continues to evolve we’ll be launching more customer-centric features on the exchange to provide users with tools that empower them to make smart financial decisions,” he explained.
Another promising industry that could see tremendous uptake of crypto and blockchain-based products is the gaming industry. South African government statistics show that over 50% of South Africans bet on sports regularly. The rise of mobile gaming via smartphones has meant that many more South Africans can afford to play. Research shows there are more than 11 million gamers in South Africa and a report issued by South Africa’s National Gambling Board projects gross gambling revenues to grow to R34.8 billion in 2020. Some estimations put South African gross gaming revenue at $2.5 billion by 2021.
Sports betting in particular had a projected rise of 12.5% compound annual rate in 2019 and with South Africa being the largest gaming market on the continent, “international companies such as Playbetr see Africa as an important market,” said Alakanani Itireleng, CEO of Satoshicentre, a Bitcoin community hub in Gaborone, Botswana.
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What is clear for UABA is the undeniable relevance of blockchain innovations with respect to opening opportunities for people of all ages and backgrounds. “We run different initiatives and making tech events fun is an effective way to get the youth engaged and interested in new innovations,” said Grey Jabesi of UABA and host of The Grey Ave Podcast. “We believe that by combining technology, entrepreneurship and business education – together with our partners – the blockchain community can make a positive impact,.” he added.
We are fortunate to have supporters such as Paxful, the peer-to-peer finance platform where people can trade bitcoin globally using multiple payment methods. We are optimistic that education around peer-to-peer finance will help bring much needed financial inclusivity in South Africa and the rest of the continent.
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