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The E-commerce Sector in Nigeria: Industry Analysis

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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.

Key findings

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.

Market Drivers

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.

Market Trends

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.

Market Challenges

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.

Opportunities 

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.

Author:

Taiwo Oyekanmi

Research Analyst

 

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Paulette Watson on International Women’s Day 2022 Breaking The Bias

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Paulette Watson, MD/Founder, Academy Achievers (Image: Supplied)

Paulette Watson thoughts – This year’s International Women’s day theme: #BreakingTheBias is really important for me as a black women and also the #BeMe digital inclusion program of raising one million females aspiration in Science Technology engineering maths related careers.

The Science, Technology, Engineering and Maths (STEM) sector is growing fast, and the supply of skilled STEM workers can’t keep up with demand. According to the World Economic forum – Future of jobs 2020, there will be 55 billion digital/tech jobs in 2022 and beyond. Yet our black girls from poorer backgrounds are vastly underrepresented in the tech industry. A recent report by the All-Party Parliamentary Group (APPG) on Diversity and Inclusion in STEM found that 65 per cent of the STEM workforce are White men compared to around 43 per cent of the UK’s population at the last UK. 

If our black girls are not digitally equipped, then they will be displaced and this will have a negative strain on our local economy.  I understand the immediate challenges that are faced amongst these girls, because they have told me, (Mental health issues, lack opportunities, feeling socially isolated due to covid), I have spoken to key stakeholders, myself and leaders from Academy Achievers sit on BAME community groups across the London boroughs, I am also a member of Newham Independent advisory board and Newham Working Partnership, where we recognised what the transformation will look like. 

Similar challenges exist in the creative sector. The Arts Council’s 2019-20 ‘Equality, Diversity and the Creative Case’ showed London has the highest percentage of Black, Asian and Ethnically Diverse staff, at 19 per cent of the total workforce. However, this is still a significant under-representation where London’s population is approximately 40 percent Black, Asian and Ethnically Diverse.  

Furthermore, our #BeMe mentoring focusing on BAME/BME girls getting into tech has more of an edge – according to the McKinsey report (Diversity wins: How inclusion matters 2020) suggests that having diverse and inclusive teams have been shown to be better able to radically innovate and anticipate shifts in consumer needs and consumption patterns.  

#BreakingTheBias is all about ensuring that our black girls are the ones who create and design the algorithms so that we can rid the oppressive algorithms, unrealistic and unconscious biases that plague our tech community. Let’s make it happen #BreakingTheBias #BeMe

 

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Bridgia Joins Google Education Integrated Solutions Initiative to Take the Industry Closer to Africa’s Higher Institutions

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Bridgia, which connects African higher institutions to the industry to drive innovation and student skill development, has announced it has joined the Google for Education Integrated Solutions Initiative. The call for higher education; to be more responsive to industry needs is a global one. It is evident in the increased industry demand for graduates with innovation and technology skills. Industry linkage offices such as Career Services in most African universities typically lack access to digital resources and supporting services to support their objectives.

Google for Education Partners are a select group of companies recognised for their capabilities to deliver digital services to students and educators. Bridgia, focused on Africa, is now among this group of partners. Bridgia’s platform provides industry insights, resources, and programmes to make the industry more accessible to Africa’s Higher Institutions.

Bridgia’s Co-Founder/CEO, Segun Ogunwale, commented: “We are delighted to progress from being a Google Cloud Partner to a member of the Google Education Integrated Initiative. This collaboration provides us more opportunities to leverage Google for Education’s resources. And reach to provide easy access to the Bridgia’s platform for students, faculty, and staff members in Africa’s higher institutions.” 

At Bridgia Africa, we believe Africa’s future lies not in its abundant mineral resources but rather; in its young, agile, and booming human capital. Its goal is to support the transformation of Africa’s human resources to human capital by providing resources and opportunities. To strengthen Africa’s higher education system while building talent pipelines for the global world of work.

Bridgia’s aim to achieve this by connecting Africa’s higher institutions to the industry to provide access to information, resources and career opportunities in collaboration with industry partners. Its mission is to champion innovation, employability and development of talent pipelines in African higher institutions. These are achieved through widened access to industry information, programmes, and opportunities. For students and faculty in collaboration with institutional and industry partners.

 

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OPay wins The Global Economics 2021 Award for best new POS payment services provider in Egypt

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OPay, the leading fintech one-stop mobile-based platform for payment and collection services in Egypt and Africa, has won the ‘Best New Point-Of-Sale Payment Service Provider,’ award from ‘The Global Economics’ institution. The announcement took place in a ceremony held in Dubai in the United Arab Emirates. Where Mr. Mahmoud khedr, the company’s Director of business development and strategic partnerships, received the award.

The Global Economics is a British institution specialized in providing detailed performance analysis of companies in various financial and business sectors, covering the major parts of the Globe. OPay, won the award after an intense competition with major financial services companies in the Egyptian market. As a testament to its efforts and successes, which are the result of the company’s strategic plans to distribute tens of thousands of points of sales. And expanding its vendors and retailers network across all of the Egyptian governorates. 

OPay, has been the fastest growing company in the Egyptian market since it launched its operations in Egypt last year. As the company works to provide all kinds of electronic services and innovative digital payment solutions to its customers in Egypt and Africa. 

Mahmoud Khedr, expressed his delight at the winning of this prestigious award saying: “we are proud with the winning of the 2021 Best New Point-Of-Sale Payment Service Provider award from ‘The Global Economics’ institution. This award reflects the commitment of our dedicated team of experts in the digital and technological sectors. To build a brand that wins the confidence of our partners and customers.”

Mr. Khedr emphasized that the company is “working towards giving the best service possible to its partners and customers,.” In addition to its relentless pursuit in executing its expansive plans in order to provide the latest services and solutions in the fintech and digital payments sector.

OPay Egypt and North Africa, has recently signed a number of successful partnerships in the fields of electronic payments and specifically in the banking sector. It has recently signed an MoU with both Banque Misr and the National Bank of Egypt (NBE). Under which the company will provide electronic payment and collection services via the internet to merchants and small and medium size enterprises (SMEs). And the partners of both banks through accepting all types of collections. Through the internet using all kinds of banking cards, in addition to QR code and R2P (Request To pay) services.

The company will also provide installment services for the credit card holders from both banks. OPay also signed an agreement with The Egyptian Company for Cards, in order to issue 200,000 smart prepaid cards for individuals and corporates, after getting the authorization of Egypt’s Central Bank (CBE).

 

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