27 July 2018 ( Lagos ) : Nigeria’s e-commerce market is directly correlated to the growing appetite for mobile data usage as well as increased network coverage. Based on data from the Nigerian Communications Commission (NCC), mobile network coverage is currently estimated at 88% on the basis of a population size of 185 million. 

However, data released from the same source show that internet subscriptions stood at 102.8 million in June. Therefore, data penetration via GSM is lower, at 56%.

A thriving e-commerce market often boosts trade activity as it provides a cost-effective method of connecting producers and merchants directly to customers. This has been seen on one of the leading e-commerce platforms in Nigeria, Jumia.

Jumia marked its sixth year of operation in Nigeria this month. The electronic based company has listed about five million products on its platforms and supported at least 10,000 SMEs by providing direct access to consumers over the past six years.  

Although there has been visible expansion in the e-commerce market, analysts doubt that e-commerce will completely replace bricks-and-mortar stores in Nigeria. Aside from general structural issues, the customers’ mindset for the payment of products before delivery will need to change. The onus is on producers to take quality assurance seriously as some customers’ fear that products delivered vary significantly from their online selection. 

Furthermore, payment before delivery has not been fully adopted. Konga (an online shopping mall) suspended its pay on delivery option but analysts gather that by next month this option will be re-launched. The firm has made some positive adjustments including investing in a logistics arm to achieve a minimum of 85% same day delivery.

Additionally, Konga has included an in-store pickup option similar to Argos in the UK. However, there are only 20 retail stores available for this option, with 45% situated in Lagos.

Cybersecurity issues have also disrupted the patronage of e-commerce platforms that insist on online payments. A recent cybersecurity report indicated that cybercrimes in Nigeria increased by 35% y/y in 2017. Given that identity theft, email spam and phishing have not been properly addressed, there is still some exposure to online fraud scams.

Analysts understand the FGN is working on a transparency scheme and counter-intelligence legislation to bolster defences against several forms of cyber-attack.

Steady growth in e-commerce can lead to a substantial reduction in transaction costs, improved supply chain management, and reduced costs for domestic and global sourcing. On a macro level, this should place downward pressure on inflation, increase productivity, profit margins, and competitiveness.

Source : Gregory Kronsten, Olubunmi Asaolu, Chinwe Egwim from FBNQuest Capital Limited.

Reporting for EasyKobo on Friday, 27 July 2018 in Lagos, Nigeria