Archives for category: Regulation

Ecommerce in Nigeria
Nigeria is the largest country by population in Sub-Saharan Africa and it also has the biggest economy. By 2030, one in every six Africans will be Nigerians, and Nigeria will have one of the 25 largest economies in the world. One area to look for continued growth and real opportunity is E-Commerce or M-Commerce (Mobile Commerce). In 2014 Nigeria recorded over $2 million worth of online transactions per week and close to $1.3 billion monthly. Nigeria’s e-commerce market is developing rapidly, with an estimated growth rate of 25 percent annually.

According to an online researcher, emarketer, while e-commerce across the rest of the world is growing at 16.8 per cent, Africa’s e-commerce space is growing at a rate of 25.8 per cent – making it the fastest growing in the world. Nigerians are notorious for their love of shopping. The Euromonitor Nigeria in a 2011 report revealed that Nigerians spend $6.3 billion per year on clothing. In a recent survey conducted by Philip Consulting 38 percent of Nigerians prefer to buy products through the internet. Middle class consumers are the biggest purchasers online. Nigeria’s middle class now accounts for 28 percent of the population, and the middle class are well educated, with 92 percent having completed a post-secondary school education. This middle class is brand conscious and tech savvy and their technology of choice is a mobile device.

Mobile phone shopping
A Terragon Group study in 2014 shows 63 per cent of Nigerian internet users had bought at least one item online. 60 percent of these buyers claimed to have used their mobile phones for these purchases. 86 percent of the respondents to the Terragon Group study claim to carry out research about an item before making a purchase, and 80 per cent pointed at mobile as their major platform for research. Mobile is the first and major point of access for all internet activities. Nigeria is the largest mobile market in Africa and the 10th largest in the world. 71 million Nigerians access Internet via mobile phones according to statistics released by the Nigerian Communications Commission (NCC) and Nigeria was number eight among the top 10 internet user countries in the world.

connectivityOne of the keys to growth in e-commerce is connectivity. Internet access in the past has been spotty at best, but is getting better. Nigeria’s internet subscriber base rose from 48.2 million in June 2013 to 67.4 million in June 2014. This represents a density of 40 percent, placing the country above the African average of around 16 percent, as estimated by McKinsey & Company. Nigeria’s internet access market is set to witness a huge boost, as the federal government has set the target of a five-fold increase in broadband penetration by 2018. This is continued good news for e-commerce in Nigeria and Nigeria’s Minister of Communications Technology, Dr. Omobola Johnson, has said that Nigeria’s e-commerce market has a potential worth of $10 billion with about 300,000 online orders currently being made on daily basis.

Even with all the potential and the good that is currently happening there are still core issues. The lack of basic infrastructure, the failed postage system, power supply, expensive broadband internet and poor road networks are greatly inhibiting the rapid growth of e-commerce business in Nigeria. Nigeria’s notoriety for online fraud has further hindered growth. In 2005, PayPal closed all Nigerian accounts and denied registration to any user traced to a Nigerian IP address. PayPal has since changed that policy and entered the Nigerian market this past summer. Outdated myths can be hard to shake and unfortunately some still see Nigeria as a haven to scam artists and fraud. Another area of concern is cybercrime. The lack of legislation that specifically targets cybercrime or cyber security has no doubt continually hampered accelerated growth in the e-commerce sector. Legal intervention will need to be raised to deal with future nefarious activities online.

Nigerians shopping
There are tremendous opportunities for e-commerce growth. In Nigeria shopping is a task that takes an incredible amount of time and effort. Many wealthy Nigerians still travel abroad to shop. Some of the reasons for going abroad are limitations on what one can buy online and the challenges associated with online shopping systems. Increased internet access, more affordable data costs, mobile connectivity, the convenience offered by online shopping, and a better product offering should attract more Nigerian consumers to make use of e-commerce sites. Two of Nigeria’s largest e-commerce sites, Jumia and Konga, have seen continued growth and as more players enter the market not only will the consumer benefit, but the Nigerian economy should benefit as well.

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Many western companies are aware of the growing mobile money market in Africa and are watching with great interest, some actively participating in this growing industry, to the success and failures of different business models in different regions and countries.  They are also paying close attention to the different players; governments, financial institutions, and telecommunication providers, in regards to regulation or lack of regulation within the mobile money industry.  MMIT operates in the mobile money space out of Nigeria and West Africa so we feel that we are in a position of knowledge and expertise to talk on this matter in a concrete way, and also in a way that can hopefully add value and substance to the mobile money industry as it grows and matures.

Nigeria is home to 170 million individuals living in a country the size of Texas.  70% of that 170 million are unbanked, which means they either do not have access to formal banking institutions and services or are not taking part of the formal banking institutions and services. Nigeria has been labeled the financial hub of the African continent and many are watching this market to see if Nigeria is able to mimic and evolve the mobile money space in West Africa and eventually all of Sub-Saharan Africa.  The Central Bank of Nigeria (CBN) is pushing for a cashless society in Nigeria which will limit the amount of cash being carried around the country. CBN is also currently licensing out mobile money licenses that will allow financial institutions and non-financial institutions (telecommunication providers and mobile money providers) to capture the unbanked populace in Nigeria.  This regulation of the mobile money sphere by CBN is seen as a blessing and also a curse.  For the people of Nigeria mobile money allows them to bank with ease and make transactional payments without restrictions regardless of their location to a banking outlet, the time factor of when the bank opens and closes, and they can perform transactions at any time of the day. The negative for the populace is the lack of agent networks (small kiosks in rural and heavily populated areas) to cater to the areas that banks are not located in. The consumer needs to be able to cash-in his or her physical money to virtual money and if there aren’t enough agent networks it defeats the whole purpose of mobile money and a cashless society.

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To counter this concern CBN has been pressing the financial institutions to increase their agent network to meet the needs and demands of the unbanked population and to decrease the use of cash as a payment option.  CBN also has been playing more of a role in the creation of the structure for the laws and regulations of the mobile money sphere to make sure it has some control over the industry.  The Central Bank fears that if it does not get involved it will not have an influence on the financial structure in Nigeria.  This has been a key issue in Kenya where the telecom company Safaricom has been able to build the M-Pesa platform and develop a monopoly on the mobile money industry and the financial banking industry of that country. CBN wants to avoid this and also apply a structure that will help the consumer but at the same time reduce cash that is circulating in the country.  Progress has been slow and to the naked eye it might seem as though CBN isn’t doing much.  You have to keep in mind that the mobile money industry is still in its infancy and government regulation is a new development for an industry that has seen little to no regulation since its birth.  MMIT believes that before the year is over you will see a significant change in the regulation and penetration of the mobile money industry led by CBN.

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Anthony Bushu is a Business Strategy, Marketing and Communication Consultant for MMIT a mobile software developer in Lagos, Nigeria.  Anthony has diverse experience in the mobile and telecommunications industries and has worked for telecommunication companies in the US, UK, and Africa.  Anthony can be reached on Twitter@anthonybushu or by email at Anthony.b@mmitonline.com.