Nigeria’s estimated $60 bn E-commerce market wobbles on broadband penetration, cyber security
Nigeria’s electronic commerce (e-commerce) market size is estimated to be over $60 billion but might be suffocating because of limited broadband penetration, which is at eight percent, cyber security and the risk shirking attitude of older generations toward e-commerce adoption.
The United Nations Conference on Trade and Development (UNCTAD), the principal organ of the United Nations General Assembly dealing with trade, investment, and development issues estimates that the global e-commerce market is worth about $22.1 trillion as at July, 2016.
Developing countries (like Nigeria) as a group are assuming more prominent roles as both buyers and sellers of goods and services. UNTAD estimates that the value of global business-to-business (B2B) e-commerce in 2013 exceeded $15 trillion with the United States of America, the United Kingdom of Great Britain and Northern Ireland, Japan and China in order of magnitude accounting for three quarters of the total volume.
Similarly, global business-to-consumer (B2C) e-commerce accounted for approximately $1.2 trillion in 2013. Whereas this is still considerably smaller than B2B, this space is poised to grow faster. In developing countries, B2C e-commerce is rapidly expanding, especially in Asia and Africa. China has already taken its pride of place as the largest global market for B2C e-commerce – measured both by online buyers and by revenue. The Middle East and Africa’s share in the global e-commerce is expected to increase slightly from 2.2 to 2.5 percent. Whilst the combined share of Western Europe and North Africa is expected to fall from 61 percent to 53 percent.
In Nigeria, it is estimated that the e-commerce market is worth about $60 billion, which would be about 10 percent of Nigeria’s Gross Domestic Product (GDP, $509.9 billion). “In post-devaluation terms, that market should be around $35 billion. Anyway you look at it, that market is huge and has an enormous potential, in my view we are still not scratching it. This is because there are certain limitations of E-commerce that have slowed down its growth and adoption in Nigeria” Niyi Yusuf, who is the country manager of Accenture, a technology and strategy firm, told BusinessDay in a recent interview.
Recent surges in e-commerce enterprises across Africa is revolutionising both the retail market and business in general. The upside or potential of this niche, as demonstrated by several e-commerce firms reveals the enormous under tapped opportunity. Given its place as one of the continent’s largest Information Technology (IT) market, Nigeria has known a rapid growth in the development of e-commerce enterprises.
According to euromonitor international, Nigerians are said to have spent N62 billion ($380 million) in online purchases as at 2011, with that figure predicted to rise as high as N150 billion ($920 million) by 2014. During this evolutionary process, a few e-commerce services have stood out in the minds of Nigerians such as Jumia, Konga, Kaymu and Wakanow, to mention a few.
A few roadblocks are obstructing the development of this huge e-commerce market. The first on this list of roadblocks is infrastructure. The quality of infrastructure in all 774 local governments of the Federal Republic of Nigeria varies dramatically from very poor to moderate and good. What that means is that the access and experience a consumer will have in Lagos would clearly be different from what somebody in village will have. Yet, whether in Lagos or in a village, every consumer wants to buy things and e-commerce potentials in Nigeria is underperforming as a consequence. “We are just not scratching the potentials of this market yet. Infrastructure therefore remains a big issue” Yusuf said.
He added “infrastructure will be electricity, because without electricity you do not have internet access. Infrastructure will be internet access. We do not have enough broadband penetration, which is less than six percent. This means very few people have internet access. So, both the availability and quality of internet access remain a big change”.
Beyond infrastructure, the other issue is inclusion; of 180 million Nigerians less than 60 million have bank account which means 120 million are financially excluded. In other climes, kids have bank accounts; their parents open such accounts for them and put their pocket money there. This inculcates that habit of banking.
A bigger question is that of the 60 million how many have cards? Most payments are electronic, it is either you use your card or internet banking to effect the transaction or make the transfer or you use mobile payment platforms. Here again there are less than 20 million mobile payment customers. There are less than 45 million cards issued out of 60 million bank customers and there are 180 million Nigerians who trade every day. Trading is just buying and this transaction could be done online.
A much more vexing issue revolves around cyber security. It is estimated that between 2000 and 2014, the cumulative figure that banks have lost to electronic fraud and cybercrimes stands at approximately N165 billion. This revelation creates several concerns around security as policy makers reiterate the drive for cash-less policy and e-commerce growth gathers momentum.
“There is a real opportunity for Nigeria to become leaders in cyber security in West Africa by implementing best practice from across the globe and applying international standards to develop internal cyber security capabilities” said Tom Griffin, Managing Director, Control Risks.