Nigeria’s Booming eCommerce Industry Set to Balloon to $13 Billion: Unpacking the Growth Factors

The Nigerian eCommerce industry is currently in the midst of a rapid expansion, projected to add an impressive $13 billion or 2.5 trillion Naira to its market value by 2018, according to a study by ThisDay. A closer look at the sector reveals attractive foreign investments, primarily in the two major players, Jumia and Konga. Over the course of a year, these industry giants attracted a combined total of $50 million (N8.25 billion) in investments, elevating the sector’s total Foreign Direct Investment (FDI) to a staggering $200 million since 2012.

Recent trends reflect a steady rise in daily customer orders. Although the order quantity only averaged about 1,000 per day in 2012, it has since catapulted to a whopping 15,000, driving the market value from $35m/5.6b Naira to a significantly higher $550m/88b Naira. This substantial jump can be attributed to increased internet penetration and an enhanced adoption of electronic payment methods.

Foreign direct investment (FDI), which now stands at $200m/39b Naira, can be credited for much of this growth. Konga alone welcomed a sizeable investment of $40 million last year, aimed at expanding its engineering operations. Apart from the juggernauts, emerging online retail companies in Nigeria have also been on the receiving end of these investments.

Recent years have seen Nigerian tech companies garner immense popularity, boosted by a tech-hungry banking sector, and impressive broadband services averaging nationally at around 4.7mpbs. The latest investment recipient, Hotels.ng, just secured funding to expand operations abroad, with online platforms like Jobberman even being acquired by foreign companies.

However, as reflected in a recent article, the accessibility of internet services still falls short, despite the exponential growth in the eCommerce sector.  To sustain this growth, government authorities need to introduce more compassionate policies. With large tech firms globally concentrating significant resources on mobile devices due to the rise in smartphone sales, Nigerian online retailers should follow suit. Major players like YouTube, Facebook, and Twitter are reporting mobile traffic figures close to 50%.

Trust is a significant factor in encouraging online shopping in Nigeria. The success of the Nigerian online retail industry is, in part, due to methods such as “pay on delivery,” which bridges the trust gap between companies and consumers hesitant to disclose sensitive information online. Market regulators could facilitate this trust by instituting stricter standards and incorporating a consumer protection bureau to investigate online payment fraud.

Nigeria’s flourishing eCommerce industry augurs well for the country, not only boosting its economy but also creating employment opportunities for over 20,000 individuals. As technology continues to evolve and accessibility improves, it will be interesting to watch this burgeoning sector redefine Nigeria’s global retail footprint.