The growing appetite for mobile data usage as well as increased network coverage has increased the potential of Nigeria’s e-commerce market. Based on data from the Nigerian Communications Commission (NCC), mobile network coverage is currently estimated at 77% on the basis of 185 million as the country’s population. However, internet data penetration via GSM is lower, at 50%. The potential impact of a thriving e-commerce market is improved trade activity as it provides a cost-effective method of connecting producers and merchants directly to customers.
Industry sources suggest Nigeria’s e-commerce market value could hit US$50bn over the next decade. A recent EIU report valued Jumia (a leading online retail platform) at US$1bn in February. The company operates in ten other African countries.
Meanwhile, Konga, its major competitor, has expanded operations by launching a groceries segment. This is similar to models established in the UK such as Sainsbury’s and Tesco. However, logistics challenges across the country could threaten the shopping experience as delivery of products may be delayed.
According to Konga, the e-company has a customer pool of 750,000. However, there are only 200,000 active customers. The number of active customers fluctuates with seasonalities. We note that the rural population accounts for only 10% of its total active customers. This could be directly correlated to low internet penetration in rural areas as well as modest income levels.
The e-commerce industry has also witnessed reduced patronage due to increased pressure on household pockets in the current downturn.
We expect a token return to positive territory for GDP as a whole this year. Our GDP growth projection for 2017 is 1.6% y/y. Nevertheless, for e-commerce to attain its full potential, infrastructural issues as well as e-fraud challenges need to be tackled.