Nigeria in pole position to benefit from $75bn e-commerce driven African market opportunity – Report

Nigeria, Africa’s economy by gross domestic products and its most populous, sits in pole position among the continent’s countries to benefit from an emerging but technology driven e-commerce market estimated to be worth between $50 billion and $75 billion, a report by the London-based Economist Intelligence Unit (EIU) and by Businessamlive has shown.

The report titled: “How technology is driving retail in Africa”, says the market size was drawn from estimates that show that e-commerce sales in Africa could reach somewhere in the region of US$50- 75bn per year within the next 5-10 years, with Nigeria being the focal point for a significant amount of e-commerce growth in the region.

With smart phones being a gateway tool to the internet for Africans, mobile penetration in Nigeria, especially, is forecast to rise from 103 per 100 in 2016 to 122 per 100 by 2021.

The EIU report says Nigeria’s three main online retailers— Jumia, Jiji and Konga—serve a mass-market clientele, and nearly three-quarters of users access the Jumia – dubbed “Amazon of Africa” – platform via their mobile phones.

Scoring 80.4 out of 100, ahead of South Africa, Democratic Republic of Congo, Ethiopia, Ghana, Kenya, Mali, Tanzania, and Gabon, Nigeria offers the greatest business environment opportunity within the wider e-commerce market, the report states, adding that the country’s scores marry the size of an addressable market (in terms of income level by household or individual) to a range of external-environment indicators relating to the overall business environment, such as market opportunities, mobile subscriber penetration rates (per 100 people) and PC ownership (per 100 people).

The rapid growth in the e-commerce sector on the African continent cannot but be based largely on the back of increased smart phone take-up among African consumers, who are using mobiles to access a variety of e-commerce shopping platforms, it observed.

According to the report, Nigeria has been identified to take advantage of the e-commerce potential, because of its high business environment opportunity potential.

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However, despite these potentials and opportunities, the fear of fraud, poor transport and mobile infrastructure, supply-chain barriers and the fragmented nature of retail markets in Africa will hold back e-commerce growth in the continent, but significant investment from both the public and private sector is needed to ensure obstacles are overcome and e-commerce can flourish in Africa.

The report, however, observed that, notwithstanding the e-commerce push, the retail dominance of physical shopping outlets in Africa is unlikely to be toppled anytime soon, as consumers in African countries prefer to use a network of physical stores, street traders and informal market sources for their purchases, which are predominantly carried out in cash.

The EIU report says the relative lack of sophistication in the nature of many transactions in the continent reflects a paucity of infrastructure, as well as insufficient familiarity and trust with alternative sources.

On the other hand, a plethora of malls have sprung up in Africa, and consumers flock to these in order to partake in a more engrossing shopping experience. In addition, although smartphone penetration, mobile broadband usage and network coverage and speed remain low, they are growing fast, leading to a “leapfrogging” effect where an increasing number of Africans are embracing the potential of e-commerce by using mobiles, rather than personal computers (PCs), for their online purchases.