The Future of eCommerce in Nigeria: Trends and Challenges

With the Nigerian eCommerce sector valued at $9 billion in 2023 and projected to rise to $22.9 billion by 2030, the country is steadily advancing its online retail industry. 

The number of eCommerce users is expected to increase from 28.6 million in 2024 to 15% of the population by 2029, a commendable growth prospect in the sector. 

The anticipated annual growth rate of around 12% further reiterates the possibilities of eCommerce in Nigeria.

In 2024, eCommerce revenue was projected to grow at a compound annual growth rate (CAGR) of 9.34% between 2024 and 2029. With 55% of the population having access to the internet, more Nigerians are gaining the ability to shop online, while smartphone usage has surged from 25 million to 40 million users, encouraging mobile commerce as an unignorable growth area. 

In fact, around 84% of internet access in Nigeria occurs via mobile devices, accentuating the need for businesses to adopt mobile-first strategies. 

Social Commerce

Social media, on the other hand, is becoming a solid tool for e-commerce in Nigeria. Platforms like Instagram, Facebook, and WhatsApp have become de facto online marketplaces where businesses can engage directly with customers. Over 60% of Nigerian small and medium-sized enterprises (SMEs) now use social media as their primary sales channel.

Businesses, such as fashion boutiques and home decor shops, have capitalized on Instagram to showcase their products, reach a wider audience, and manage customer orders directly through the app.

Payment Innovations

Secure and convenient payment solutions are an essential factor in boosting consumer trust in e-commerce. Platforms like Paystack and Flutterwave have bolstered payment processing in Nigeria, allowing consumers to pay easily via mobile wallets, credit cards, and bank transfers. In 2024, mobile payment usage is projected to grow by 30%, as more Nigerians move to digital payment methods.

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Government Initiatives and Regulations

Government support for the digital economy has been growing, with policies aimed at encouraging innovation and growth in the eCommerce space. The Nigeria Startup Act is an example of such initiatives, providing a regulatory framework to support digital businesses.

Also, Initiatives like the Export Skills Acquisition Centre (ESAC) aim to train youth and women with the skills needed to succeed in the eCommerce sector 

In 2021, the federal government launched the “Digital Nigeria” program, aimed at promoting a knowledge-based economy and enhancing infrastructure for eCommerce. This has resulted in improved regulations and investment in digital startups, but challenges remain in terms of policy enforcement and clarity.

These statistics, from Statista 2023 and PwC Nigeria, tell us that Nigeria’s eCommerce sector is on the brink of exponential growth, though it must overcome several challenges to sustain its upward course.

Jumia, one of Nigeria’s leading eCommerce platforms, has been at the forefront of mobile commerce. In 2023, Jumia reported that 70% of its sales were conducted via mobile devices, noting the indispensable role of mobile commerce in driving online retail.

Historically, the concept of eCommerce emerged in the late 20th century, evolving from traditional commerce through significant technological advancements. 

It began in the 1960s with Electronic Data Interchange (EDI), followed by Michael Aldrich’s 1979 online shopping system. However, the 1990s saw the launch of the World Wide Web and Amazon, founded by Jeff Bezos, which transformed online shopping. 

Again, key figures like Pierre Omidyar (eBay), Marc Andreessen (Netscape), and Tim Berners-Lee (World Wide Web) also played crucial roles in shaping eCommerce. Thus eCommerce has revolutionized how businesses and consumers interact, leading to a new era of digital shopping and commerce.

However, in the words of Jack Ma, a prominent entrepreneur and co-founder of Alibaba Group “E-commerce is not just about buying and selling. It’s about connecting people and ideas.”  

Available data reveals that as of 2023, the global eCommerce market is estimated to be valued at approximately $5.7 trillion, with projections indicating it could surpass $6.3 trillion by 2024. This growth is largely driven by the increasing penetration of the internet, mobile devices, and digital payment solutions worldwide. 

Meanwhile, the top ten eCommerce countries in Africa include; Nigeria, South Africa, Egypt, Kenya, Morocco, Ghana, Tanzania, Uganda, Algeria, and Ethiopia.  

Whilst Nigeria leads the continent with a burgeoning market, South Africa follows closely with a well-established eCommerce framework. Egypt and Kenya also show strong growth, driven by increasing internet access and mobile payments. 

The Opportunities and Challenges in Nigeria’s eCommerce Industry 

These statistics, from Statista 2023 and PwC Nigeria, tell us that Nigeria’s eCommerce sector is on the brink of exponential growth, though it must overcome several challenges to sustain its upward course.

As one of the fastest-growing digital retail markets in Africa, this expansion provides numerous opportunities but also challenges. Limitations such as logistics, security, and regulatory issues will need to be addressed for the sector to fully reach these projections.

Logistics and Infrastructure

Nigeria’s underdeveloped logistics infrastructure such as road networks and power supply, is one of the biggest limitations to eCommerce growth. While major cities like Lagos and Abuja benefit from efficient delivery systems, rural areas remain underserved. Only about 30% of eCommerce deliveries reach outside urban centres, which hinders the sector’s expansion into rural markets.

The lack of a strong logistics network can also lead to delays in deliveries and increased costs, affecting customer satisfaction and business profitability.

Trust and Security Concerns

Despite advancements in payment security, issues about online payment security and trust remain prevalent among Nigerian consumers. – Fraudulent activities and data breaches can corrupt consumer confidence in eCommerce platforms, making it essential for businesses to invest in strong security measures and build trust with their customers.

The growth of fraud and cyberattacks has led to distrust among some consumers. In fact, 44% of Nigerian consumers report hesitance to shop online due to fears of payment fraud or data breaches. Businesses are addressing this by adopting advanced security measures like two-factor authentication and encrypted payment systems.

High Competition

The eCommerce market in Nigeria is fiercely competitive, with both local and international companies vying for a share of the digital commerce pie. 

This intense competition drives innovation and improved customer experiences but also puts pressure on businesses to differentiate themselves and maintain profitability.

Regulatory Challenges

Despite government initiatives, there are still regulatory challenges. Complex tax laws, high import duties, and inconsistent enforcement create barriers for businesses looking to scale. Some eCommerce platforms have scaled through these hurdles by forming strategic partnerships or adopting local sourcing to minimize costs.

The lack of clear and consistent regulations can create uncertainty and hinder the growth of the eCommerce industry.

In 2022, Konga faced regulatory challenges due to discrepancies in import tax policies, prompting the company to change focus to locally sourced goods and reduce reliance on imports.

But What does the future of eCommerce presuppose and what are the Opportunities and Challenges Entrepreneurs’ can envisage?

The future of eCommerce in Nigeria appears promising, driven by a young, tech-savvy population and increasing internet penetration. 

The Opportunities 

Thinking in futuristic terms(2024 and 2030), several key opportunities for eCommerce in Nigeria are emerging.  One major area is market expansion, particularly in rural regions where e-commerce services are still underdeveloped. Additionally, focusing on niche markets, such as organic foods and local crafts, can attract underserved customer segments. 

Furthermore, the logistics market, projected to grow at a CAGR of 13% between 2021 and 2025, offers significant opportunities for eCommerce platforms to enhance efficiency through partnerships with local delivery services or by developing their own logistics solutions. The increasing acceptance of digital payment systems presents opportunities for fintech companies to collaborate with eCommerce platforms to improve payment solutions.

Social commerce’s value is estimated to reach $16 billion by 2025, as social media platforms become vital channels for marketing and sales. Strategic partnerships between eCommerce platforms and local businesses can further enhance product offerings and market reach.

What are the challenges that can impede the opportunities?

However, several challenges must be addressed for eCommerce to reach its full potential in Nigeria. Infrastructure deficiencies, including poor internet connectivity and unreliable power supply, remain significant barriers, with about 50% of Nigerians lacking reliable access to high-speed internet. 

Additionally, the logistics infrastructure is underdeveloped, leading to challenges in delivery and increased operational costs.

Again, Regulatory and compliance issues complicate the landscape, as eCommerce businesses navigate complex frameworks and inconsistent law enforcement. Adding to this is the cybersecurity concerns, which also pose risks with online fraud costing Nigerian businesses approximately $200 million annually. 

According to the Nigeria Cyber Security Report 2022. Cultural factors, such as a preference for cash-on-delivery (COD) due to distrust in online payments, remain a challenge, as does increasing market competition among local and international players vying for market share.

It can be said that the eCommerce landscape in Nigeria is on the brink of significant transformation driven by technological advancements and changing consumer behaviours. While challenges exist, substantial opportunities for growth in logistics, mobile commerce, and social commerce are present. 

To capitalize on these opportunities, stakeholders must address infrastructure deficits, enhance payment security, and build trust with consumers. With the right strategies, eCommerce in Nigeria could become a cornerstone of the economy in the next 5-10 years. 

For us, we are of the view that the government should come in where necessary by addressing the teething problems that could impede the success already alighted above through effective and people-centric policy whilst also addressing insecurity challenges.

The truth is, this will address not only the cancerous and burgeoning challenge of unemployment amongst others.