November 24, 2023/Coronation Research

Nigeria’s e-commerce sector has undergone substantial expansion, attracted considerable investments and provided a robust marketplace for small and medium enterprises. The significance of e-commerce has been notably accentuated, first during the challenges posed by the COVID-19 pandemic and subsequently during the implementation of the CBN’s Naira Redesign policy in Q1 2023.

In alignment with these trends, industry sources suggest a substantial growth trajectory for the Nigerian e-commerce sector, anticipating it to reach USD9.0bn by 2023.

An assumption of an average y/y growth of 11.7%, over the next four years, would result in a projected market volume of USD14.1bn by end-2027. This forecast underscores the sector’s resilience and potential for continued expansion, presenting a compelling opportunity for strategic investment.

It is important to underscore the pivotal role that enhanced mobile connectivity has played in facilitating widespread internet access for an increasing number of Nigerians. According to data sourced from the Nigerian Communications Commission (NCC) as at August 2023, mobile network coverage reached an estimated 101%, based on a population size of 218 million. In tandem, broadband penetration achieved a rate of 45.6%. While the proliferation of smartphones has empowered users to seamlessly partake in online activities, including shopping, internet subscriptions stand at approximately 159 million. Notably, this figure falls behind comparable African nations such as Morocco (88%), Seychelles (81.6%), and Egypt (80%).

The e-commerce sector’s expansion owes much to the success of online payment platforms like Interswitch, Flutterwave, and Paystack. ese platforms have not only facilitated smooth financial transactions; they’ve also built trust among consumers, encouraging more people to shop online.

Data from the Nigeria inter-bank settlement system (NIBSS) shows that the value of e-payment transactions rose to N135.52trn in Q1 2023. This represents an increase of 298% y/y compared to N34.04trn in the corresponding period of 2022. The increase in electronic transactions can be partially linked to the cash scarcity experienced in Q1 ’23, which was triggered by the CBN’s Naira Redesign policy.

Meanwhile, the latest data on e-payment channels from the CBN reveals that 8.3 billion transactions valued at N459trn were recorded on electronic payment channels in 2021. We expect to see a considerable rise in transaction volumes when FY2023 figures are released.

Numerous e-commerce platforms operate within Nigeria, with Jumia emerging as the foremost player. In 2022, Jumia achieved significant traction with an impressive 147 million web visitors. The company’s financial statement for FY2022 disclosed noteworthy performance metrics, encompassing 39 million orders and a revenue of USD221.9m (N186.4bn). This marked a substantial growth compared to the preceding year, where 34 million orders and a revenue of USD177.9m (N149.4bn) were recorded.

Commonly transacted categories on these platforms span a spectrum of consumer goods, including food, personal care products, fashion, beauty products, and electronics. Beyond Jumia, other prominent platforms making significant strides include Jiji and Konga. In 2022, Jiji garnered a robust 54 million web visitors, while Konga attracted a noteworthy 23 million visitors.
Black Friday stands out as one of the prime shopping seasons, marked by a surge in consumer interest for lucrative deals. E-commerce platforms play a crucial role by providing cost-effective promotional avenues for small and medium-scale enterprises (SMEs). The heightened consumer spending during Black Friday contributes significantly to the revenue uptick for retail businesses, spanning both online and brick-and-mortar establishments. This
surge in sales holds the potential to positively influence key economic  indicators, including the Gross Domestic Product (GDP).

However, it is imperative to recognize that while Black Friday generates short-term economic boosts, its sustainability and enduring impact hinge on several
factors. These include the maintenance of consumer confidence, the broader economic landscape, and the efficacy of businesses in capitalizing on this shopping season to establish a lasting impact on their operations.

E-commerce offers Nigerian businesses a dynamic platform to showcase their products on a global scale. In doing so, it dismantles traditional geographical
constraints, and substantially broadens market reach. This global connectivity not only propels the growth of domestic enterprises but also holds the potential to significantly impact Nigeria’s export earnings. E-commerce remains a catalyst for local businesses to tap into a diverse range of consumers globally, fostering cross-border trade.

Although Nigeria’s e-commerce landscape holds immense potential, it is essential to acknowledge and address the prevailing logistical and supply chain challenges. Inadequate infrastructure, limited warehousing, and connectivity issues in rural areas stand as formidable obstacles. Additionally, concerns such as rising operating costs, cybersecurity, and fraud risk have compelled several e-commerce businesses to scale back or cease operations in the country. The impact of these challenges is further exacerbated by suboptimal customer service and questionable return policies among some businesses, leading to diminished trust levels among consumers.

Therefore, it is imperative for local e-commerce entities to prioritize and enhance operational efficiency, trustworthiness, and overall customer experience. Addressing these challenges comprehensively is paramount for the sustained growth and success of the e-commerce sector in Nigeria.

The FGN’s efforts towards improving infrastructure and transportation represent a promising stride toward bolstering the efficiency and reliability of the e-commerce supply chain. Prioritizing cybersecurity measures is paramount to instilling greater confidence among consumers. Furthermore, staying well-informed about international trade regulations and customs procedures is indispensable for businesses keen on ensuring seamless export processes.

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