With a recent disturbing report that after three years of the launch of mobile money in Nigeria and despite the Central Bank of Nigeria’s drive towards ensuring that physical cash flow in the country is reduced to the barest minimum through its Cashless Policy, there are still fewer than 2000 active mobile money agents in the country.
This is against the report that Kenya’s Mpesa achieved a 20,000 mark within the first three years of operation, despite the country’s 44.04 million population being about a quarter of Nigeria’s population.
The question that begs for an answer in the country is: “How do we achieve the target of 75,000 agents in the next two years.”
At a recent forum in Lagos, stakeholders gathered to review trends in the continent’s e-payment and e-commerce sphere, especially as it concerns Nigeria. It was obvious that despite the country’s cashless policy drive, a lot still needs to be done to set the pace for a viable e-commerce space in Nigeria.
For e-commerce to stand, all the ingredients of sales, payment, and delivery should be in place, within and outside the shores of the country.
With up to 300 e-commerce sites in Nigeria, Nigerians have been said to spend about $380 million on e-commerce, with a projected increase to about $920 million in 2014.
Online shops and travel agencies such as Jumia, Konga, DealDey, OLX, and Wakanow.com have popularised online shopping in Nigeria. But without a viable means of electronic payment and veritable infrastructure to ensure payment online, e-commerce will still be standing on one leg in the country.
Like other online shops and consumer service providers, Jumia raised over $50 million cash-for-equity funds from industry giants, JP Morgan, Summit Partners, and Millicom within a year of operation.
Also, with a growth rate of 25.8 %, e-commerce in Africa is the fastest in the world, however, the growth in Nigeria is not very encouraging judging from the country’s position as the 10th most populous nation in the world and with a huge untapped market. It should also be noted that the growth rate in Africa or Nigeria is not comparative to the development of e-commerce in other developed countries as these countries have attained a level of growth that does not require such speed in further development, but rather stability, gradual improvement, re-strategising and policy improvement.
Although some believe that with an estimated growth rate of 25% per annum, and worth of over N255 billion, e-commerce in Nigeria is having it good, most of this growth is seen in the rising spate of online shops, which does not really depict e-commerce as much as it depicts making online product choice.
This is because most of these shops transact business online and payment is made out in cash on delivery.
Getting Started
First, there should be a realization that the country operates in a very peculiar environment where small and medium enterprises (SMEs) contribute more than 46% of the nation’s gross domestic product (GDP). With a population of over 17.2 million, these SMEs need to be courted and wooed into latching in on the provisions of mobile money and e-payment. Unfortunately, the infrastructure deficit has not helped to draw these economy boosters on the side of e-transaction. In a December 2013 report, it was stated that about 78% of installed Point of sale (PoS) terminals are dormant. This is not a very good pace for a country with a policy and target on electronic payment.
Challenges
Inadequate Agent Network
For e-commerce to thrive, people should be willing to drive it. Stakeholder interest should range from the customers through the agents to the service and fund providers. Mobile money agents in the country are too few compared to several mobile money providers. With ABOUT 2000 mobile money agents from the licensed 20 service providers, it is obvious that coverage is still slow. This will also impact the level of awareness. The presence of agent networks across the country will create a sense of wider acceptability by consumers.
Because of infrastructure deficit, most operators of e-Payment and mobile money stay away from certain areas they deem ‘not profitable for business’. However in such areas, despite the flow of business, most people prefer the use of cash. The concentration has been more on the developed regions and buoyant communities, rather than the low-income earners. Agent networks concentrate on the big shopping malls and outlets leaving out the small shops that can as well drive the electronic payment and bring it to the grassroots.
Low Awareness
It is appalling that a good majority are yet to understand both the workings and availability of e-commerce. Despite the few advert placements and electronic campaigns, rural dwellers and traders are yet to get a full grip on what e-payment and mobile transactions are all about. Sometimes, placing a PoS terminal in some small shops becomes inconvenient to the shop owner as no customer uses the terminal, and these shop owners do not have the time to start a workshop for their customers on the need and usage of the terminal. Therefore the onus is on the service providers to take the awareness campaign to the places where it matters, to the doorsteps of the consumers and merchant outlets.
Infrastructure
Getting the infrastructure right will drastically improve the success rate of e-payment and e-commerce in Nigeria. A major challenge being faced in most sectors of the economy, which has also been slowing down development in the country, is inadequate and decaying infrastructure. Key among these are technology, power, and road.
The issue of trust has been one that has over the years been compounded by the degenerating infrastructure decay in the country. Since the inception of the global system for mobile (GSM) communication in Nigeria, one consistent factor and challenge has been getting quality service right. Despite customer dissatisfaction, they know they do not have an alternative but to communicate, no matter the quality of service being rendered. However, it is a different scenario when this same system is used as a platform for mobile commerce and the exchange of money. The suspicion and distrust cannot be gambled on. Here, there is a choice – go with cash, which a lot of people find more convenient, although with much risk.
The CBN decided that no telco will be granted a mobile money license, but that they should be content with being carriers so as not to be entangled with the burden of playing on both fronts but rather concentrating on making available a veritable platform for driving payment. This is a step in the right direction and has been applauded by other stakeholders who believe that telcos have a very important role to play in ensuring quality mobile money services without bias.
Just as almost all the sectors of the economy depend on the power sector to blossom, getting this infrastructure right will further boost the viability and generate more interest in e-commerce. Most e-commerce merchant locations are not operative because they cannot sustain the needed consistent power to operate. With the report that over 78% of PoS terminals are inoperative, it is obvious that the challenge also rests on getting the power infrastructure right to help rural and SME e-commerce operations.
Access to merchant locations by shop owners in rural communities has also been recognized as a challenge in the deployment and acceptability of electronic payment channels in such communities. The road infrastructure needs to be put into consideration for the desired growth to be achieved.
Moving Forward
Regulatory
Having a good policy-driven regulatory framework is also an important vehicle to drive e-commerce and e-payment in the country. Having the regulator mandate and empower a department or an arm to specifically handle e-payment and e-Commerce affairs and ensure implementation of set policies, to nurture and grow the sector is expedient. Although some stakeholders have opined that the 22 licensed mobile money operators are too many for healthy competition, effective monitoring and proper synergy to take place.
FG
The federal government’s drive towards implementing the broadband plan will not only go a long way in accelerating the growth of e-commerce but will also push existing e-commerce-inclined businesses to global competitiveness. It is expected that with the increase in bandwidth and the availability of broadband infrastructure, there will be an increase in online activities. This will be necessitated by cheaper bandwidth and easier access to the resource. With adequate bandwidth, key drivers to e-commerce will be enabled. These would include online access, e-payment, teleconferencing, fast connectivity for easier use of interactive media, and data exchange, among others.
Partnership for Growth
CBN’s decision to ensure that the mobile money process is a bank-driven model is a step in the right direction. At least it allows all parties to focus on their areas of competence. Resources should be pooled together to ensure that all arms work together for a common cause. There should be specialization – the financing, the agent networks, the service providers, technology and backbone providers, and the enlightenment campaigners should work harmoniously to drive the sector. These partnerships between financiers and service providers, and between financiers, service providers, and awareness campaigners will create the required partnership, devoid of unhealthy competition which retards growth. Partnerships/collaboration, outsourcing, and healthy competition will boost the growth.
Whereas it has become necessary for partnerships to be brokered between financial institutions and mobile money and e-payment firms, care should also be taken to ensure that such partnerships do not repel consumers who are looking for cheaper deals and convenient payment platforms. If they do, it might still go down to stunting the growth of e-commerce in the country.
The peculiarity of the Nigerian business environment and the demands of the public require that stakeholders in the e-payment and e-commerce space find the value proposition for the customer and work on it. There is no need to do everything and every service, even the ones the people do not need or use in the quest to shore up profitability. This ends up alienating the consumers from the providers.
There should be operational guidelines that will make simplicity, relevance, and building-wide acceptability keywords in this drive.
Although statistics are promising, with about 300 e-commerce sites operational, the top of them getting international financing, and partnerships being brokered with financial institutions, the shops are set to do business, but the challenges have to be addressed for e-service to meet e-payment and blossom into e-Commerce.
