‘Nigerians Must Believe in e-Commerce Growth’

15 Nov 2012

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Mr. Tobenna Okoli 

Information Technology (IT) business analyst, Mr. Tobenna Okoli, spoke with Amaka Eze on the Nigerian e-Commerce space, insisting that Nigerians must support the new trend of development. Excerpts:
How would you describe the level of e-Commerce in Nigeria?
e-Commerce as a sales platform, is very promising. I believe that anyone, anywhere who is still skeptical about its power is being very unwise. However, e-Commerce is still in its infancy in Nigeria and must be treated like that infant. Although its potential is assured, there are still some challenges to be addressed.

What are the major challenges of e-Commerce in Nigeria?
In every new innovation, there are several big challenges that come with it. One of the major challenges of e-Commerce growth in Nigeria is the culture barrier. Buying and selling online is still a foreign concept to most Nigerians, even to most people that reside in the city. Ignorance and a general air of distrust remain largely to blame for this.

Another challenge is the high costs of e-Commerce on the merchants’ side in obtaining secure payment solutions from service providers and the difficulties of delivering tangible goods sold online to customers in a timely and cost-effective manner. Most times, the high cost incurred from the merchants is transferred to the customers, thus making it very difficult for them to shop online, because of the price difference from other regular shops.

There is also the challenge of web access. About 70 per cent of Nigerians who use the internet do so using mobile phones, but meanwhile, most e-Commerce websites are configured for PCs. The problem of access thus poses serious problems for businesses which seek to capture the core of Nigerian internet users.

We must not also forget the fact that perhaps, a very critical challenge is the fact that the average Nigerian is poor. The average Nigerian has very little residual income, and in Nigeria today, shopping online is regarded as a luxury which many believe they cannot afford.

Talking about poverty, World Bank statistics show that Nigeria's GDP grew by 7.2% in 2011, but in 2012, the growth rate is still below 7%. Does that suggest increased poverty level for the country?

One thing we have failed to note is that those macro-economic figures do not always reflect the true financial position of the average citizen. Whether we accept it or not, the lot of the average Nigerian worsens by the day. According to the Nigerian Bureau of Statistics almost 113million Nigerians are living in poverty and the numbers rises daily. Thus the GDP growth does not always mirror poverty reduction.

Also, steady rise in food and fuel prices are further worsening the poverty situation by shrinking the residual incomes of Nigerians which is supposed to drive e-Commerce. In western countries, by comparison, e-Commerce thrives better because the cost of essentials such as food and shelter do not take as large a chunk of household incomes as they do in Nigeria. More so, the relative ease of access to consumer credit avails citizens of western countries of cheap funds to spend on items of pleasure. The same cannot be said of Nigeria where the banking crisis of 2009 even forced banks to reduce drastically the little consumer credit facilities that were hitherto available.

What do you think is the way forward?

In creating solutions, we should focus on mitigating the challenges already identified. Firstly, on a macro scale, the standard of living needs to rise, especially among the dwindling middle-class, for e-Commerce to have a very strong foothold across the country. Improving the general standard of living is the reserve of macro economists and I would not dare to venture down that road. But if it can be achieved, e-Business would be better for it. Also, the easing of access to consumer credit would put more disposable income in the hands of Nigerians and lead to more e-commerce activity.

Configuring e-Commerce for mobile web will also open the industry substantially. The future of the internet globally in general, and in Nigeria in particular, is mobile. Online merchants should make their websites compatible with mobile phones for optimum reach. The cost of obtaining online payment solutions by merchants from service providers need to crash considerably. At present the costs of such solutions are too high to allow for wide adoption by would-be online merchants.

Another teething problem is that of delivering tangible merchandise, purchased online, to customers. This requires both public and private initiatives. The transport infrastructure needs to be improved by the governments especially road and rail. Online merchants, on their part, need to develop cost and time efficient ways of making deliveries within existing constraints. The Nigerian Postal Service is worth patronising in this regard.

What industries will be the key drivers of growth in e-Business?

The current area of relative success involves payments for services such as school fees, airline tickets and household bills. This area of e-commerce will continue to grow. As a matter of fact, more focus should be given to paying for services online. Also, as with the rest of the world, items such as clothing’s, consumer electronics, mobile phones, among others, show a lot of promise for the Nigerian e-Commerce space

Another promising area would be SMS-based mobile payment solutions for goods that do not necessarily require sighting before purchase such as common household supplies. This is a cheaper alternative for merchants and customers alike, as the costs of running online businesses are still prohibitive to many small enterprises in Nigeria.

What role should the federal and state governments play in e-Commerce?

This question is similar to asking what roles federal and state governments agencies should play in regular commerce. e-Commerce in Nigeria is more of a private sector affair, supported by the government agencies. The governments can only keep providing the right environment for trade to thrive like providing infrastructure especially power and a robust transportation network.

The governments should therefore do everything possible to enhance ease of doing business by fostering the rule of law and minimising bureaucratic bottlenecks that stifle business. Interestingly, governments are increasingly adopting e-payment platforms for tax collection. This is a good development as it enhances the ease of doing business in the country.

What must be done to drive ICT growth in e-Commerce?

Information and Communications Technology (ICT) is doing very well in Nigeria and the key to a higher growth would be home-grown solutions. ICT is the most dynamic phenomenon in today's business environment thus it is only natural to monitor keenly such giant.

The Nigerian ICT industry cannot grow substantially with our current passion for technology importation. Specialisation is the best way to start. We need to select, first, special areas that are useful to the local market and expand outwards. This would ensure that maximum results can be extracted from limited resources.

Technology importation is not wholly bad but it should be supplemented by developing home-grown solutions beginning with the emergence of an ICT hub akin to Silicon Valley in India where local start-ups can sprout en-mass.

Experience has shown that great phenomena start out from hubs ranging from art to finance to manufacturing. In the USA, for example, New York is the hub for finance, Hollywood for movies and Silicon Valley for ICT. Hubs bring together the very best of talent in a given field to bring about astronomic growth of that industry. In Nigeria, for example, Lagos is the hub for commerce and financial services.

One would assume that Lagos, the commercial hub of Nigeria is best suited to be the pioneer hub?

Of course, Lagos, on the surface, appears to be the natural choice but further analysis show that Lagos does not offer the mix of modernity and serenity that a promising ICT hub requires. Owerri has the particular advantage of being metropolitan without the boisterousness of Lagos.

At their other factors that set Owerri apart as a would-be ICT hub?

Well, using Silicon Valley as a model, while making adjustments for the special Nigerian situation, Owerri has what it takes to emerge as Nigeria's ICT hub for several reasons. The city has a considerable number of reputable higher institutions. In particular, the Federal University of Technology Owerri,(FUTO), should serve as the academic nexus for carrying out ICT research and development in the city, because the school and its students have shown a peculiar likeness towards ICT over the years. Of recent, it emerged first position in the Institute of Software practitioners of Nigeria (ISPON) competition in 2011, and also in the Students Free Enterprise (SIFE) Challenge 2012; both nationwide technology competitions. Most importantly, Owerri boasts of a large youth population with affinities for education and entrepreneurship.

What special areas will the Owerri ICT hub focus and who will lead the revolution?

The areas of focus will revolve around the current needs of the Nigerian ecosystem. As I stated before, Mobile web applications should be prioritised over PC-based apps. Also important will be enterprise applications and cloud computing targeting the public sector, which is still lagging behind.

Also, a combination of the federal and state governments will start somewhat earlier as enablers while the private sector will take over as incubators and accelerators. Specifically speaking, governments would continue to expand infrastructure, maintain security and improve the quality of education and research in Science, Technology, Engineering and Maths (STEM) to create ICT parks where ICT start-ups can be located. Private sectors on the other hand, will provide support in the form of angel investors, entrepreneurial guidance and valuable networks to would-be ICT start-up founders. Additionally, the private sectors especially Small and Medium Businesses (SMBs) will find home-grown solutions more applicable to their operations.

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