Monday, 26 January 2015

FG to Generate $10bn Annually from e-Commerce Market..

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Telecommunications technology minister, Omobola Johnson
Following the massive growth recorded in Nigeria’s electronic commerce market, the federal government may be looking to generate $10 billion annually from the sector.

The telecommunications technology minister, Omobola Johnson, was recently quoted to have said that the industry has the potential to do much more given the rate at which it is growing.

Nigeria’s e-commerce market continues to experience robust growth on the back of increased internet access and improved mobile connectivity.  Based on industry reports, 300,000 online orders are placed daily.

As reported by the Nigerian Communications Commission (NCC), active internet subscription in Q3 2014 stood at 73.9 million. This represents an internet penetration of 43 per cent in the same quarter.

Analysts said the CBN’s cashless policy has also played a role in facilitating growth in electronic commerce by placing emphasis on the utilisation of e-payment systems.

THISDAY investigations revealed that while electronic transactions remain dominated by the use of ATMs, there has been very strong growth in online purchases through leading industry players such as Konga, Jumia, Wakanow and Quickteller.

However, online retail shops still have challenges with payment methods as customers prefer to pay for products when delivered (cash on delivery).

“This is particularly due to concerns over fraudulent activities. Jumia disclosed that 60 per cent of its orders come from Lagos with mobile phones and fashion products dominating purchases, “said analysts at FBN Capital.

They also noted that the rise in processed orders by online retailers as well as the need for efficient delivery of products led to an awakening of Nigeria’s postal and courier industry.

“Online retailers are partnering with courier operators to meet customer demands. On a macro note, strong growth in e-commerce could increase visibility while reducing cost for SMEs, as well as generate jobs. It also bodes well for fiscal revenue collection (through an expansion of the tax net), “they added.

Meanwhile, the electronic commerce sector is attracting a lot of foreign investments as two of the leading players in the sector, Jumia and Konga received $50million (N8.25 billion) investments in the last one year.

While it has been difficult for the companies in the sector to access funds from the local bourse, a report by FBN Capital Limited revealed that Jumia and its principal competitor, Konga have secured funding from Swedish and South African sources.
Analysts noted that the development of e-commerce is an extension of the emerging middle class story, which the portfolio community has embraced.

According to the analysts, “In the public equity space, consumer goods and finance sector stocks have been the main beneficiaries. This is the story of Nigeria joining the somewhat tarnished group of BRICS. We feel that it will ultimately make the grade but not before the elections due in February 2015 and the resulting opportunity to address shortcomings in governance and other areas.

“MasterCard Incorporated included Nigeria in its global online shopping survey for the first time in 2012. The exercise found that 92 per cent of Nigerians who shopped online were content with the experience. However, more significantly it also found that 78 per cent of Nigerians did not shop online for which the main reason was said to be security concerns.”


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