Guiding principles drive consumer protection in Nigeria's e-commerse sector

 

Nigeria’s e-commerce sector holds considerable potential for future growth, with sales set to double between 2016 and 2020. In recent years major African e-retailers have established operations in the country, with Zinox Technologies’ recent acquisition of Konga highlighting the sector’s growth potential and attractiveness to foreign investors.

However, these companies face considerable challenges, including cybersecurity concerns and difficulties with cash-on-delivery, which is a preferred payment option for many. Legal reforms aimed at improving consumer protection may help in the short term, but further expansion of broadband internet and mobile payment platforms remain critical components of long-term industry growth.

Market Snapshot

In March 2018 Jumia’s annual Nigeria Mobile Report approximated that the country’s e-commerce market was valued at $13bn. According to Jumia, the total number of users accessing its website via mobile phone rose by 11% in 2017 to make up 79% of total visitors. Site visits from laptop users fell to 18% over the same period, down from 29% in 2016. Speaking at the report launch, Juliet Anammah, CEO of Jumia, stated that this trend has been supported by the rising supply of affordable devices, a growing market for secondhand devices, gradual adoption of online payment platforms and increased use of social media sites. The Nigerian Communication Commission reports that mobile internet subscribership nearly tripled between May 2013 and May 2018, increasing from 38.1m to 103.2m users.

Nigeria is home to Africa’s top three e-retailers: Jumia, Konga and Jiji. In February 2018 Zinox Technologies announced it had acquired Konga in a surprise deal, and in April 2018, Konga and e-commerce firm Yudala announced a merger. The new entity is operating under the Konga name and aims to be profitable by 2020. Growth projections support this goal: $1.9bn in online sales were made in Nigeria in 2016, and e-sales are forecast to double by 2020. Local media reports have estimated that Nigeria’s e-commerce segment could be valued at over $50bn by 2027.

Cybersecurity Concerns

There is considerable scope for expansion of online payment platforms to drive e-commerce. Jumia’s study found that 70% of Nigerians prefer to pay with cash on delivery, while 28% use credit or debit cards and only 12% use mobile money platforms. This has challenged e-retailers, and some companies like Konga have stopped offering the option to pay with cash on delivery, owing to frequent cancelled orders and rising delivery and security costs.

Cybersecurity concerns also shape consumer preferences for payment methods. In March 2018 the Consumer Protection Council (CPC) said that 70% of Nigerians are concerned about the safety of online transactions. The Nigerian Interbank Settlement System recorded 1461 cases of electronic fraud in 2014, amounting to losses of N6.2bn ($20.1m), while banks, other financial institutions and mobile payment operators reported 946 fraud cases resulting in losses of N5bn ($16.2m) in 2015. According to the Ministry of Communication Technology, the country loses approximately N78bn ($252.2m) to cybercrime annually.

Consumer Protection Reforms

The authorities have moved to improve the e-commerce operating environment, and in March 2018 the CPC announced new guidelines for e-commerce platforms. The guidelines, which are designed to improve consumer protection, focus on five guiding principles, including establishment of a dedicated customer service apparatus; full disclosure of any terms, conditions, or restrictions on marketed products; fair and transparent advertising practices; timely delivery; and consumer privacy and data protection. Babatunde Irukera, director general of CPC, told media that the commission planned to engage with industry representatives to promote and develop the five guiding principles, paving the way for sustainable long-term growth.

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The Report: Nigeria 2019

Retail chapter from The Report: Nigeria 2019

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