E-commerce in Nigeria is still in its early stages but holds significant potential for growth.
The country has a fast-growing youth population, expanding consumer power, and increased smartphone penetration, which are all factors that contribute to the growth of e-commerce.
Here is a brief overview of how e-commerce emerged and evolved in Nigeria over the years:
1. Internet Penetration
Nigeria has witnessed a remarkable increase in internet penetration over the years, with more Nigerians now having access to the internet due to improved internet connectivity and the affordability of smartphones. This increased internet access has led to a substantial rise in the number of potential online customers, contributing to the growth of the e-commerce industry.
2. Demographic Shift
The fast-paced and modern lifestyle of Nigerians has shifted consumer preferences towards convenient shopping options, making e-commerce an attractive choice. The rise of the middle class with greater disposable income has further propelled the demand for online shopping, fostering the growth of e-commerce platforms.
3. Government Support
The Nigerian government recognizes the pivotal role of e-commerce in the country’s economic growth and has taken steps to support its development. In 2015, the government signed the Cybercrime Bill into law to prohibit and prevent fraud in e-commerce, providing a legal framework for online transactions.
4. Market Segmentation
The Nigerian e-commerce market is segmented by B2C e-commerce (Beauty and Personal Care, Consumer Electronics, Fashion and Apparel, Food and Beverage, Furniture and Home) and B2B e-commerce. This segmentation allows businesses to tailor their offerings to different customer needs and preferences.
5. Payment Methods
E-commerce businesses in Nigeria can offer a hassle-free way to shop for a diverse range of products and services without the need for physical store locations. The country has one of the largest internet economies in Africa, with a predicted revenue of USD$6,765.7 million by 2023.
Early Days
The early days of e-commerce in Nigeria saw the emergence of the first online shops in the early 2000s, which primarily targeted Nigerians abroad, offering them the opportunity to shop for gifts and goods to send home.
Sites like ShopNigeria.com and DeNiger were among the pioneers during this time.
However, these platforms offered limited options and inconvenient payment systems, leading to a slow uptake as online shopping was not very popular or trusted yet.
The growth of e-commerce in Nigeria has been influenced by various factors, including the rapid increase in internet penetration, the demographic shift towards convenient shopping options, and the government’s recognition of the importance of e-commerce in the country’s economic growth.
As a result, the e-commerce landscape in Nigeria has evolved significantly, with the country’s e-commerce market expected to reach USD 7.63 billion in 2023 and grow at a CAGR of 11.82% to reach USD 13.34 billion by 2028.
The evolution of e-commerce in Nigeria has been characterized by the country’s increasing internet penetration, the rise of the middle class with greater disposable income, and the government’s support for the development of e-commerce.
These factors have contributed to the expansion of the e-commerce industry in Nigeria, positioning the country at the forefront of the digital transformation in the e-commerce landscape
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Rise of Marketplaces
The rise of e-commerce marketplaces in Nigeria, particularly with the launch of Jumia and Konga around 2012, marked a significant shift in the country’s online shopping landscape.
These platforms adopted an online marketplace model, providing a wider variety of goods and services, which expanded consumer access to more products and merchants’ access to a larger customer base.
The introduction of marketplaces also addressed trust issues by vetting sellers and providing logistics, which built more consumer confidence in shopping online.
This, in turn, contributed to the growth of the e-commerce industry in Nigeria.
The Nigerian e-commerce market has experienced significant growth in recent years, driven by increasing internet penetration, growing smartphone usage, and a rising middle class with disposable income.
The landscape of commerce in Nigeria has undergone a significant transformation in recent years, fueled by the rapid growth of digital technology.
The country’s e-commerce market is highly competitive, with both local and international players vying for market share.
As a result, e-commerce businesses need to continually innovate, offer unique value propositions, and enhance customer experiences to stay ahead of the competition and capture a loyal customer base
Growth of E-commerce
By 2015, e-commerce platforms in Nigeria, such as Jumia and Konga, had raised millions of dollars to capture the growing market.
They reported over $500 million in transactions by 2017, marking a significant increase in the industry’s performance.
During this period, online shops expanded in various categories, including fashion, food delivery, flight, and hotel bookings, while the number of merchants selling online grew as consumer trust increased.
The growth of e-commerce in Nigeria has been driven by several factors, including:
1. Increasing internet penetration
With more Nigerians gaining access to the internet, particularly through mobile devices, the potential customer base for e-commerce has expanded.
2. Growing smartphone usage
The widespread adoption of smartphones has made it easier for Nigerians to connect to online platforms and engage in various e-commerce activities.
3. Rising middle class
The growth of the middle class in Nigeria has increased disposable income, contributing to the popularity of online shopping.
4. Market segmentation
The Nigerian e-commerce market is segmented by B2C e-commerce and B2B e-commerce, allowing businesses to tailor their offerings to different customer needs and preferences.
5. Government support
The Nigerian government has taken steps to support the development of e-commerce, such as the Cybercrime Bill, which prohibits and prevents fraud in e-commerce, providing a legal framework for online transactions.
As a result, the e-commerce industry in Nigeria has experienced significant growth, with the market size expected to reach USD 13.34 billion by 2028
Read also: How To Create Your Free Online Store in Nigeria
Emergence of Fintech
The emergence of fintech has played a pivotal role in the growth of e-commerce in Nigeria.
Fintech companies have been key players in expanding e-commerce by providing digital payment options, thus facilitating online transactions.
Startups like Paystack and Flutterwave have been at the forefront of this movement, enabling customers without international credit cards to shop online and contributing to the surge in the youth population and internet penetration, which has expanded the customer base.
The impact of fintech on Nigeria’s economy has been substantial, with the financial services sector now contributing 5% to the country’s GDP in 2022, up from 3% five years ago.
Fintechs have democratized access to financial services, capturing the attention of global investors along the way.
The sector has also seen significant investment, with fintechs operating in Nigeria raising a staggering $773 million in investments from about 80 deals.
This growth has been further highlighted by the presence of unicorns—companies with a valuation over $1 billion—such as Interswitch, Flutterwave, Opay, and Esusu, positioning Nigeria as a leader in Africa’s financial technology landscape.
The Fintech Association of Nigeria (FintechNGR) has been established as a self-regulatory, not-for-profit, and non-political organization to serve as a platform for the development of the fintech industry in Nigeria.
The association has consistently interfaced with regulators such as the Central Bank of Nigeria (CBN), the Securities and Exchange Commission (SEC), the National Insurance Commission, and the government at all levels to develop the fintech ecosystem
Read also: 11 Best E-Commerce Website Builders Nigeria
Impact of COVID
The COVID-19 pandemic has had a significant impact on the e-commerce industry, providing an added boost to the sector as consumers shifted their shopping habits online.
E-commerce startups raised millions more amid shifting consumer behaviors, and logistics and delivery services grew to meet the increased demand.
Projections indicate that the accelerating growth will continue even post-pandemic.
Key aspects of the impact of COVID-19 on e-commerce include:
1. Sales growth: The pandemic led to an additional 19% sales growth for 2020, with global e-commerce revenues experiencing a 13% increase.
2. Shift in consumer behavior: Lockdowns and social distancing measures led to more people working from home and avoiding shopping malls, leading to a surge in online shopping.
3. Increased online demand: The pandemic caused a significant increase in online demand, contributing positively to e-commerce growth.
4. Supply chain disruptions: The pandemic disrupted supply chains, affecting e-commerce performance. However, the increased online demand compensated for these disruptions.
5. Increased online audience: The pandemic led to more people using the internet and e-commerce platforms, benefiting the industry.
6. Labor shortages and extended delivery times: The pandemic caused labor shortages and extended delivery times, which negatively impacted e-commerce performance.
Despite these challenges, the e-commerce industry has adapted and continued to grow. As consumer behaviors change and businesses adjust to the new digital landscape, the growth accelerated during the pandemic will likely continue even as the world recovers from COVID-19.
Future Outlook
The future outlook for e-commerce in Nigeria is positive, with lots of room for expansion to reach its full potential.
Improving digital infrastructure is key to unlocking access to a wider consumer base, and government policies around governance and regulation will shape how the market evolves.
According to Statista, the digital commerce market in Nigeria is projected to grow by 12.91% (2023-2027), resulting in a market volume of US$26.96bn in 2027.
The Nigeria e-commerce market size is expected to grow from USD 7.63 billion in 2023 to USD 13.34 billion by 2028, at a CAGR of 11.82% during the forecast period.
The growth of e-commerce in Nigeria is expected to continue, driven by increasing internet penetration, growing smartphone usage, and a rising middle class with disposable income.
The Nigerian e-commerce market has immense potential, and its growth is expected to continue, with projections indicating that the market will reach US$ 22.9 billion by 2030.
If adoption barriers continue to reduce and trust increases, strong future growth is expected.
The e-commerce industry in Nigeria has the potential to transform the way businesses operate and how consumers shop, offering numerous advantages and opportunities for both sellers and buyers.
As the industry continues to evolve, businesses will need to innovate, offer unique value propositions, and enhance customer experiences to stay ahead of the competition and capture a loyal customer base
Conclusion
In little over a decade, e-commerce in Nigeria has evolved from its fledgling beginnings to become an expanding sector with promising prospects ahead.
The industry has experienced rapid growth and development, driven by factors such as increasing internet penetration, the rise of the middle class, and the emergence of fintech companies providing digital payment options.
The Nigerian e-commerce market is expected to grow significantly, with projections indicating a market size of USD 13.34 billion by 2028, and a further increase to USD 22.9 billion by 2030.
The industry’s growth has been further accelerated by the COVID-19 pandemic, which led to a surge in online shopping and the expansion of logistics and delivery services to meet increased demand.
Looking ahead, the continued expansion of e-commerce in Nigeria will depend on improving digital infrastructure, government policies, and the reduction of adoption barriers to further increase consumer trust.
As the industry continues to evolve, businesses will need to innovate, offer unique value propositions, and enhance customer experiences to capture a loyal customer base and sustain growth.
Nigeria is poised at the forefront of the digital transformation in e-commerce, and the future holds exciting trends and innovations that will shape the industry’s continued growth and development.
