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E-commerce attracts N8.25bn foreign investments

By on March 28, 2014

Following the boom in online and e-commerce transactions in Nigeria, the sector is attracting a significant foreign investments as two of the leading players in the sector, Jumia and Konga  received $50 million (N8.25 billion) investments in the last one year.

The sector has witnessed a phenomenal growth in the last one year. Data from the official Nigerian Inter-Bank Settlements System (NIBSS) showed an increase in online payments from $314 million equivalent in 2010 to $488 million in 2012, and a projected rise to $630 million in 2013.

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 Konga, its principal competitor, have secured funding from Swedish and South African sources.

Analysts at FBN Capital 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.”

The analysts stressed that Nigeria, being a frontier market still has issues such as postal system, grossly inadequate road network and the poor quality of service outside the main urban areas to address.

They said: “Anecdotally, there have been suggestions that some consumers like to order online but prefer to pay cash on delivery of the merchandise. They may well be driven by the fear of fraud. We have to see the growth of e-commerce in the context of the CBN’s cash-lite agenda and the FGN’s national broadband policy 2013-2018, according to which 80 per cent of the population is to enjoy mobile broadband access and 20 per cent fixed line access.

“This is work in progress and Nigeria is several years behind East Africa, for example. Given the favourable consumption trends and demographics, however, we expect very strong growth in e-commerce ahead.”

 

[This Day]