Online activity is on the rise in Nigeria, with internet subscriber numbers growing and digital transactions increasing, though uptake risks being slowed by gaps in infrastructure.
There has been a strong increase in mobile internet subscriptions this year, with user numbers up by 13.6% in the first half of 2015, according to a report issued by the Nigerian Communication Commission (NCC) at the end of August.
This brought the number of mobile internet users to 92.6m, the NCC report said. Market leader MTN added 1.3m clients to its roster, for a total of 40.4m subscribers, while the three other GSM operators – Etisalat, Airtel and Globacom – all posted double-digit subscriber growth over the period, adding a combined 9.5m users. Etisalat’s total subscriber count rose to 15.2m, while Airtel and Globacom reached 17.5m and 19.3m, respectively.
Higher dependence on mobile technology for accessing the internet has also generated a surge in smartphone sales. According to Juliet Ehimuan-Chiazor, Nigeria country manager of Google, internet-enabled devices accounted for 35% of the 19m phones sold in Nigeria last year, double the number sold in 2013.
As more Nigerians come online, the government has begun looking for ways to tap the ICT sector and extend its benefits more broadly across the economy.
In mid-August President Muhammadu Buhari issued a directive to the Ministry of Communications Technology to sharpen its focus on harnessing ICT’s revenue-generating potential.
Falling oil income has heightened the need for Nigeria to maximise the earnings capacity of other sectors, he said, and a streamlining of approval processes for new developments would help the country in the rapid deployment of new projects.
The ministry has already announced plans to offer IT services through the country’s network of post offices – estimated at more than 3000 branches – in a move that should provide rural communities in particular with greater access to the internet and boost the volume of electronic financial transactions.
The plan is in line with a policy announced in 2014 to increase financial inclusion across the country, especially in rural regions. Whereas bank branches remain heavily concentrated in urban areas, the Nigerian postal network is more evenly dispersed throughout the country. According to local media, more than 60% of Nigerians live or work within 15 minutes of a post office, compared to around 30% of Nigerians in similar proximity to a bank.
The push towards greater financial inclusion is receiving added impetus from the staged roll out of a digital national identity card, which saw the first residents receive their IDs in late August. The smart card, which will be issued to all Nigerians aged 16 or older, will have biometric identification as well as a smart chip-based payment application. Cardholders will be able to use the ID for social benefits and savings, as well as electronic payments.
Greater financial inclusion and internet access could provide an already strong e-commerce sector with an added lift. The use of ICT in trade and retailing activity continues to rise in Nigeria, with technology platforms now widely accepted as a means of doing business.
According to a February study conducted by Ipsos on behalf of Paypal, 89% of Nigerian internet users shop online or are expected to do so. This puts Nigeria’s e-commerce client base above that of South Africa or Kenya, which stand at 70% and 60%, respectively.
E-commerce adoption in Nigeria has risen rapidly in recent years, according to Raphael Afaedor, co-founder and CEO of online retailer Supermart.ng. Speaking to local media in August, Afaedor said Nigeria’s e-commerce market – which also includes major online outlets such as Jumia and Konga – was the largest on the continent.
According to a recent Ministry of Communication Technology report, e-commerce is now worth around $550m per annum, compared to $35m in 2012, he said. “With an estimated growth rate of 25% yearly, there is a projection of about $10bn potential if it is well harnessed,” Afaedor told local media.
The number of online transactions rose sharply over the same period, from an average of 5000 per day to 40,000 by the end of last year. E-commerce activity is expected to accelerate further despite the general slowing of the Nigerian economy, with online sales revenue projected to reach NGN139bn ($698.5m) this year, according to Afaedor.
While the segment’s y-o-y gains are significant, e-commerce’s share of the country’s $100bn in annual wholesale and retail turnover remains relatively small, and further uptake could be limited by infrastructure gaps and high costs.
Disruptions to power supply and uneven geographic coverage have the potential to limit ICT’s contribution to the economy, particularly given the high cost of last-mile connectivity.
According to Omobola Johnson, minister of communications technology, some $25bn worth of investment will be needed in the next five to 10 years to build the necessary infrastructure for fast, nationwide internet coverage.
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