It is a very beautiful vision and one we must commend and support: “The Federal Government has said that it is targeting an increase in e-commerce trading, from the current market value of $13bn to about $75bn by 2025. The Permanent Secretary, Ministry of Industry, Trade and Investment, Dr Evelyn Ngige, who disclosed this on Tuesday in Abuja at the second National E-commerce Roundtable organised by the ministry noted that e-commerce had grown from 14 percent in 2019 to 17 percent in 2020.”
This is how great things happen provided we can walk the talk. The future of markets in Nigeria would be digital because the transition from meatspace to the digital space will continue for decades. Yes, Nigeria has decades-long opportunities to redesign its industries and commerce is a big component.
Yet, if Nigeria wants to make this $75 billion ecommerce business come to pass, it has to do two things: fix postal service (PPP or joint venture with private sector) and stimulate ecommerce spending.
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In the United States, they used the initial sales tax waiver collection to make things online cheaper. In other words, because the old Amazon was not required to collect local sales tax, things in Amazon were cheaper than your neighbourhood store.
If you spend $1000 on Amazon, you do not have to pay an extra $80 sales tax unlike in your local store which is required to collect it. And with free shipping, many would wait for the extra two days it would take Amazon to ship the items, to save that $80. So over time, ecommerce became a destination for shopping. American policy seeded that redesign.
The second part is that without a good postal service, there is nothing like a dynamic ecommerce sector at the consumer level (B2B ecommerce is flourishing). The marginal cost of an ecommerce business is captured by transaction and distribution costs. The distribution cost is physical (yes, you have to actually move the item from the warehouse to the buyer) and the internet will not solve that cost element. So, without a postal service in Nigeria, we cannot have a dynamic ecommerce since participants would be required to build huge logistical systems. Not many have that resource. So, Nigeria needs to get the postal service working for us to touch that $75 billion.
Doable? Yes if we focus on some pillars and anchors. In short, $75 billion is very small. The total consumer spending in Nigeria is close to $350 billion yearly; we have rooms to digitize.
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No, it’s not doable, certainly not $75 billion in four years. A sector that grew only by 3% from 2019 to 2020, and then a permanent secretary that obviously never understood the historical account she gave, felt that the same sector can now grow by more than 300% in four years? She never told us where her inspiration was coming from. This is how we advertise ignorance here.
What is the volume of the entire digital transaction in 2020, have we even breached $20 billion mark? But magically, only ecommerce would command $75 billion in four years, just because we hear that total value of commerce is around $350 billion!
This lack of tact that makes us to think that once we make proclamations and declarations, that we are actually making sense, needs to vanquished.
If we hit $30 billion by 2025, that will be a great accomplishment, because even if you invest in the infrastructures needed to power ecommerce at scale, you cannot still build them within three years. Let’s dream responsibly here.
“Dream Responsibly” – lol!