Linda Ikeji Social, Efritin, OPay, Jumia: Why are Nigeria's tech and ecommerce products failing?

November 1, 2016. Like a gust of fresh ember breeze, LIB CEO and Nigeria’s most influential blogger, Linda Ikeji, launched a whole social network—Linda Ikeji Social. Yup, you guessed right, like Facebook.

Sporting a signup/login page suspiciously identical to Facebook’s, LIS seemed to have the ultimate edge to lock the fleeting attention of the Nigerian social media user: monetized participation. It was big, audacious, and started with a bang. Then with barely a whimper, it faded away.

From having 50,000 new users in a single day to no longer having control of its domain name, LIS is perhaps the most startling ‘hype to hush’ story on Nigerian tech.

In an interview with Business Insider by Pulse, Linda blamed the failure on a “mediocre” engineering team. She learnt her lessons and made sure the right decisions regarding personnel and product were taken in subsequent projects (LITV being a notable example). Yet one can’t help but feel that a crucial ingredient of that sour soup was overlooked: inexperience.

But LIS is just a spot in a large cemetery hosting the bones of Nigerian tech companies. Before coronavirus stole all significant headlines, it was official: bike-hailing start-ups were dead and cremated.

June 2017.  Offering significant commercial traffic disruption, Max NG debuted in Lagos. It introduced motorcycles 200cc and above to circumvent Lagos State’s ban on okada, offering lease-to-own arrangements with drivers who could not afford their own motorcycles. Great news: a bike-hailing industry had just kicked off on the back of tech.

A year and two years later, Gokada and Opay joined respectively. The race, it seemed, was on. With improving services/software, aggressive marketing, and regular discounts on rides (especially from Opay’s Oride), it appeared that the transportation industry had been successfully disrupted. It also seemed that investor funds could not stop pouring in. At $9 million and $5.4 million respectively, Gokada and Max NG seemed underfunded in a fresh industry bursting with promise, if not hype. In fact, the former’s CEO Fahim Saleh outlined ambitious plans to expand into a driver-centred ecosystem—to feature motorcycle insurance, maintenance, personal life insurance, and micro-finance loans.

Enter Oride by Opay, flying—or rather hailing—at a higher level. It offered staggering incentives and bonuses if riders switched sides: having raised $50 million in funding in July 2019, Oride seemed quite the moneybag hurtling down, like Alusi, to disrupt the disrupters.  It was certainly a great time to be alive.

Except that it wasn’t. 

In no time, perhaps sighting insane dollar figures flying all over the place, the LASG was proposing a N25 million annual licensing fee for operators. Then came an additional N30,000 fee proposed per motorcycle. By this intended regulation, the Lagos State Government seemed to be sending a message: “Eye wey see go chop.”

After a few problems with road transport unions, the start-ups reportedly agreed to a deal with NURTW and RTEAN—facilitated by LASG: every rider would purchase a daily ticket of N500 to stem harassment and extortion by state and local revenue collectors. That was cool, it seemed. 

Just that by January 2020, LASG announced that in a month it would start  implementing motorcycle bans in six local governments, and later expand to include all of Lagos. Despite attempts by operators to rebrand as delivery services, the bike-hailing industry in Nigeria was effectively done, shattering also the services that used them to penetrate markets.

Ready, light, cremate.

One wonders: did these tech entrepreneurs, from start, not factor in past and future state policy on motorcycles?

If you look across the corridor towards Nigeria’s ecommerce, the story isn’t much different, albeit for different reasons.

Founded in 2012 and raising $823.7 million in funding over five rounds, “Africa’s first unicorn”, Jumia, seemed a potential future rival to Amazon and Alibaba—in terms of possible customer base at least. The ecommerce start-up had gone public April 12, 2019, listing at $14.50 per share and cementing its unicorn status with a $1.1 billion valuation. Four days later, its stock prices peaked at $49.77, earning an African start-up record valuation of $3.8 billion.  

Jumia's purple patch wasn’t destined to last, however. In what has been described as one of the most spectacular declines of African start-ups, its share price plummeted to $5.53 in August of the same year, going on to hit a $2.33 low in March 2020. Currently it manages to stay just below the $5 mark. 

Dogged by accusations of internal fraud and concealed losses—it racked up almost $1 billion in losses from its inception to 2019—Jumia has shut its doors in 3 of its 14 African markets: Rwanda, Cameroon, and Tanzania. Earlier, its original owner, Rocket Internet, had dumped its entire 11% share. “It’s practically impossible to work,” said Olumide Olusanya, a Lagos competitor noting that the eventual collapse is only a matter of time. The story is the same for some other tech/ecommerce start-ups around. 

Founded in 2012 by Sim Shagaya and raising $3.5 million in seed funding, Konga seemed destined to rule as one of Nigeria’s biggest tech giants. In 2015, it was ranked Nigeria’s most visited site. In April of the same year, it raised an additional $41 million in Series C funding. Few would predict Konga not continuing for the next decade at least. 

Unfortunately, fairy tale beginnings coming to premature conclusions seem to have become a staple of ecommerce/tech start-ups in Nigeria. Konga slashed workforce by 10% and 60% in 2016 and 2017 respectively, yet struggled with the Nigerian market despite attracting $79.5 million over four funding rounds. It was eventually acquired by the Zinox Group, the parent company of Yudala, which decided to continue with the Konga brand and restructure operations. In April of 2018, Zinox dissolved Yudala into Konga in order to combine online store presence and offline distribution centres and stores. Perhaps it will break the jinx and become one of Africa’s largest ecommerce platforms. 

Yet the sour tale isn’t over.

Established in 2011, 2015, and 2012 respectively, Deal Dey, Efritin.com, and OLX have their fossils in the Nigerian ecommerce cemetery. They all failed in less than a decade—only OLX was salvaged by a Jiji acquisition. 

While some of these firms doing one-minute challenge were mismanaged, others crashed when impatient investors pulled out. Efritin, among others, was buried in allegations of embezzlement. Whether it is a tech or ecommerce start-up, Nigeria has become one huge investment black-hole.

Beyond the cited reasons are perhaps more. “The digital marketplace in Africa is smaller than most start-ups project,” Chukwunwike Nweke, a tech enthusiast tells Nigeria Abroad. Indeed in America and other western countries, the tech market runs on a culture of strong digital penetration and solid funding. If that is the case, are tech entrepreneurs overstating facts—pointing at dubious graphs and PowerPoint profit utopias to mislead investors?

“They promised heaven and earth,” Linda Ikeji had said of the LIS engineers. That is something, like the kite is in the hype. Which leads to the conclusion: either the statistics are lying, or men are lying behind them.

An imaginary comedian, Kizito is also a software developer and occasional knowledge enthusiast.