Cybercrime threatens Nigeria’s $10bn electronic commerce industry

Lingering distrust amongst Nigerians to perform online shopping due to fear of electronic fraud, still remains one of the fundamental obstacle hindering the swift development of electronic commerce in the country, market observers have said. Omobola Johnson, minister of communications technology, earlier disclosed that the country’s e-commerce market had a potential value of $10 billion with about 300,000 online orders currently being made on daily basis. Speaking with BusinessDay in Lagos, recently, Olumide Olusanya, chief executive officer, Gloo.ng, Nigeria’s online grocery store, said the potential of the industry remains largely untapped. Though e-commerce firms have changed tactics in recent times by encouraging Cash on Delievery (CoD) payments to bridge the lack of confidence in the system, Olusanya said that this option still poses some level of risk to the industry’s growth and viability.

Market observers are of the view that fear of online fraud further cascades into the financial services industry as many banks currently clogg their payment channels with a myraid of security layers and processes in order to forstall cyber attacks, which is simply not convenient for Nigerians online buyers. “Abroad, online shopping is a one-click process. In Nigeria, before you can conduct an online transaction, you have to provide your card number, TVC 2, card expiry date, PIN. After that, you are asked to supply a one-time authentication code. It is just too cumbersome for a customer to consummate an online transaction”, said Olusanya, in an interview with BusinessDay.

According to the Gloo.ng CEO, payment systems are yet to pecolate down to the masses. “Mobile money is not as ubiquitous as it is in Kenya with MPESA. “Debit and credit cards are still tied to bank accounts”, he further added.

The entry of PayPal, US-based online payment process, into Nigeria, was expected to provide seamless payment experience, but PayPal account holders can only pay for goods and services abroad. Raphael Afaedor, co-founder of Jumia Nigeria, pointed out that CoD payments is playing a massive role in addressing the issue of trust. “Once the selected items get to the customer and they confirm its authenticity and the warranty of the goods they can hand the cash over to the delivery man. Once a customer orders once or twice and have built trust, he/she can then move to the next level of paying online with credit cards,” he further explained. According to a recent survey, the local online shopping sector grew from N49.9 to N62.4 billion between 2010 and 2011, and from N62.4 to N78 billion between 2011and 2012 representing a 25 percent increase in each period, says Phillips Consulting.

According to the World Bank, the country’s middle class has risen by 28 percent while its GDP based on purchasing power has increased by 21.67 percent in the last four years. The rise in consumer spending, as well as the expansion of broadband service, has boosted the growth of Internet-enabled businesses in the country. The value of Nigeria’s online payment has risen exponentially in the last few years. Online payments grew from $314 million in 2010 to $488 million in 2012, according to Nigerian Inter-Bank Settlement System (NIBSS). Industry analysts told BusinessDay, that the cash-lite policy of the Central Bank of Nigeria (CBN), aimed at encouraging electronic transactions, which started with Lagos in 2012, is already acting as a tributary stream for growing e-payments channels. The ministry of communications technology has expressed high hopes of further growth.

Ben Uzor