Moonshot by TechCabal is the conference that will bring together Africa’s tech ecosystem in person to network, collaborate, share insights and celebrate innovation. Join us in Lagos on October 11 and 12. In this article built around the conference, Hannatu Asheolge writes about what it would take to transform the last-mile delivery space in Nigeria to ensure that it reaches its full potential.
Hylehirra Samaila is an entrepreneur selling clothes and shoes on social media since 2021 via HeraCloset. Of all the parts of running a business, dealing with logistics is the most challenging and distressing for her, despite being an integral part of her business. Having products delivered to customers can be a hassle, as delivery riders are typically unreliable, delivering goods much later than planned and riling up her clients in the process.
Nigeria has one of the fastest-growing last-mile logistics industries in Africa, driven by a combination of factors like the growing youth population and increasing internet penetration—among others. There is a rising demand for consumer goods and services across the country and revenue in Nigeria’s e-commerce scene is expected to reach $9.2 billion by the end of 2023. These goods must be moved across various points, necessitating last-mile deliveries.
Due to the industry’s success, there has been an influx of last-mile logistics startups in recent years. However, these startups suffer from a variety of challenges which impede the growth of the sector, ranging from infrastructure deficits to policies that undermine the ease of doing business, low trust among customers, and high operational costs.
The problems of last-mile delivery in Nigeria
Nigeria has a terrible road network, the worst in Africa, which is one of the biggest problems plaguing last-mile delivery in the country. According to Ope Onaboye, CEO of e-commerce fulfilment startup, Renda, their Kenyan customers can order goods and have them delivered in 15 minutes due to their advanced road network.
This is rare in Nigeria, especially in major cities like Lagos, which is one of the most congested in the world. Commuters spend a minimum of three hours in traffic daily, and for a logistics business, this translates to less productivity and increased operational costs. Traffic congestion and a bad road network have remained the biggest pain points in logistics management, because, beyond increasing operational costs, they nullify delivery estimates and predictions, breaking the system flow of deliveries and leading to dissatisfied customers.
Samaila has had several cases where she’s had to refund angry customers for deliveries not making it out on time, which affects her business’s growth and incurs losses for her.
“Sometimes you send out orders as early as 9 a.m., promising the customers that they’ll receive it in two or three hours, only for their deliveries to be stuck in traffic for up to seven hours,” she lamented.
In May 2023, the Nigerian government removed a fuel subsidy
“If we’re being realistic, you can’t just move from charging customers ₦2,000 for delivery to ₦6,000. You have to find a middle ground that your customers can afford, which means that you’ll be operating on a deficit in the cost versus your revenue because you cannot transfer the cost of logistics to your customers after a certain point,” Onaboye shared with TechCabal on a call.
Business owners like Samaila have had to find ways to cut costs for customers, which she says is exhausting. Delivery has moved from what typically costs ₦2,000 to ₦3,000 or ₦3,500. Fortunately for Samaila, her customers have been understanding of the situation and do their best to cooperate, for the most part.
Onaboye cannot say the same for his company. Some of Renda’s clients have not been as understanding, and the fuel price hike has reduced the volume of orders they process.
“We have to continuously engage with stakeholders, which is not easy, as some of them have turned their backs on us. The fuel price hike has hit us in terms of volume, but we have to keep ensuring that our customers feel supported and our partners are happy. We have these conversations every single day,” Onaboye shared.
Transforming last-mile delivery in Nigeria
The Nigerian logistics market size is expected to reach $58.6 billion by 2029, with road deliveries being the fastest-growing segment. This growth cannot be actualised in isolation without the government playing a role. Recent government policies have resulted in the shutdown of a good number of last-mile delivery startups and, if it continues, will only impede the industry’s growth.
Logistics is pretty much transportation, which is using vehicles to move goods, and so the environment that allows for smooth transportation needs to be there. Good roads and road networks not only improve delivery times but reduce the maintenance costs of vehicles. The more dilapidated the roads are, the easier it is for vehicles to get damaged and require fixing.
Kana Fanda, who runs a small last-mile delivery business, says she’s lost track of how many times she changed tyres for her bikes last year.
“You can’t even blame the riders because the bumps and potholes on the roads are very bad. There are times when the entire revenue made goes into fixing a bike due to a road accident, which is very bad for business.”
Now, her bikes only deliver parcels to areas where they’re certain the roads are smoother. While she has had to give up a large number of her customers, thereby slowing the growth of her business, she believes that that is better than spending the bulk of her revenue fixing bikes.
Government has another important role to play in transforming last-mile delivery, apart from fixing roads. According to Onaboye, the government needs to be deliberate about the policies that are implemented and how they affect businesses.
“The government has to be sure that the policies it’s pushing out support businesses rather than kill them. We have a lot of last-mile delivery companies in Nigeria, but the environment is stifling them, rather than enabling them to thrive. Government policies need to be more friendly to businesses operating in the transportation sector,” he said.
Did you enjoy this article? Then click this link to register for Moonshot and check out our fast-growing list of speakers coming to the conference!