Nigeria’s e-commerce sector’s growth has been undermined by inadequate digital financial services (DFS), according to a study by the nation’s telecoms watchdog, Nigerian Communications Commission (NCC).
The growth of e-commerce as well as digital businesses in Nigeria have hindered by the current limitations in the DFS ecosystem, authors of the NCC report.
The report underscores the significant opportunity to enhance the digital financial system (DFS), which could spur broader digital transformation and boost overall business competitiveness. By strengthening digital financial services, the report authors note, Nigeria could better leverage its market potential and support the integration of digital entrepreneurs with related financial services.
According to the report, “Without a sustainable DFS ecosystem, e-commerce and digital businesses in Nigeria will not be able to grow. Despite the role of small business and entrepreneurship in the economy, digital financial services in Nigeria are currently inadequate for some segments of the population, the most excluded being predominantly women and young people, and those living in rural areas. According to the World Bank FINDEX survey 2021, only 34 per cent of adults in Nigeria used digital payments in the last 12 months (compared in78% in Kenya and 66% in Ghana).”
According to the report, “Without a sustainable DFS ecosystem, e-commerce and digital businesses in Nigeria will not be able to grow. Despite the role of small business and entrepreneurship in the economy, digital financial services in Nigeria are currently inadequate for some segments of the population, the most excluded being predominantly women and young people, and those living in rural areas. According to the World Bank FINDEX survey 2021, only 34 per cent of adults in Nigeria used digital payments in the last 12 months (compared in78% in Kenya and 66% in Ghana).”
Mobile money, a critical driver of DFS across sub-Saharan Africa, has seen low penetration in Nigeria. Only 6% of adults in the country have a mobile money account, compared to 69% in Kenya and 60% in Rwanda. This low adoption rate is a major factor in the limited penetration of digital financial services, the reports says.
The report also emphasizes the importance of e-government initiatives in addressing broader challenges. Nigeria’s e-government efforts are crucial for combating corruption and enhancing service delivery to citizens. The country ranks 140th out of 196 on the UN e-government development index but shows improvement in the UN e-participation index, where it ranked 117th out of 193 in 2022.
The report also reveals that recent advancements include the launch of a central portal for government services (www.services.gov.ng) and the digitisation of taxation through the Integrated Tax Administration System (ITAS). Additionally, several states have introduced electronic management information systems (eMIS) for education and telemedicine pilots in the health sector, although challenges remain in capacity building and awareness.
In the realm of e-commerce, Nigeria has demonstrated strength with its private sector driving growth. The UNCTAD business-to-consumer e-commerce index for 2020 ranked Nigeria 94th globally and among the top in Africa. The report also highlights the potential of digital entrepreneurship, with Lagos emerging as a dynamic ecosystem for startups, although there is a need for broader access to digital infrastructure and services.
The report concludes that Nigeria’s innovation landscape, while showing promise, requires further development. The country ranks 114th out of 132 in the global innovation index, with room for improvement in market sophistication and overall support for investment and competition.
Nigeria’s cloud services sector is evolving, according to the report, with four enterprise-grade data centers offering various services. The government, through NITDA, is promoting local hosting and the use of the .gov.ng domain to protect data, signaling a need for increased investment in this area.
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