E-commerce to drive growth of SMEs

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Tuesday, February 09, 2016 09:00 AM / FBNQuest Research

Internet subscription in Nigeria grew by 31% y/y to 97 million in September 2015. This represents a penetration of 57% using 170 million as the country’s population size. The surge in internet penetration has enhanced trade by spurring e-commerce transactions.

Over the past few years, the broadband sector has attracted sizeable investments, which have assisted in driving e-commerce platforms. According to a recent report on China by Boston Consulting Group (BCG), e-commerce is expected to play a major role in the development of China by accelerating the growth of shopping via smartphones and other mobile devices.

China’s consumption is expected to grow to US$6.5trn over the next five years from US$4.2trn recorded in 2015 according to the report and e-commerce to contribute as much as 42% of the total.

Nigerian online retail platforms such as Konga and Jumia have been seeking ways to incorporate small, medium and micro enterprises (SMEs) into their marketplace to drive business. In 2015 Jumia incorporated over 150% more SME retailers and doubled the number of products available on its online marketplace.

Given the enhanced focus on economic diversification, attention should be placed upon encouraging SMEs as they are seen as vital for the growth and innovation of dynamic economies.

In Ghana, SMEs provide about 85% of manufacturing jobs. Further, SMEs account for 70% of Ghana’s GDP. The figure for Nigeria in 2013 was 47% of GDP

By adopting e-commerce, SMEs stand to benefit from increased revenues and margins, improved market reach, access to new markets, and cost savings in marketing and communication expenditure.

In Q3 2015 the small and medium enterprises development agency of Nigeria (SMEDAN) and Globacom announced plans to partner on strategies to create e-commerce solutions that would enhance the efficiency of transacting business between SME operators and their customers.

There are still several roadblocks which slow expansion within the industry. Data security, logistics issues mainly due to poor road infrastructure, high costs of sustaining internet subscriptions and customer preferences for cash payment on delivery are a few of the major culprits.

Harnessing the economic potential of this segment requires supporting policies to address a pattern of poor policy implementation. The Buhari-led administration has indicated that development of SMEs will be one of its priorities.

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