There is no Uber in Nigeria’s other cities apart from Lagos and Abuja, but this is about to change. Nigerian car-making company Innoson Vehicle Manufacturing (IVM) is starting a sweeping revolution, which may most likely configure the country’s tech startup landscape. The automobile company has announced it is piloting a digital car-hailing service in the south eastern city of Enugu, marking the first ever-presence of a digital car-hailing service in the city, and a second major effort in that region following competitor Bolt’s entry into a neighbouring city, Owerri, in 2018. Code-named IVM Connect, the service, available from the first week of October 2020, would initially maintain a fleet of 200 branded hatchback cars.
On a bigger note, part of IVM’s one-year plan after the pilot launch would be to roll out up to 5000 vehicles and expand to Owerri and other eastern states. If this happens, Nigeria’s major city, Lagos, home to Africa’s most valuable tech startup ecosystem, and often touted as solely representing most of Nigeria’s major efforts towards a knowledge-based economy would be in for a major competition.
Here Is How IVM Connect Will Work
- Although Innoson Vehicle says the project — by providing job opportunities for residents of the south eastern state — is part of the company’s major efforts towards its Corporate Social Responsibilities (CSR), it looks like it is aiming at two birds with a stone. The adoption rate of IVM motors in Nigeria is relatively low, and so it appears the company hopes to use its new car-hailing strategy to thrust its vehicles into the faces of Nigerians. But then, it would be inadvertently opening up a relatively large market for tech startups still afraid to test waters outside Lagos or outside Nigeria’s capital city Abuja.
- Innoson Motors is perhaps — or perhaps not — also abreast of the ongoing debacle in California where ride-hailing drivers — who are fed with up with the whole gig economy concept— are up in arms against companies like Uber and Lfyt. That is why the car maker would not be relying on gig workers, so-called and defined. Under a new model, IVM would be recruiting the drivers itself, through a consulting firm. To this effect, the company has created a web portal and applications are open to suitably qualified candidates, with the qualification criteria, among others, being possessing a minimum of Ordinary National Diploma (OND) certificate and demonstrating that you understand and speak tech. So much for the initial show off, but not until more ride-hailing competitors make their way into the market.
- IVM Connect’s model is therefore simple: a driver is recruited and given an IVM branded hatchback car, which he/she is expected to buy (on a hire purchase plan within two years) upon completion of payment. The new ride-hailing platform will not accept cash; and there is still some fog around its commission model.
- IVM says it is partnering with Nigeria’s Federal Road Safety Corps (FRSC) for the purpose of recruitment, training, and issuing necessary licenses to qualified drivers. The company has also indicated that relevant regulatory stakeholders have also been duly consulted to avoid clash(es) as has been the case, in recent times, in Lagos where bike-hailing companies were recently banned from operations after series of investments.
How Would This Configure Nigeria’s Tech Startup Landscape?
Before now, Lagos is synonymous with Nigeria whenever Nigeria’s tech startup ecosystem and the investments that come to it are mentioned. One of the reasons for this is the population density of the city, which is home to more than 20 million people. The city also holds about 15.2% of the country’s entire internet population (14,192,283 subscribers).
However, recent events, such as ban on bike-hailing startups who, backed by the state government, have invested heavily in the city; and introduction of new taxes for ride-hailing companies operating in the state, are building pent-up emotions among current industry players and may likely change the dynamics a few years from now. A glimpse into this future is already playing out with disgruntled startups locating away from the city.
Lagos’ neighboring state Ogun, with more than 5 million (6.3%) active internet subscribers as at Q3 2017 is the second state with the highest rate of internet penetration in Nigeria, and a strong contender after Lagos. This is followed by Oyo, FCT, Kano, Kaduna, Rivers, Edo, Delta, and Niger states, all 10 states accounting for more than 54.9% of the internet subscriber base in the country.
In the entire south east where IVM would be piloting its ride-hailing service — made of Abia, Anambra, Ebonyi, Enugu and Imo states — there are close to 15 million active internet subscribers, as at Q3 2019.
The figures are even more interesting when a combination of adjoining states, where the highest economic activities occur, is made. For instance, the south eastern state of Anambra which forms an urban conurbation with Delta, alone, has more than 5 million active internet users. The state of Delta, on its own, has more than 4 million internet subscribers. Therefore, this presents a big opportunity for tech startups, such as IVM, looking to scale their models. Most interesting also is when another neighbouring state such as Abia, with over 3 million internet subscribers, is added to the combination.
One major factor that may most likely function to retain a good number of tech startups in Lagos is the fact that, apart from an internet user base of more than 17 million people, at a GDP per capita of more than $7000, Lagos houses most of Nigeria’s easily disposable incomes. This factor becomes more compelling when the state is compared with other regions, such as the south-east, for example, where IVM wants to launch the pilot phase of its ride-hailing service.
Collectively, the region has an average GDP per capita of around $1300. This may not be entirely a disincentive to scaling, given that there are other countries with lower economic indexes but relatively buoyant startup ecosystems. For instance, Uganda’s capital city Kampala has an estimated GDP per capita of around $2000, and still houses some of the continent’s leading tech startups, like the recently acquired Beyonic; Safeboda etc.
Therefore, scaling to Nigeria’s other states is highly practicable, provided that the uncertainty of government policies, infrastructural deficit, security and scattered population density of those states (resulting in increase in cost-per-customer acquisition and which could translate to a hard time attaining profitability), are well taken care of.
Even these factors are not absent from current challenges plaguing the Lagos startup ecosystem. Apart from disruptive policy alterations, the state is still groaning under the heavy weight of traffic jams. A survey report by Planet Projects showed that, at least, 3 out of every 10 years spent in Lagos is lost to traffic — meaning that residents of Lagos, Nigeria’s economic capital, spend an average of 7 hours 20 minutes in traffic every day.
This is not getting any better any time soon as more and more vehicles — there are currently more than 5 million cars in Lagos, out of over 11 million vehicles in Nigeria — continue to line bumper-to-bumper across roads in the city.
One thing IVM’s latest move would definitely achieve is to test the waters, and normalise tech trends outside Lagos and Abuja. This could most possibly trigger innovations and investments in tech startups beyond both cities, and correspondingly configure the tech startup landscape in Nigeria.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer