The current foreign exchange crisis rocking the Nigerian economy has hit the nascent e-commerce sector as the sector’s major foreign investors have begun to pull back. Vanguard investigation has revealed that some of the big players in the industry such as the Africa Internet Group and Konga.com have begun to implement massive restructuring in order to stay afloat and remain in business.
Sources close to AIG said most of its subsidiary companies like online retailer, Jumia.com, online marketplace, Kaymu.com, online hotels booking, Jovago.com, online real estate marketplace, Lamudi.com and online vehicle marketplace, Carmudi.com have all implemented a massive restructuring exercise that saw them cutting their workforce by more than 50 per cent.
The source also disclosed that the Group’s taxi hailing application, EasyTaxi is considering shutting down as only two members of staff are left at the moment to maintain skeletal operations of the service pending final decision on its future. Recall that the industry began to feel the meltdown from October last year when companies like Jumia and iROKO implemented massive job cuts that saw over 300 jobs lost in the industry within the period. Also by January this year, Nigeria’s online marketplace, Konga.com bowed to the prevailing economic situation by disengaging about 10 per cent of its workforce citing a need to restructure in respect to prevailing economic situation.
In a statement, Konga had said: “With this restructuring and by taking advantage of new innovations and upcoming retail opportunities in the market space, we are optimistic that we are on the path to grow an even healthier and more sustainable business, whilst delivering best in class service to our customers.
The decision to restructure and realign our company’s focus to be more agile in the prevailing local economic conditions is not one that was taken lightly.” Recall that both AIG and Konga have huge foreign investments from Rocket Internet and Naspers respectively. People familiar with the matter said these investors have become sceptical of Nigeria’s investment landscape and have become reluctant to continue to provide additional funds for these firms. Operators and industry analysts alike believe that the lull in the sector has been precipitated by the uncertainly resulting from the unstable exchange rate including steady decline in disposable income in the economy.
Mark Essien whose Hotels.ng raised $1.2 million in 2015 said it is difficult not to expect the forex crisis not to have huge implications for the sector especially with its dependence on dollardenominated investments. He said: “For companies like ours that raise money from foreign investments, the direct impact of an unstable exchange rate is that we cannot properly predict how much money in foreign currency we will be able to generate to repay our investors. That makes the investment more uncertain. The internal market however, particularly in hospitality has remained relatively stable.” He added that, (the state of the local currency) “does diminish the willingness of foreign investors to invest as they are not sure what will happen with such companies. In particular, the companies that earn money locally will have their growth slowed down when observed from an external perspective (when they declare their revenue in USD). However, he still thinks that this period remains the best to invest in the sector because “Costs are cheap because of the weaker currency. We can hire and pay a lot less than before.
So the dollar stretches really far.” Also speaking, Osamede Evbkhavbokun who is the Director of Nigeria’s pioneer online marketplace, Gidimall Nigeria however believes that “Nothing will happen to e-commerce firms that have received foreign investments because as you can see, for those who still have their funds in foreign exchange, they have better advantage at this point in time. Where they may have some challenge is in the area of repatriating earnings which I do not think any e-commerce firm is doing at the moment. As at today, the dollar has fallen significantly to less than N230/$ and things are gradually beginning to ease up.” He however added that there is a strong need more than ever before for investors to look inwards and embrace made in Nigeria products and by extension e-commerce. “We hope to see industry players like MainOne take on the challenge of providing scalable hosting services for this growing sector. As a matter of fact, there has been a massive upsurge in the growth of .ng domains which strengthens the argument that we are ready to look inwards in other to patronize our own. That way, we will no longer be under immense pressure looking for foreign exchange in other to meet our obligations as well as grow our industries,”
CREDIT: VANGUARD NEWSPAPER, NIGERIA