Digital Trade Dialogues: Spotlighting Nigeria
 
eTrade Alliance Nigeria Policy Dialogue

By Erica Vambell, Chelsea Hamati, Matt Rapkin, Brian Ream, Kati Suominen

The eTrade Alliance has a robust workstream to conceptualize and promote policy solutions conducive to MSME ecommerce. On June 30th, 2021, the Alliance hosted a virtual Digital Trade Dialogue with Nigerian policy makers and private sector leaders, focused on promoting Nigerian micro, small, and medium-sized enterprises’ (MSMEs) use of cross-border ecommerce. The event was co-hosted by the American Business Council, Ringier One Africa Media (ROAM), and its Jobberman platform, which are working in the Alliance on a large-scale workforce digital skills and ecommerce readiness assessment project in Nigeria.

 

The timing was fitting: COVID-19 has been a huge challenge to MSMEs in Nigeria. According to the April 2021 Global State of Small Business Report by Facebook, 51% of Nigerian MSMEs have cut employment since the start of the crisis, and 27% of Nigerian MSMEs remained closed as of February 2021. At the same time, this past year has highlighted the potential for digitization and ecommerce to accelerate MSMEs’ recovery and growth.

 

The Alliance looked to support through this event the engagement of Nigerian MSMEs, especially women-led and rural MSMEs, in domestic and cross-border ecommerce, with discussions on:

 

  • Challenges to Nigerian MSMEs to use ecommerce and cross-border ecommerce;

 

  • Policy and technology solutions to these challenges; and

 

  • Pilot program ideas and policy initiatives to operationalize solutions to promote MSME ecommerce and recovery, including through the eTrade Alliance’s work, at local and national levels.

 

A new Alliance policy report and roadmap for African countries to support MSME ecommerce was shared among the participants.

 

The event was opened by keynote addresses from two Ministers, H.E. Niyi Adebayo, Minister of Industry, Trade, and Investment, and H.E. Isa Ali Pantami, Minister of Communications and Digital Economy, who stressed the significance of MSMEs and ecommerce for increased productivity, employment generation, and wealth creation in the Nigerian economy; the government’s commitment to providing an enabling environment for MSME and ecommerce growth; and growing enthusiasm of many stakeholders to provide solutions to challenges facing MSMEs in selling online.

 

Colin Dreizen, Director of USAID’s Office of Economic Growth and Environment in Nigeria, Margaret Olele, CEO of the American Business Council, and Clemens Weitz, CEO of ROAM also offered opening remarks. Alliance Technical Director, Nextrade Founder and CEO Kati Suominen, introduced the eTrade Alliance and provided diagnostics on Nigerian MSMEs’ use of ecommerce and Nigeria’s adoption of policies conducive to MSME ecommerce. Massimiliano Spalazzi, Jumia’s CEO, provided an overview of the ecommerce landscape in Nigeria.

 

The subsequent four panels of experts offered rich perspectives on timely ecommerce topics:

 

 

The panel agreed that despite innovations in payment technologies for cross-border ecommerce, policy reforms and training of MSMEs are essential to ensuring these technologies are accessible and utilized, especially considering there are some 38 million people without access to the formal financial system. Additionally, women’s financial inclusion is still limited, with only 45 percent of women accessing formal financial services, compared to 56 percent of men.

 

The panel's diagnostic on some of the leading barriers for Nigerian MSMEs to access secure, fast-distributing working capital included 1) lack of basic education on ecommerce logistics; 2) facilitating payments through social media; and 3) high settlement costs.

 

Panelists weighed in on solutions to address some of these constraints, including the development of a curriculum for onboarding MSMEs on marketplaces and logistics services; a digital currency to reduce fraud and accelerate payments; availability of easy access to data on customers and transactions; and a standardized QR code that would allow MSMEs to transact with ease and access working capital. More broadly, QR codes could have a significant impact on financial inclusion by increasing the penetration of digital payments across small merchants with solutions built using a Unified Payment Interface. Once QR code payment acceptance becomes more widely available, it will be easier for consumers to use the money they store on their mobile accounts.

 

Finally, the developments around the newly established Pan-African Payments and Settlement System (PAPSS) should significantly facilitate cross-border settlement and reduce costs. The panel noted that though many of the country’s MSMEs remain excluded from the formal financial system, the Central Bank of Nigeria’s strategies align well with the observed challenges.

 

  • Ecommerce logistics, last-mile delivery, and trade facilitation, including through open APIs, blockchain, and digital addresses, with the following panelists: Jason Blackman, Senior Director, Customs, Trade Compliance and Regulatory Affairs at DHL Express, Jacqueline Rajuai, Geo Program Manager at Google Plus Codes, Romain Poirot-Lellig, Founder & CEO of Africa Delivery Technologies and Kwik, Oluremi Martins, Founder & CEO of Natural Girl Wigs, Teniola Tayo-Olugbode, CEO of Tamak Logistics; moderated by Amgad Shehata, Senior Vice President, International Public Affairs and Strategy at UPS.

 

Panelists focused on the key challenges of ecommerce logistics for MSMEs, including last-mile delivery which is in particular constrained by challenges with payments infrastructure, government regulations on logistics licensing requirements and payment transfers, and providers' challenges in dealing with the variability of demand. The panelists also discussed constraints MSMEs face in shipping and ordering goods, including high costs and operational inefficiencies associated with cross-border deliveries and managing returns, especially in overseas locations. Representatives from logistics companies also shared potential solutions to enabling ease of use, ranging from using Google Plus Codes as a digital addressing solution in areas where addresses are not available, to digitizing logistics payments.

 

The panel agreed that Nigeria has some unique logistics ecosystem challenges but ones that can be solved with the right policies and incentives, in three areas:

 

First, the panel agreed that Nigeria has great potential to be an ecommerce hub, but is restricted by domestic demand for ecommerce services due to internet and mobile data limitations (there are very few options to purchase unlimited data plans). Better access to data could incentivize innovative logistics companies to enter and operate in the country to serve MSMEs.

 

Second, access to digital payments is a challenge for logistics providers that do not accept “cash on delivery”. Much of Nigeria is unbanked, and about 70% of smaller daily purchases are made cash on delivery. Thus more digitized service providers can accommodate a limited share of demand. While fintechs are beginning to emerge in the market to fill this gap, the banking sector is wary of their entry as they risk losing market share.

 

Third, fragmentation of logistics services, customs duties on inbound ecommerce, and compliance costs and municipal taxes raise costs to delivery companies – which are compelled to pass the costs on to MSMEs. There are opportunities to lower logistics costs for example through sustainable packaging and resized shipments, cargo consolidation, and strategic partnerships with industry stakeholders.

 

Finally, the panel discussed how government and ecosystem players can train MSMEs to navigate and save money on cross-border logistics.

 

 

The panel discussed the variety of capacity building programs available in Nigeria to help fill the gaps that exist in digital and technology skills, with examples from private sector companies such as Visa, Google and Microsoft, international organizations such as the UN, non-profits like the Women’s Technology Empowerment Centre (WTEC), and government programs through the Nigerian Export Promotion Council.

 

A strong theme and consensus in this panel was that capacity building should be targeted to the real needs of the businesses. For example, training should include not only digital skills but also business skills, such as how to manage finances, build a business plan, and prepare a Profit & Loss statement. A WTEC program that had surveyed women learned that the women were not interested in becoming “the next Bill Gates.” Rather, programs need to meet women-led firms where they are and find out what interests them and what needs they have. It is for example useful for women to learn the fundamentals of doing business and then layer digital skills on top. Training should also take into account the different sectors that companies are in when trying to sell online, and especially in exporting, for example helping companies learn about the certificates they may need whether exporting fashion or food.

 

eCommerce Institute discussed best practices and ideas from successful ecommerce capacity building programs in Latin America, many of which echoed the discussion on programs in Nigeria, including: organizing events and “eCommerce Days” to build up the local ecommerce ecosystem, offering trainings and mentoring based on firms' differing levels of e-readiness and sectors, measuring ecommerce development and trends, and going beyond teaching to assist with practical implementation of new skills through toolkits and resources.

 

The panel recommended that business skills development is added into the education curriculum and that affordable digital skills and tools are made more broadly available. The panel also was very enthusiastic about the potential of partnership and collaboration at the grassroots level, to ensure the right training and help is given to the right businesses and entrepreneurs. A specific idea was to create a directory of all the ongoing training programs being led by private sector and government agencies. This directory could be shared amongst organizations, allowing for opportunities to avoid overlap and create more synergy, and could also help MSMEs find targeted training and services for their specific needs.

 

  • Digital trade policies for MSME ecommerce: business and policy perspectives and global best practices, with the following panelists: Charles Murito, Director, Sub Saharan Africa, Government Affairs & Public Policy at Google, Serge Ntamack, Government Affairs Director at Microsoft, Barbara Kostchwar, Executive Director of the Visa Economic Empowerment Institute, Olubunmi Osuntuyi, Secretary-General of the International Chamber of Commerce in Nigeria; moderated by Kati Suominen, Alliance Technical Director and Founder and CEO of Nextrade Group.

 

The panel agreed that while digitization is enabling African economies to leapfrog 20th century solutions and monolithic IT architectures to an era of interoperable digital ecosystems, there is still a great deal of basic groundwork to be done, to respond to the devastating effects of COVID-19, deal with stubborn, basic challenges such as lack of electricity and internet connectivity, and to translate firms growing connectivity and digital transformation into productivity gains. The panel also discussed the critical and urgent importance of closing digital skills gaps and workforce mismatches in Nigeria. Google’s Digital Sprinters report shared during the discussion highlights some of these challenges.

 

The panelists discussed possible solutions such as the acceleration of digital infrastructure rollout, building on current spectrum and infrastructure; targeted capacity-building and financing for women-led firms; and skills development programs to equip the Nigerian workforce to excel in the digital economy and adapt to emerging challenges – all panelists discussed skills development programs they champion in Africa and beyond, and that policies to promote startups across different industries must also be pursued.

 

According to the panel, there is a need for holistic national ecommerce strategies, to bring greater coherence to various agencies' work on MSME ecommerce and the digital economy. Data transfer policy is also a top priority - enabling MSMEs and startups to access data including export and import data across borders is essential for them to generate insights to streamline their operations, improve their customer service, innovate new products and services, and expand into new markets.

 

Emerging agreements in Asia and the Americas such as the 11-country Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the US-Mexico-Canada Agreement (USMCA) have high-quality standards for data privacy and transfer and can be good examples for African economies to consider in the African Continental Free Trade Agreement (AfCFTA). USMCA for example enables members to have their own data privacy regimes and promotes strong data protection laws, but also endorses the APEC CBPR data transfer regime for member countries’ firms to move data across borders. The 2020 Digital Economy Partnership Agreement (DEPA) among CPTPP members Chile, New Zealand and Singapore is another great example for Nigeria and other African nations of a forward-looking trade agreement. It includes several next generation provisions, for example to promote the interoperability of member economies’ payment systems and Fintechs, and advance AI governance.