Nigeria currency woe a toll on Ecommerce firms

The severe shortages of the currency is taking a toll on Ecommerce firms in Africa’s most populous nation as cost price more than double, which means that many of them are no longer breakeven

This is un top of rising inflation eating deep into the pockets of consumers.

The dollar shortage is really affecting our operations seriously and because of the kind of business we do, on line retail companies do not fall into the categories of those that have the right to bid for dollars the interbank markets, according to Bassey Eyo, Managing Director/CEO at  Payport Global systems, in an interview with BusinessDay.

“We import most our products. When we started two years ago, we used to buy a shoe for $10 at an exchange rate of N160 (N1600), that same shoes today is now sold for N4000.  It’s really affecting our sales, said Eyo.

Nigeria is struggling with a sharp fall in oil price by 50 percent that forced the central bank to impose capital controls while banning 41 items from its official windows.

The restrictions caused capital flights as investors jilted stocks and bonds on the fret of an abrupt devaluation.

Also, manufacturers are unable to source dollars for the importation of raw materials and economic activities slowed.

The country’s economy contracted by 2.10 percent in the second quarter from a year earlier and 0.36 percent the previous quarter.

The International Monetary Fund forecast the economy will shrink by 1.8 percent this year, the first full-year contraction since 1991.

Inflation rate increased to 17.60 percent for the month of August from 17.10 percent for the month of July, the highest in 11 years.

The naira has fallen almost 40 percent to N315 on since the Abuja based bank allowed the currency to float. The currency appreciated by 0.47 percent to close at N307.25  2pm on Tuesday while it goes for as much as N412 at the Bureau the Change or parallel market.

“If the price they import go up, the prices will go up in tandem,” said Raphael Afaedor co-Founder & CEO – Supermart.ng.

“It also depends on the business. Those operating in the food and groceries are not affected because people must eat. People are buying clothes but the challenge is that there are not much of locally produced clothes,” said Afaedor.

 There are many challenges inhibiting the growth of companies operating in the on line retail industry which includes poor road network, epileptic power supply, lack of trust and awareness and logistics.

For instance, logistics and shipment delivery problems makes daily deliver in most Nigeria cities not feasible in 24 hours. Most cities do not have standardised addresses like in the Europe, United States and most Asia countries.