Nigerian nonconsumption

These bold Nigerian companies are targeting nonconsumption, and winning

By:

Oct 3, 2019

I live in Boston, Massachusetts, and in the past month, I’ve enjoyed 24-hour electricity, called a taxi using a ride-hailing service, and ordered products from an online store—without an ounce of stress. There was a time when such conveniences were only available to a select few who could afford them. But as a result of a plethora of entrepreneurs who targeted nonconsumption in different industries, most products and services have been democratized, such that the average person living in the United States can now lead a productive life. 

Nonconsumption occurs when people who would otherwise benefit from purchasing a product cannot do so because they lack skill, wealth, access, or time. When innovators target this market by offering simple, affordable, and accessible products and services that solve everyday problems, they’re able to tap into what is perhaps the richest vein for growth, while simultaneously creating inclusive prosperity.

Unfortunately, in countries such as Nigeria, there’s still a long way to go in democratizing basic products and services that have the potential to transform the lives of millions of people.

If I lived in Nigeria today, having uninterrupted access to electricity would be a fantasy. Ordering products online and using ride-hailing services would be possible, but only if I were wealthy since services like these are still niche and expensive. But all of that is changing.

New ventures are springing up across the country, eager to make a dent in poverty by targeting nonconsumption. Our research has shown that bold entrepreneurship focused on market-creating innovations—innovations that target nonconsumption by making products and services simple and affordable so that many more people can afford them—can truly transform Nigeria.

Take Arnergy Solar Limited for example. Arnergy co-founders Femi Adeyemo and Kunle Odebunmi noticed the vast nonconsumption of reliable electricity in Nigeria, especially in the business sector, and developed a viable solution using solar energy. With an innovative business model that allows customers pay a subscription fee that’s cheaper than their current energy spend, local companies are able to easily adopt Arnergy’s solution. Often, a hindrance to adopting renewable energy based solutions is the upfront cost, but Arnergy is solving this problem with its unique business model.

In less than five years, Arnergy has installed more than 2MW of electricity and manages over 5MWH of energy storage for more than 2,000 clients. The co-founders have their eyes set on capturing the more than $9 billion Nigerians spend annually on expensive and inefficient fuels for their generators, not to mention the additional potential revenue from tens of millions of Nigerians for whom electricity today is still a fantasy. The company recently raised $9 million in its Series A round—which was led by Breakthrough Energy Ventures, a fund supported by Bill Gates, Jack Ma, and Jeff Bezos, and several others—and may very well reimagine the country’s energy sector. Fixing the electricity industry would be a boon to Nigeria’s economy, but the country still faces many other challenges, like logistics and transportation. Enter Kobo360.

Founded in 2017, Kobo360 seeks to transform the logistics and freight business in Africa, beginning with Nigeria. Obi Ozor and Ife Oyedele, co-founders of Kobo360, noticed the inefficiency in the logistics business after spending some time studying the industry. For example, they learned that truck drivers were at risk of getting attacked by highway robbers because they often had to carry cash for provisions along the way. In addition, because there was no way to track the drivers and goods, some drivers would steal goods and report that it was the work of armed bandits. As a result of the inefficiency and lack of transparency in the industry, the price of goods increased. The average Nigerian, for instance, spends more than half of their income on food.

Kobo360’s “Uber for logistics” solution is solving this problem by building transparency, efficiency, and predictability into the logistics process. The company signs up truck drivers on its platform and connects them with companies that need goods moved, then manages all the financial transactions, pays the drivers electronically, and deploys a team of auto mechanics to fix the truck in the event of a breakdown. In addition, drivers also gain access to truck financing, discounts on diesel, education and healthcare assistance, and insurance. 

Kobo360 has already raised more than $37 million with Goldman Sachs leading their most recent fundraising round, and has signed up more than 10,000 drivers. As the innovative company tackles issues with long distance freight logistics, Metro Africa Express, or max.ng for short, is tackling another related issue: short-distance delivery and transportation.

In a country with close to 200 million people, fewer than 10% of households have cars, according to the Nigerian National Bureau of Statistics. For contrast, 80% of households in the United States do. The car, for most Nigerians, is simply too expensive, but max.ng is working to democratize mobility by connecting riders to motorcycle drivers in a safe and predictable way—much like Uber or Lyft. Using less expensive vehicles such as motorcycles and three-wheelers, max.ng is addressing the significant nonconsumption of mobility in the country—and the strategy is paying off. Max.ng has raised more than $8 million, directly employs more than 100 people, and has completed more than one million rides. It’s even inspired copycats such as Gokada and ORide. This increased competition will lead to further growth of the industry as these companies move more people around.

Today, the average Nigerian still struggles to move around easily and enjoy the benefits of uninterrupted electricity. While this adversely impacts the standard of living for most Nigerians, it also creates significant opportunity for bold entrepreneurs to develop market-creating innovations that have the potential to change the trajectory of the country. Learning about them gives me hope about the country’s future.

Efosa Ojomo is a senior research fellow at the Christensen Institute, and co-author of The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty. Efosa’s work focuses on using Disruptive Innovation theory to fundamentally change the discourse in the global development community, thus enabling nations to engender their own path to long-term growth and prosperity.