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The Next Frontier: How E-commerce is Reshaping Nigeria’s Informal Economy

By leveraging technology, logistics, and fintech solutions, micro, small, and medium enterprises (MSMEs) are empowered to scale sustainably in the informal market

by Techeconomy
February 28, 2025
in News
0
e-commerce and Nigeria's informal sector | Sunil Natraj
Sunil Natraj, CEO, Jumia Nigeria

Sunil Natraj, CEO, Jumia Nigeria

UBA
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Has e-commerce truly lived up to its potential of reforming Nigeria’s vast informal economy, offering financial inclusion, digital empowerment, and a pathway to sustainable growth?

Nigeria stands at the cusp of an e-commerce revolution, with digital adoption transforming not just how consumers shop but also how businesses scale in a $100 billion informal retail market.

However, operating outside formal structures means many small businesses may still struggle with visibility, access to capital, and expansion beyond their immediate communities.

E-commerce platforms are doubling down on strategies to provide a digital marketplace that connects businesses to millions of customers nationwide.

By leveraging technology, logistics, and fintech solutions, micro, small, and medium enterprises (MSMEs) are empowered to scale sustainably in the informal market.

Expanding Consumer Reach

Nigeria’s informal sector accounts for over 57% of the country’s GDP. A recent report released by Jobberman Nigeria, in partnership with the Mastercard Foundation states that the informal sector employs 76.7% of Nigeria’s workforce signaling an expansive growth in this sector.

However, for many entrepreneurs in Nigeria, the biggest challenge is not just producing or selling products—it’s delivering them. What is commonly obtainable is that distribution channels often limit MSMEs to their immediate surroundings or regions.

E-commerce has rethought this narrative by increasing pick-up stations, hyperlocal delivery networks, and alternative last-mile delivery solutions.

As of mid-2024, Jumia, a leading online platform, has established over 200 pickup stations and more than 24,000 active independent sales consultants nationwide.

Through this City Expansion Initiative, Nigerians can enjoy the convenience of accessing needed products even in rural and sub-urban areas where last-mile delivery systems may seem challenging.

Increasing Visibility for Small Businesses (MSMEs)

With the rise of digital shopping, small businesses no longer need to rely solely on traditional brick-and-mortar stores to attract customers.

Studies indicate that 81% of consumers research products or services online before making a purchase. Through e-commerce, vendors can now list products online, and fulfill orders nationwide, expanding their customer base beyond local borders.

E-commerce Empowering Local Manufacturers

Nigeria’s push for Made-in-Nigeria goods is gaining momentum with the rise of e-commerce. Local manufacturers, often sidelined by imported goods, are tapping into online marketplaces to reach a wider customer base.

E-commerce provides Nigerian producers with a virtual storefront, allowing them to showcase and sell their products to consumers across the country.

This direct access to a national market not only helps reduce dependence on imports but also fosters the growth of local industries, contributing to the county’s economic growth.

Digitizing Payments and Access to Financial Services

The struggle to access and manage finance poses a barrier to operations for informal businesses in Nigeria.

Access to finance has been a significant challenge for MSMEs in Nigeria’s informal economy. Many businesses, particularly in the informal sector, struggle to obtain credit due to the absence of formal financial records.

E-commerce platforms like Jumia are changing this by enabling businesses to accept digital payments and creating transaction histories that enhance financial credibility.

Through fintech integrations on e-commerce, small companies can build a digital footprint that promotes financial inclusion and formalization of the informal sector.

Job Creation Through E-commerce

Beyond vendors, e-commerce is unlocking new income streams for thousands of Nigerians. According to Statista, revenue in the e-commerce market in Nigeria is projected to reach US$7.04bn in 2025, contributing significantly to job creation and economic growth.

A report by Boston Consulting Group reveals that online digital platforms, such as Jumia, which match buyers and providers of goods and services, could create about 3 million new jobs in Africa by 2025.

By establishing Pick-Up Stations, employing thousands of people both directly and indirectly through its ecosystem, Jumia Nigeria has enhanced job creation in Nigeria encompassing roles in customer service, logistics, and technology.

No form of business is without challenges, while business bottlenecks may exist, e-commerce must continually leverage these challenges as springboards for transformative innovation.

At Jumia, we believe that e-commerce is not just about transactions—it’s about transformation. By empowering MSMEs with the tools, reach, and infrastructure they need to thrive, we are not only shaping the future of retail but also accelerating Nigeria’s transition into a more inclusive and dynamic digital economy.

*Sunil Natraj is the CEO of Jumia Nigeria.

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Tags: e-commercee-commerce and Nigeria's informal sectorjumia nigeriaSunil Natraj
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