ECONOMY - 23 JAN 2017

Tech, Taxi, and Revolution

Tech, Taxi, and Revolution
Ebi Atawodi, General Manager of Uber in Nigeria

It's true what they say about the revolution – it will not be televised. From inception, Uber, now the most acclaimed transportation company in the world, has altered the taxi service market in a way that can only be described as revolutionary. Currently operating in over 500 cities, the American Transport Network firm shot to prominence by empowering users to hail a GPS-navigated cab on-demand. In the process, it has come to redefine the way people move and relate. Mercifully, Nigeria has not been spared from this change. 

 

Coming to Nigeria

By and large, the taxi system – and wider transport system – in Nigeria is a bit of a nightmare. What is likely to be a billion-dollar industry is left relatively unregulated and is defined by bus conductors known as ‘Agberos', rickety taxis known as ‘kabukabus’ and the occasional heavy-handed LASTMA official. More generally, many public and private vehicles are ill-fit for road use and this is a challenge Uber quickly faced in efforts to build a quality fleet of available cars. And frustratingly for customers, pricing was arbitrary and often extortionary. 

So far, Uber has infiltrated Lagos and Abuja, Nigeria's two major cities. The impact has been profound, especially in Lagos, where the firm has now been in operation for over two years. Still, the transport system is too vast to have been altered by just one company in such a short space of time and many of the problems still remain. In fact, some would say that Uber has accentuated some of them. 

 

An Adaptable Platform

The successes achieved by Uber Nigeria has not come without daunting challenges. Some of these have been cultural. For example, many Nigerians still distrust online payment systems which are a crucial feature of the Uber platform. In response to this, Uber introduced the option of cash payments and today, nearly half of all journeys are settled through cash. This is the clearest example of the company's adaptability during its time in Nigeria. This trait is very handy considering Nigeria's business environment is known to be very volatile.

One spectacular hurdle Uber had to jump was fuel scarcity. Such situations are problematic for a ride-sharing platform as they reduce the number of drivers available and force a price premium which frustrates customers. To tackle this, Uber partnered with petrol stations to ensure preferential treatment for its drivers. Just like that, the problem was eradicated. Once again, the firm has shown impressive efficiency at adapting to and solving problems unique to countries like Nigeria.

More recently, the Lagos State Ministry of Transportation announced that Uber was required to pay as much as ₦100,000 per car for a franchise license. Given the size of Uber's fleet, this fee could become substantial, even for Uber. The Ministry claims that the law has always existed but was rarely enforced, creating the question of what the motive is behind the sudden focus on stricter enforcement. Some quarters suggest the move is simply a revenue generation ploy. Whatever the case may be, it is reflective of the uncertainty inherent in doing business in Nigeria. Both parties are locked in talks at the moment and the prognosis is unclear. The most likely outcome could be a similar agreement to the one between MTN and Nigerian Communications Commission.  

Meanwhile, the state has threatened a clampdown on “vehicles that operate under the Uber app without registration", according to a ministry spokesperson. 

This is the first major legal challenge Uber has faced in Nigeria and will require a different approach. With Nigeria though, it would be unsurprising if the issue fizzles out on its own. 

 

The Model Behind Uber's Success

Uber has refused to be tagged as a transport company, referring to itself, instead, as an online information services platform that connects drivers with riders. Most controversially, it stresses that its drivers are not employees. According to the company, drivers are effectively contractors who leverage Uber's platform and rules to get jobs.This model is hinged on the sharing economy concept which has been replicated so successfully in other industries. 

But while Uber generally considers its drivers as part-time workers, the story is slightly different in Nigeria. Consistent with the adaptability theme, drivers have adapted the Uber platform to customer needs. It is not unusual to find customers with favourites – particular Uber drivers who act as their personal drivers. Meanwhile, Uber also permits a partner scheme that matches partners (who own cars) with drivers (who are willing to drive). Upon meeting, the agreement between the two parties is highly personalised. In a city such as Lagos, there are likely to be more willing drivers than available cars. To tackle this, Uber recently teamed up with First Bank Nigeria, a subsidiary of FBN Holdings Plc., to provide loans to drivers who can then purchase second-hand vehicles in the role as Uber drivers. 

 

Pricing & Competition

Another key facet of Uber's model is its dynamic pricing system which works by calculating the equilibrium price of supply and demand in real-time. By charging higher fares during peak hours, drivers are incentivised to work more, either by increasing their hours or by reentering the labour market. Naturally, the system is not universally popular as riders are hesitant to pay double fares for what they see as the same trip. 

As Lyft is to Uber in the U.S, so are Afrotaxi, My Cabman, Oga taxi, and a host of others, in Nigeria. However, none of these firms have presented a sustained challenge to Uber and many have struggled to survive recently. This could be down to the stronger appeal of foreign firms in the Nigeria market. More likely, Uber's larger capital base, durable model, and extensive network cannot be ignored. Finally, Uber benefitted from first-mover advantage to the extent that many people directly associate ride-sharing with the Uber brand.

While its nature remains undefined, its impact is unquestionable. The hope is that Uber's influence is able to transform a sector that has remained dormant for many years. Meanwhile, much can be learned from Uber's business model and use of technology. Lagosians have grown to love Uber, till surge do them part.

 

Follow this Writer on Twitter @anselem_kadiri. Subscribe to read more articles here.

Anselem Kadiri

Anselem Kadiri

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