Latest data from Uber shows why the model is failing in Nigeria

Uber’s 4-year anniversary: Not much to celebrate, as world’s largest ride-hailer struggles to scale in Nigeria’s perilous taxi market

Leading ride sharing app, Uber celebrated four years of operating in Africa last week. It also announced that it had created about 29,000 jobs or economic opportunities as it will like to call it and over 1.8 million riders.

Uber also reported that in Nigeria, it has about 267,000 riders who actively utilize the app/service and 7,000 drivers in Nigeria alone. In just under three years since the ride sharing app came into Nigeria, this achievement appears laudable.

 

The achievement is not also limited to Nigeria. Uber also reported impressive numbers across other Sub-Saharan African countries such as Kenya, Tanzania, Ghana and South Africa, where it first launched. According to the data described above, its driver and riders population as at 2017 are in South Africa 12,000/969,000, Kenya 5,000/363,000, Ghana 3,000/140,000 , Uganda 1,000/48,000, Tanzania 1,000/53,000 respectively.

Juxtaposing the data from Nigeria with those of its African counterparts reveal a major problem for Nigeria. Unlike it’s Sub-Saharan African neighbours, Nigeria is the lowest when it comes to the number of riders per driver. See chart below;

 

Why this is bad

At just 39 riders available to each driver, Uber drivers in Nigeria have by far the lowest pool of customers where they can draw from in SSA. South Africa in contrast has about 81 riders per driver, dwarfing Nigeria by 2 folds. Ghana which is a far smaller economy than Nigeria even has 47 riders per driver.

Thus, for Nigeria to be at the same riders per driver level as South Africa, riders would have to double to as high as 567,000. It has taken Uber about 4 years to reach 276,000, suggesting that more work needs to be done in the Nigerian entity.

If you also consider that Uber riders also form the same pool that their other competitors of Uber cater for, then the data looks even more precarious. If the numbers don’t stack up for the world’s leading ride sharing service, it is hard to see any smaller local competitor survive in the short-term.

For current Uber Partners and would be Partners, the data should also raise red flags concerning the viability of this partnership. Having access to just 39 riders per driver is not an encouraging sign for several reasons. For example, it means that with fewer riders, fares will likely remain depressed for longer while the number of rides available for each driver per day will be limited.

Flawed model?

The data above appears to indicate that the ride sharing model is facing significant challenges with scaling in Nigeria. Uber must have known that its number of riders and indeed drivers have been shrinking in Nigeria which suggest why it did not hesitate to slash prices, after Taxify, a rival service, launched in Nigeria. But the effect has been anything but positive for Uber.

As prices crashed so did service. Drivers would not accept trips that did not look lucrative, leaving would be Uber riders frustrated and often falling back to legacy taxis if the alternative is not forthcoming.  Uber Partners have also often complained of lower than expected margins while drivers have protested as they see their income plummet.

Uber might be celebrating 4 years in Sub Saharan Africa but along with its partners and drivers, the future of this model is nowhere close to being rosy.