The last few months have been tough for Nigeria’s logistics sector. No, it’s not simply because of fuel scarcity. There is a broader problem that suggests that Nigerian logistics might be broken.
Notably, Nigeria might not be alone. In the United States, 6 per cent of a product’s prices are due to logistics costs. But in Africa, they account for 70 per cent. Howbeit, Nigeria’s case is quite peculiar. For instance, it costs $4,000 to move a 40-foot container from Shanghai to Lagos, Nigeria. Yet, somehow, it costs the same $4000 to move the same container from the seaport in Apapa to Lagos mainland, a 20km trip.
Recently, tech-enabled players have been bearing a more charring brunt, especially companies like Gokada, a leading last-mile delivery firm.
Gokada has raised $12.4 million in venture funding over the years. But the company’s last successful funding round was in 2019. You’d think that with such a reputable name, raising more rounds wouldn’t be a problem. But that’s not the case. The company has had its fair share of struggles recently. Despite growing the company’s revenue tenfold and increasing delivery order volume a hundredfold under former CEO Nikhil Goel, Gokada is no longer profitable.
In November, the company had to trim 20 employees off its workforce. At the beginning of the year, it had 82 employees. But now, the company has laid off another 54 workers. A TechCabal report highlights how the company had to choose between mass layoffs and a complete shutdown.
Attempting to stay afloat, Gokada tried to raise $750,000 from retail investors earlier this year, valuing the company at $10 million. Crowdfunding was unusual, especially for a company whose last VC round was nearly $6 million. It gave the impression that Gokada was having a hard time raising money from the capital markets. Nevertheless, the company believed it was popular enough to raise funding from the public. Gokada has 4,000 riders, making it the leader in Nigeria’s delivery scene and having twice the number of riders of its nearest competitor, Jumia. (Notably, Jumia is also chasing elusive profits.) But even that was a struggle, and the company eventually had to beat down its target to just $100,000. Gokada even reportedly considered selling its business to a competitor, Kwik Logistics, last year. But talks eventually fell through.
Gokada is not the only one struggling in Nigeria’s logistics market. Earlier this month, Sendy, a Kenyan logistics scale-up, announced that it was ceasing on-ground operations in Nigeria. The news came a few months after the company laid off 30 per cent of its staff. The new changes imply that Sendy will abandon its asset-heavy model that facilitated order fulfilment from parcel pickup and warehousing to last-mile delivery in Nigeria. So it will simply “connect sellers to logistics providers but will no longer consign their goods.”
On February 2nd, Hytch, a Nigerian logistics startup, announced that it shut down all its operations. According to reports, the company wasn’t making enough money to run the business and struggled to raise money. Hytch was in the market for only less than ten months. However, Laolu Onifade, its co-founder and CEO, vowed never to return to the logistics business.
Nonetheless, Nigeria’s logistics market does not paint an entirely gloomy scene. At least not everyone is having a liquidity crisis. For instance, OnePort 365 raised $5 million last year after growing its revenue by 420% in one year. Jetstream, a Ghanaian logistics company with a presence in Nigeria, also raised $13 million in January. But it’s hard to miss the fact that the recent crop of logistics companies pulling all the attention all have one thing in common: asset-lightness. They don’t operate with the same asset-heavy model that Gokada, Jumia and other market leaders have been running.
