Lagos, Nigeria – Key players in Nigeria’s e-commerce sector have raised alarms over the continued reliance on the Pay-on-Delivery (POD) model, describing it as a major impediment to the industry’s long-term growth and sustainability.
At the recently held E-commerce and Payment Forum organized by the Lagos Business School, stakeholders argued that while the POD system may have been necessary during the early days of online retail in Nigeria, it has now become a costly burden.
“Pay-on-Delivery was one of the fundamental mistakes made when e-commerce launched in Nigeria,” said Dave Omoregie, Chief Operating Officer of Konga Group. “While the model may thrive in other markets, it doesn’t suit Nigeria’s unique economic and cultural context.”
Omoregie explained that inconsistencies in consumer behavior—often driven by economic uncertainty—make it difficult to rely on POD. “We’ve had situations where a customer orders a product but cancels on the delivery day due to delayed salary payments,” he noted.
Other participants echoed these concerns, highlighting trust issues as a major reason for the persistence of POD. Josephine Sarouk, Managing Director of Bayobab Nigeria, said many Nigerians still prefer brick-and-mortar stores because they’re wary of fraud or product misrepresentation online.
“When it comes to trust, we often underestimate its impact,” Sarouk said. “Many consumers still need to be convinced that e-commerce platforms can deliver as promised. Until there’s collective industry action, phasing out POD may be difficult.”
She added that any move to eliminate the payment method would need to be a unified decision among all major players to avoid losing customers to competitors who continue to offer the option.
Mounting External Pressures
In his keynote, Mr. Olu Akanmu, Executive-in-Residence at Lagos Business School, outlined additional pressures facing Nigerian e-commerce firms. He cited the growing presence of international players like Temu, as well as macroeconomic factors such as the weakening Naira and shrinking consumer purchasing power.
“We’re witnessing the commoditization of the market, where most players offer similar services at lower prices, leading to thinner margins and reduced profitability,” Akanmu said. “These trends call for urgent strategic realignment across the sector.”
Growth Potential Amid Challenges
Despite these concerns, industry projections remain optimistic. A recent PYMNTS Intelligence report forecasts that Nigeria’s e-commerce sector could grow from $15 billion in 2023 to over $33 billion by 2026 in business-to-consumer sales.
The report noted that while online transactions currently account for just 6% of total retail activity, Nigeria’s digital sales penetration is among the highest in the Middle East and Africa region.
It also highlighted the diversity of payment options in the country, with consumers still relying on a blend of account-to-account (A2A) transfers, debit and credit cards, and cash on delivery.
As the industry continues to mature, stakeholders agree that addressing trust issues, phasing out unsustainable payment models, and embracing innovation will be key to unlocking Nigeria’s full e-commerce potential.