Ride hauling market in Nigeria seem like an untapped gold mine on the surface, but on conducting an intense research, it is definitely a death trap for most startups, who dared to pitch into it.
An estimated 2500 apps who have launched the business over the past decade, only become obscure in matter of weeks and months or a year later.
This consistent failure has been attributed to this popular story of startups being pushed out of market by global giants, such as Bolts, Uber and Indrive. They claim these brands have presence in other developed countries generating enough capital to fund other branches.
Opinion and experiences always point out that this is a business where drivers are longing for platforms with constant demand even if the commission is lower. While Riders in turn look for drivers, closer in proximity irrespective of the fact that the app is navigable with comfortable car to ride on, in other words riders prefer apps with shorter wait time.
An inexperienced ride hauling app, most times feels tempted to spread their services to wider geographical area, this move often make drivers dispersed and out of reach for riders.
The solution lies in building a viable network or structure where Riders and Drivers are present, ensuring everyone sticks around and concentrated. A good approach to solving this problem Is by picking a good geographical area.
When Uber launched in 2014 it focused on Lagos island , around the upscale part of Lagos. Gokard, the motorcycle hauling services launched in 2018 with an exclusive focus in Yaba, Lagos. A hub where students and Tech professionals are densely situated. This improves the perception of supply and also helps in the establishment of a functional terrain to gather the revenue and experience needed for further geographic expansion. It also helps to refine its model using inflows of customer feedback , the insight helps in expanding to surrounding regions.
An atomic network is critical. Laolu Onifade, founder of the now-defunct car pooling startup Hytch, learned this the hard way. Onboarding about 50 drivers before launch and about 1,000 riders days after launch, with no marketing spend, seemed like a good start, but their locations were too dispersed. “One thing we noticed was that sometimes, a driver would be on the island and the rider is somewhere on the mainland,” he recalled. Even when a service succeeds in building a viable atomic network, this success is not easily transferred to other locations or networks. This is why most platforms use a city-by-city expansion.
Another Method a ride hauling startup can utilize to make profit especially when competing with established brands, is by expanding into cities where those established brands are less focused. Bolt cleverly exploited this by expanding into cities where Uber was less focused. According to news reports from the period, while Uber initially concentrated its resources on primary commercial hubs, Lagos and Abuja, Bolt pursued rapid expansion into underserved cities like Enugu and Abeokuta. By doing so, it captured market share and built a local network effect in areas where it faced little initial resistance.
A new company can sidestep established rivals by targeting secondary cities and suburbs or regions within a city where they lack a strong presence. However, creating these networks from scratch in every new location is extremely costly.
Building a Committed Driver Base
The Challenge of Building Committed Driver has evolved dramatically.
Ugochi Ugbomeh, co-founder of one of Nigeria’s foremost ride-hailing platforms, e-Tranzit, says that when the company launched 12 years ago, it started with company-owned cars and salaried drivers. This strategy was to ensure drivers were always available and to control the experience for their first users.
She recalls a market with low smartphone penetration, where the concept of sourcing rides from an app was alien to taxi drivers, requiring extensive evangelism. “e-Tranzit imported over 100 mobile devices from China, providing them to drivers for free with repayment tied to their earnings.
When Bankole Cardoso launched the Rocket Internet-backed Easy Taxi, another early ride-sharing platform, in 2013, he faced similar hurdles. “The first challenge was convincing Nigerian taxi drivers of the value of this innovation,” he said. Easy Taxi found a financing partner to provide phones to drivers on a three-month repayment plan. Within a year, they had 500 cars in Lagos and 200 in Abuja.
The approach of the Nigerian pioneers like e-Tranzit and Easy Taxi to kickstarting their atomic network is known as flintstoning—manually bootstrapping the network by importing phones and providing financing to yellow cab drivers. These efforts were crucial.
Uber’s launch changed the economics of driver acquisition by literally paying to bring in everyone to the network. The platform used a “peer-to-peer” (P2P) model, which looked beyond yellow cabs and began recruiting everyday people with cars who were not in the taxi business. Driver literacy and smartphone penetration were less of an issue thanks to the initial investment of the previous platforms and the widening of the taxi driver profile to the young tech-savvy car owner. By July 2016, Uber had accumulated nearly 1,500 drivers and completed over a million trips in Lagos and Abuja, with plans to double that, Uber partnered with banks to finance car purchases for its drivers, some of whom were leasing other people’s cars. However, to qualify for its lucrative vehicle leasing programmes, drivers reportedly needed to maintain a performance rating above 4.5 and generate earnings exceeding ₦2.4 million within six months. The opportunity to drive-to-own a car gave them more incentive to stay active on the app and pick up riders. This hire-purchase model, aimed at reducing entry barriers while securing driver loyalty, was later adopted by other services such as LagRide.
The Spending on Scaling Strategy
The historical spending on scaling networks is staggering: Ugbomeh noted that e-Tranzit burned through roughly ₦100 million (about $540,000 in 2014 when the company was most active) on marketing and incentives before shutting down. Uber was built on a global subsidy strategy that saw it lose billions until 2023, when it first recorded an annual net profit of over $1.8 billion from a $37 billion revenue. The local investment continues today: By 2021, Bolt had invested over €50 million ($57.3 million) in Nigeria. In 2023, the company pledged to invest $107 million more. On the other hand, inDrive has committed over ₦5 billion to driver welfare in 2024 alone.
Onifade, who shut down his ride-sharing company after four months, explained that while attracting an initial 100 riders and 50 drivers was easy, sustaining them was a battle against constant churn from both sides and hardly worth the effort. His startup couldn’t afford the heavy subsidies riders required, and drivers inevitably switched to bigger platforms. “Even if I suddenly came into the required investment, I won’t go into ride-hailing as a business,” he said on a call.
Platforms justify aggressive spending and sustained losses as a strategy to achieve market dominance.
Conclusion
The path to profitability, even for the winner, is arduous. Bolt has publicly stated that it is profitable, but only in some cities and product lines. Uber first announced a full-year profit in 2023, fourteen years after its founding in 2009. This was only achieved after the company drastically cut spending and diversified its revenue, leveraging the powerful network effect from its ride-hailing service to build adjacent businesses like logistics and food delivery in several markets.
