Lagos can be a real struggle for digital businesses – Babajide Duroshola, Country Manager, Safeboda
Lagos can be a real struggle for digital businesses?
Lagos, Nigeria's commercial capital, effectively shut down bike-hailing operations last year after authorities prohibited motorcycles from plying the state's major roads. However, another city in the country, Ibadan, has proven to be a haven for the Safeboda bike-hailing startup.
The company, which recently celebrated its first year in Nigeria's bike-hailing space, has now completed over 1 million rides in Ibadan. Safeboda has achieved this feat in less than 13 months of operation.
Lagos does not value bike-hailing businesses
Babajide was forthright in his assessment of the Lagos state government's stance on bike-hailing startups.
While the Safeboda CEO acknowledges that this factor influenced the startup's location choice, he notes that the decision to launch in Ibadan was made prior to Lagos's prohibition of bike-hailing.
“We had relocated to Ibadan prior to the Lagos ban. We announced in October 2019 that we would begin operations in the country later that month. However, it made no sense for us to launch during the holiday season, so we pushed it forward. That decision was made prior to the Lagos ban.”
The Lagos prohibition made it appear to be an extremely prudent decision.
He continues by explaining that the Lagos government's stance compelled the team to investigate other cities in order to gain a better understanding of the critical landscape and indices that would make it easy to scale the business in any of those locations.
For Ogun, the state bears an uncanny resemblance to Lagos. It is in many ways competitive with Lagos, and as such, it is likely to adopt, if not entirely improve, the strategies of its more illustrious neighbor. As a result, it was classified as a high-risk state.
Lagos ≠ Nigeria
During the live audio chat, Babajide addresses the widespread misconceptions about Lagos that prevent many businesses from considering other states as viable markets.
However, he notes that Lagos is clearly at the forefront of Nigeria's economic development, as evidenced by the state's FAAC quota and internally generated revenue (IGR).
“Typically, Lagos gives us a good sense of what Nigeria is as a country, whether in terms of people's earning power or per capita income. Even from FAAC allocations and IGR, one can see the stark contrast between Lagos and the rest of the states,” he explained.
This is not to say, however, that businesses cannot thrive outside of Lagos. Babajide provides an illustration: It's interesting that many people are unaware, but Smile Telecoms began in Ibadan before relocating to Lagos.
“We've seen instances where businesses establish themselves in other cities before expanding to the commercial capital (Lagos). To be honest, expanding businesses outside of Lagos is a bit more challenging, as I believe people are more price-sensitive. In Lagos, people are still somewhat sensitive, but the market has already inflated significantly.”
Thus, when you expand your business outside of Lagos, you begin to see instances of people being extremely particular about ten, fighting for twenty change, which is an extremely interesting dynamic.
Why Ibadan?
Why would you not? Babajide, who has been in charge of Safeboda's operations in Ibadan for over a year, says the city is a viable market with a highly intellectual population.
“Take Ibadan, for example. It is one of the most educated cities in Nigeria. There is the University of Ibadan (UI) and the University College Hospital (UCH) in the vicinity. It's a city that isn't overly commercial but retains viability, owing to its proximity to a commercial city.”
According to Babajide, Safeboda encountered few difficulties when establishing himself in Ibadan. He claims that smartphone adoption was extremely high and that people were familiar with how to use basic apps.
“That laid the groundwork for us to build the business. Everything else was more about education, design, product-market fit, and pricing in a highly competitive market,” he explained.
So what advantages do cities like Ibadan possess over Lagos?
Lagos can be a real headache for digital businesses, with startups confronting everything from transactional government policies to inadequate transportation infrastructure and unreasonably high operating costs.
“However, in Ibadan, the average person commutes in about 30 minutes, which means that people are more relaxed and refreshed, although we are beginning to see a shift in that dynamic as more traffic comes in.”
Babajide then provides two compelling analogies to bolster his argument. To begin, six bunches of bananas costing 800 naira each in Lagos will cost you a total of 750 naira in Ibadan! “I was even considering starting a banana business,” he jokes.
Then, for as little as 50,000, you can actually put up a billboard in Ibadan!
But how do you deal with the fear of missing out?
Many entrepreneurs are hesitant to establish a business outside Lagos, owing to the fact that residents of the commercial capital earn significantly more than residents of other Nigerian states.
To address whether this is a legitimate concern, Babajide explains that a business's location choice is highly dependent on its operating model.
He asserts that a bike-hailing startup such as Safeboda requires literal feet on the ground and cannot operate completely remotely, unlike Risevest, Cowrywise, or others that continue to have customers use their services in all circumstances.
Babajide then makes the case for Ibadan by referencing the COVID-19 lockdown period, during which Safeboda operations would have been completely shut down if they were located in Lagos.
“I recall at one point when Andela went completely remote, I knew a few of the developers who relocated to Ibadan for a better quality of life. They were able to obtain better housing, better internet, self-sufficiency in power, and a higher standard of living in comparison to Lagos.”
Indeed, when you leave Lagos, the air changes.
Getting Top Talents in Ibadan
How easy or difficult was it for the Safeboda team to find talent suitable for the culture and performance they were attempting to establish in Ibadan, given that the majority of Nigeria's best talent resides in Lagos?
Babajide responds in detail.
“Interestingly, our talent pool is divided into distinct cadres. There is a management pool of talent that has prior experience working in businesses, assisting businesses in scaling, and developing strategic relationships. We struggled to recruit talent in that category, but were fortunate that our Head of Marketing was already based in Ibadan, even though he was in Lagos at the time, and so we essentially brought him back to Ibadan.”
What we needed to do was import these guys, make them very attractive offers, assist them with relocation, and generally convince them that Ibadan offers a higher standard of living than Lagos.
“We did struggle to find senior talent, but not nearly as much with junior talent,” he added.
While Lagos is undoubtedly the largest market in Nigeria for digital businesses, it is far from the only viable one.
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