How pricing, competition forced Uber’s shut down in Nigeria after 12 years

Uber, the first ride-hailing company in Nigeria, has shut down its services in the country. The sudden news, which began as something of a rumour, quickly spread like wildfire, with many people asking the all-important question: why? The company tried to explain the why in its official message to the press.

“After careful consideration, we have made the difficult decision to discontinue operations in Nigeria as part of evolving business priorities and investment focus across the continent,” the company said.

What the company has said is that Nigeria (and Uganda) are no longer priority markets. What it didn’t say is why it came to that conclusion. But if you have followed the e-hailing space quite diligently, you will know this was a decision hinged on several critical factors.

Read also: Following Uber Nigeria’s exit, Moove permits drivers to operate on Bolt and inDrive

Competition and declining purchasing power drove Uber out

Uber’s announcement might seem sudden to everyone, but the decline that led to that decision was a gradual journey.

It entered the Nigerian market in 2014 as a luxury taxi service and never really got off that proverbial high horse. Due to the high standard it set at the time, the only Uber-compliant vehicles were SUVs, limousines, and the latest-model saloon cars.

Such luxury service comes with luxury pay, which went pretty well at the time. Taxify entered in 2016 and liberalised the whole taxi-hailing business, essentially redefining it as taxi-sharing while also accepting lower-class vehicles. The market began shifting towards Taxify and with that, the drivers.

Yet, rather than revise its model and compete at that level, Uber chose to throw money at the problem, which created more problems, as covered here.

When that didn’t work, the company finally decided to compete, and the market was stable for a while. The services were still luxurious, with different classes and standards, and not everyone could afford all.

Then, inDriver rebranded as inDrive in 2022 and introduced a model that redefined the competition.

First, it gave passengers the power to negotiate fares while offering the same ride to several drivers at once. What this meant was that no matter how low a passenger bargained, there was always a driver desperate enough to accept it.

Consequently, it crashed ride fares to the delight of passengers. They flocked to the app and gave inDrive a significant market share.

Another consequence of the cheaper fares was an influx of battered, rickety cars that fell short of the standards that the e-hailing industry had set. It became typical to enter rides without air conditioning. When asked, drivers operating on inDrive blamed low fares on the app, which have made their services less of a luxury and more of a necessity.

To compete, Bolt adjusted its fares and introduced its version of fare bidding to trigger a price war with inDrive. Uber maintained its standard fare and 25% commission, the highest in the market.

While its refusal to compete on the terms set by its competitors at the time was honourable, it nonetheless led to a massive loss of market share.

The company had banked on offering quality rides in the hope that a share of the market still wanted quality rides. However, it failed to take into account the declining purchasing power of the majority of Nigerians.

This was exactly what happened, and as the market flocked to cheaper apps that suited their diminished pockets, the drivers followed the market, leaving Uber with a promise of quality rides nobody was willing to pay for.

Amid all of this, operating costs were rising for drivers.

Fuel costs rose by over 500 per cent; spare parts, data and other needs rose sharply, and drivers had to scramble to make ends meet.

While this was an industry problem, Uber was hit the hardest. Its commission meant drivers earned less of what they made, which wasn’t longer significant because the market had already left Uber behind. Indeed, even drivers on UberGo, its cheapest service offered in partnership with Moove, complained bitterly about the scarcity of rides while pleading for permission to use other apps.

“There is no work on Uber Go, and I don’t know what is happening,” one driver, Lanre, told me. “I have deleted my app and reinstalled it; I have logged out and logged in, but there are still no requests. There is no work on Uber Go, and I don’t know what is happening,” he lamented.

Uber refused to compete on the terms dictated by its competitors. It did not realise that the Nigerian market was becoming too poor to afford its services, while drivers, whose operating costs were skyrocketing, needed urgent revenue.