Ride-hailing giant Uber has announced its withdrawal from Nigeria and Uganda, following exits from Tanzania and Côte d’Ivoire. The company, once a pioneer in online ride-hailing in Nigeria, had expanded into 12 cities and claimed to have contributed 34 billion naira to the local economy in 2023.
However, Uber’s journey in Nigeria has come to an end, with the company citing a “thorough review of its business” as the reason for its decision to wind down operations. This move comes amidst a broader retreat from the African market, where Uber is now present in only four countries: Egypt, Ghana, Kenya, and South Africa.
The Challenge of Balancing Fares and Costs
The primary challenge for Uber in Africa has been striking a balance between offering affordable fares to low-income customers and ensuring drivers can make a living, while also maintaining a profit margin. This delicate equilibrium has been disrupted by rising fuel prices, particularly in Nigeria, where the removal of fuel subsidies in 2023 led to a threefold increase in petrol and diesel costs.
The recent disruption to global oil supplies following the US-Israeli attack on Iran has further exacerbated fuel costs, forcing Uber to raise fares for passengers. Ikemesit Effiong, a partner at consulting firm SBM Intelligence, notes that many Nigerians have “bled out” of middle-income status, shrinking Uber’s target market.
The depreciation of the naira, which has lost around two-thirds of its value against the dollar since 2023, has also posed significant challenges for Uber, as many of its costs are dollar-denominated. As Effiong puts it, “the maths stopped working.”
Competition and Local Adaptation
Uber’s struggles in Africa can also be attributed to intense competition from rivals like Bolt and inDrive, which have adopted more flexible business models. Bolt, for instance, charges a lower commission of 15-20% compared to Uber’s 25%, making it a more attractive option for self-employed drivers.
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Moreover, Bolt has adapted to local market realities by allowing drivers to operate older vehicles and even motorized three-wheelers in some parts of Nigeria. While this approach has “come at a cost” to Bolt’s reputation, it has enabled the company to appeal to a broader market beyond the shrinking middle class.
In contrast, Uber’s insistence on stringent vehicle standards and full insurance requirements may have limited its appeal in a market defined by price bargaining. As Effiong observes, Uber’s model of eliminating price haggling between drivers and passengers may not have been well-suited to the Nigerian context, where such negotiations are commonplace.
The rise of inDrive, which allows passengers and drivers to negotiate fares via its platform, further shows the importance of adapting to local market forces. As Uber reorients its business towards more profitable markets and explores innovations like robotaxis, its competitors in Africa are finding success by prioritizing local adaptation and flexibility.
This disparity highlights the challenges Uber faced in maintaining its market share in the face of aggressive competition and shifting economic conditions.
Uber’s Decline in Nigeria: A Shift in Market forces
Uber’s exit from Nigeria marks a significant shift in the country’s ride-hailing environment. The company’s former country manager, Tope Akinwumi, had once praised Uber’s impact in Nigeria, highlighting its contribution of 34 billion naira to the local economy in 2023 and the 1.8 million hours saved for riders. However, the company’s decision to withdraw from the market indicates a change in priorities and a recognition of the challenges it faced.
The Future of Ride-Hailing in Africa
Uber’s withdrawal from Nigeria and other African countries does not signify the end of ride-hailing on the continent. With Africa’s megacities expanding and public transport options limited, there is a significant demand for digital mobility solutions.
