Pay-on-Delivery Hurting Nigeria’s E-Commerce Growth: Stakeholders Warn
Introduction
Nigeria’s e-commerce sector has seen remarkable growth, with platforms like Jumia, Konga, and Chowdeck driving online retail across the country. However, stakeholders are sounding the alarm on a major hurdle: pay-on-delivery (PoD). While this payment method has fueled consumer trust in a market wary of online scams, it’s now identified as a significant barrier to sustainable e-commerce growth. This article explores why pay-on-delivery is hurting Nigeria’s e-commerce sector, the challenges it poses, and potential solutions, with a focus on insights from industry experts.
Background Context
Nigeria’s e-commerce market is projected to reach $7.6 billion by 2025, driven by increasing internet penetration and a young, tech-savvy population. Pay-on-delivery, where customers pay cash upon receiving their orders, became popular to address trust issues in a market plagued by fraud and unreliable logistics. However, this model has led to high return rates, increased operational costs, and fraud risks, prompting concern among stakeholders. Recent discussions on platforms like X and reports from industry leaders highlight the urgency of addressing this issue to unlock Nigeria’s e-commerce potential.
Why Pay-on-Delivery Is Hurting Nigeria’s E-Commerce Growth
- High Return Rates and Logistics Costs
Pay-on-delivery allows customers to inspect goods before payment, but it also leads to significant return rates. According to a 2024 report by TechCabal, up to 30% of PoD orders in Nigeria are returned due to buyer remorse, mismatched expectations, or outright refusal to pay. This increases logistics costs for e-commerce platforms, as they bear the expense of delivery and return shipping. For instance, a Lagos-based vendor on Chowdeck reported losing 20% of revenue to returns in 2024, highlighting the financial strain on businesses. - Fraud and Non-Delivery Issues
Fraudulent orders are a growing concern with PoD. Customers sometimes place orders with no intention of paying, tying up inventory and delivery resources. A 2025 Nairametrics report noted that logistics firms lose millions annually to such practices, with some delivery agents facing safety risks when customers refuse payment or provide fake addresses. This undermines trust in the supply chain and discourages investment in e-commerce infrastructure. - Cash Flow Constraints for Businesses
PoD delays revenue collection, as businesses only receive payment upon successful delivery. This creates cash flow challenges, particularly for small and medium enterprises (SMEs) reliant on quick turnover. Stakeholders at a 2025 e-commerce summit in Lagos warned that PoD’s dominance stifles scalability, as businesses struggle to reinvest in growth or improve logistics networks. - Consumer Trust vs. Operational Efficiency
While PoD builds consumer trust by reducing the risk of paying for undelivered or substandard goods, it hampers operational efficiency. Unlike prepaid digital payments, PoD requires manual cash handling, increasing the risk of errors and theft. Industry leaders argue that shifting to digital payments could streamline operations and reduce costs, but Nigeria’s low banking penetration (44% as of 2024) limits this transition.
Stakeholder Warnings and Proposed Solutions
Stakeholders, including e-commerce platforms, logistics providers, and fintech experts, are advocating for a shift away from PoD. Key recommendations include:
- Promoting Digital Payments: Platforms like Flutterwave and Paystack are pushing for incentives like discounts to encourage card or mobile payments. Dayo Ayoade, a Nigerian entrepreneur, built a payments engine capable of 2.2 million transactions per second to support seamless digital transactions, showing the potential for scalable solutions.
- Improved Logistics Networks: Investments in last-mile delivery and tracking systems could reduce return rates by ensuring accurate deliveries. Companies like Chowdeck, which hit N2.3 billion in deliveries in 2025, are leveraging technology to optimize logistics.
- Consumer Education: Campaigns to build trust in prepaid systems, coupled with stronger fraud protection, could shift consumer behavior. Stakeholders suggest partnerships with banks to offer secure payment gateways.
- Hybrid Payment Models: Some platforms are experimenting with partial prepayments or escrow systems to balance trust and operational efficiency.
What’s Next for Nigeria’s E-Commerce?
The future of Nigeria’s e-commerce hinges on balancing consumer trust with operational sustainability. While PoD remains dominant, its drawbacks are clear. Stakeholders warn that without a transition to digital payments, the sector risks stagnation. Success stories like Chowdeck and innovative payment solutions from fintechs offer hope, but widespread adoption will require collaboration between e-commerce platforms, regulators, and consumers.
Conclusion
Pay-on-delivery has been a double-edged sword for Nigeria’s e-commerce growth, enabling trust but hindering efficiency and scalability. As stakeholders warn of its long-term impact, the industry must pivot toward digital payments and robust logistics to sustain its upward trajectory. By addressing these challenges, Nigeria’s e-commerce sector can unlock its full potential and compete globally.
Call to Action
What are your thoughts on pay-on-delivery in Nigeria’s e-commerce? Have you faced issues with this payment method? Share your experiences in the comments and stay updated on Nigeria’s evolving e-commerce landscape!
Suggested Authoritative Sources
- TechCabal – For insights into return rates and consumer spending trends in Nigeria’s e-commerce sector.
- Nairametrics – For data on logistics losses and vendor performance, such as Chowdeck’s delivery milestones.
- X Posts – For real-time stakeholder sentiments and innovative solutions like Dayo Ayoade’s payment engine.
- BusinessDay Nigeria – For broader context on Nigeria’s e-commerce market projections and challenges.
- McKinsey & Company – For reports on digital payment adoption and e-commerce trends in Africa.