Nigeria’s commercial capital, Lagos effectively shut down bike-hailing activities last year after authorities banned motorcycles from plying major roads in the state. However, another city in the country, Ibadan has turned out to be a safe haven for the bike-hailing startup, Safeboda.
The company, which recently marked its one-year anniversary in Nigeria’s bike-hailing space, has now completed more than 1 million rides in Ibadan. Remarkably, Safeboda has hit the milestone in just about 13 months of operations.
So, the Technext team hosted a Twitter Spaces on Tuesday with Safeboda Country Manager, Babajide Duroshola on “Running a Digital business outside Lagos“.
He shared some interesting insights.
Lagos does not value bike-hailing businesses
Babajide did not mince words when describing the Lagos state government’s position on bike-hailing startups.
Based on our engagements and conversations with the Lagos state government, as a team, we decided that these people do not see the value in the okada business so we had more risks going into the state.
The Safeboda boss acknowledged that this influenced the startup’s location choice, but says the decision to launch in Ibadan had been made before Lagos proscribed bike-hailing.
“We had actually moved to Ibadan before the Lagos ban. We announced in October 2019 that we were launching operations there later in December. But it didn’t make sense for us to launch during the festive period so we moved it forward. We had made that decision before the Lagos ban.”
The Lagos ban just made it seem like a very smart decision
He goes on to explain that the Lagos government’s stance pushed the team into checking out other cities to understand some of the important landscape and indices that would make it easy to roll out the business in any of those places.
For Ogun, the state shares too many similarities in Lagos. In many ways, it is in competition with Lagos and as such, might be likely to adopt strategies from its more illustrious neighbour, if not improve on them totally. This made it a high-risk state.
Lagos ≠ Nigeria
During the live audio-chat session, Babajide addresses the false perception a lot of people might have about Lagos, which prevents many businesses from seeing other states as viable markets.
People see Lagos as Nigeria, but that is not necessarily true because once you step outside Lagos, which is a very commercial city, the landscape and dynamics are quite different.
Babajide Duroshola
But, he points out that Lagos is clearly at the forefront of Nigeria’s economic development, as shown by the state’s Federation Account Allocation Committee (FAAC) quota and internally generated revenue (IGR).
“Lagos typically gives us a fair sense of what Nigeria is as a country, whether it’s as regards people’s earning power or income per capita. Even from the FAAC allocations and IGR, you can see the massive difference between Lagos and every other state,” he said.
In 2020, Lagos State posted an IGR of ₦418.99 billion, accounting for 32.1% of Nigeria’s total ₦1.31 trillion and about ₦100 million more than the combined IGR of Abuja (₦92.06 billion), Delta (₦59.73 billion), and Kaduna (₦50.75 billion).
Data source: National Bureau of Statistics (NBS)
However, this doesn’t necessarily mean that businesses cannot thrive outside Lagos. Babajide gives an example: It’s interesting that many people don’t know this, but Smile Telecoms actually started in Ibadan before they moved to Lagos.
“We’ve seen situations where businesses start out in other cities and then expand to the commercial capital (Lagos). Building businesses outside Lagos is a bit tricky to be honest because I think people are more price-sensitive. In Lagos, people are still kind of sensitive but it’s already very inflated.”
So when you’re building your business outside Lagos, that is when you start to see things where people are very particular about ₦10, fighting for ₦20 change, so it’s a very interesting dynamic.
Why Ibadan?
Why not? Having overseen Safeboda’s operations in Ibadan for over a year, Babajide says the city is a viable market filled with highly intellectual people.
“You look at Ibadan and it is one of the most educated cities in Nigeria. You have the University of Ibadan (UI) there, then the University College Hospital (UCH) as well. It’s a city that isn’t so commercial but still has that viability especially because it is close to a commercial city.”
According to Babajide, starting out in Ibadan didn’t bring up too many issues for Safeboda. He says smartphone adoption was very high and people understood how to work with basic apps.
Drivers were interestingly tech-savvy, we even had drivers who understood how to upgrade a smartphone and things like that.
“That did set up the basis for us to build the business. Every other thing was more of education, design, product-market fit and setting prices for a sensitive market,” he said.
So what advantages do cities like Ibadan possess over Lagos?
Lagos can be a real hustle for digital businesses, with startups having to deal with everything from transactional government policies to poor transport infrastructure and unreasonably high operating costs.
Lagos is a commercial city, and everything is transactional including government policies so you kind of struggle. Also, the city infrastructure is nothing to write home about. You have very good employees who end up spending up to two hours of their time in traffic daily.
“But in Ibadan, you find that the average person is commuting in about 30 minutes so people are more relaxed and refreshed, although we’re beginning to see some change in that dynamics where more traffic is coming in.”
To be honest with you, for a business like mine (Safeboda), I’d really like traffic to happen because it then means that people need bikes to get around a lot faster. Though things are still kind of expensive, the quality of life in Ibadan is considerably better than Lagos.
Babajide then gives two interesting analogies to buttress his point. First, 6 bunches of bananas priced at ₦800 per bunch in Lagos will cost you a total of ₦750 in Ibadan! “I was even thinking of starting a banana business,” he says rather jokingly.
Then you can actually put up a billboard in Ibadan for as low as ₦50,000!
But how do you deal with the fear of missing out?
Many entrepreneurs are sceptical about building a business outside Lagos because residents in the commercial capital generally earn more than those in other Nigerian states.
Responding to whether this is really a concern, Babajide explains that a business’s choice of location will largely depend on its operating model.
He says a bike-hailing startup like Safeboda literally needs feet on the ground and cannot function fully remotely like Risevest, Cowrywise or others which still have customers use their services under any circumstances.
Babajide then makes a case for Ibadan by referring to the COVID-19 lockdown period during which Safeboda operations, if in Lagos, would have been completely shut down.
Everybody just likes to be in Lagos and it still borders around some of these social issues like going to a new city to start a new trend or the fear of the unknown.
“I remember at some point when Andela went fully remote, I knew some of the developers who started moving to Ibadan because it gave them a better quality of life. They were able to get better houses, good internet, provide themselves with power supply and live a better quality of life compared to Lagos.”
In fact, when you go out of Lagos, the air is different.
Getting Top Talents in Ibadan
How easy or difficult was it for the Safeboda team to find the fitting talents for the kind of culture and performance they were trying to create in Ibadan, knowing that most of the best talents in Nigeria reside in Lagos?
Babajide gives a detailed answer.
“Interestingly, there are different cadres to our talent pool. There is the management pool of talents that already have the experience of working in businesses, helping to scale businesses and building strategic relationships. We struggled with finding talents within that category but were very lucky that our Head of Marketing was already Ibadan-based though he was in Lagos at that point in time so we just basically took him back to Ibadan.”
What we had to do was import these guys, give them very good offers, assist with relocation and on the whole make them realise they would have a higher standard of living in Ibadan compared to Lagos.
Ibadan is a very educational city, so it’s very easy to get really good entry-level talents, brush them up and train them till they do have a good understanding of the business, how to build operational processes and stuff like that.
“We did struggle for the senior talents but for the junior talents we didn’t necessarily struggle so much in finding people,” he added.
Lagos undoubtedly remains Nigeria’s biggest market for digital businesses, but it is not the only viable one.
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