Multi-services startup OPay has announced that it’s suspending some of its business concerns in Nigeria. The company made this known through a statement it put out on Thursday.
The segments to be put on hold include its ride-hailing service ORide and OCar, and its logistics unit OExpress. It attributed this decision to “the harsh business conditions which have affected many Nigerian companies.”
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According to the company, lockdowns induced by the COVID-19 pandemic had negatively impacted its ride-hailing business, just like it had hit others in the same niche elsewhere in the world.
The statement also mentions “government ban” as a reason for shelving these operations– perhaps a reference to the Lagos State Government prohibiting transport bikes from plying the city’s roads.
OPay had launched in Nigeria in 2018 as a fintech startup. It dominated business news headlines the next year, as it raised $170 million from two investment rounds, and diversified into several sectors. Ride-hailing was one; others included food delivery, a marketing vertical for SMEs, and a platform for content creators.
OPay says its move to shrink its services is part of a strategy to “restructure our business away from rides.” It will now be focusing on its fintech business, which was its first offering to Nigerians.
The payments segment appears to have performed strongly thus far this year. OPay disclosed that between January and April, transactions on its payments platforms rose 44%. It pins some of this growth down to the pandemic; the lockdown and the need for contactless payments have led more people to send and receive money via electronic channels.
What Really Happened?
Ride-hailing has indeed been hit very badly by the pandemic. In many parts of the world– including Nigeria –they have had to halt their operations for a while. Companies like Uber and Bolt have implemented cost-cutting measures, which in some cases have involved laying-off thousands of drivers.
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However, OCar’s would-be competitors resumed operations after restrictions on public transportation were lifted.
ORide, the bike-hailing subunit, was dealt a fatal blow when the Lagos State Government banned motorcycles from plying the city’s highways and major roads.
The company’s executives appear to think that battling Bolt and Uber for a share of the ride-hailing market is no longer feasible. The potential customer base has shrunk due to a fall in incomes across the general population. Shedding their transportation-oriented businesses was perhaps the best option they had.
Additional funding from its Chinese investors may have saved some of these businesses. But the appetite for further investments in the company may be low at the moment. The ban on its bikes dealt it a bad hand in this respect. Investors could also be reeling from the impact of COVID-19 on their other investments and may want to protect themselves against further losses.
Also telling is OPay’s decision to focus on its fintech and ecommerce businesses. These segments appear to have performed strongly during the lockdown. It’s expected that they will carry some of that momentum forward, as Nigerians become more comfortable with online marketplaces and payments.
Featured image source: Tech Economy NG
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