Some of the issues facing the industry include regulatory hurdles and political willingness. Others are profitability and operational models.
Business Insider SSA sits down with Akpan expresses optimism that the company’s ORide efforts in the sector will reap dividends at the end of the day. He said the focus of the parent company is to address financial inclusion and help to bring the informal sector into the financial inclusion space leveraging on technologies and global support to make a difference.
OPay’s country manager also shared the company's plans and how riders can join the ride-sharing business model of ORide.
Excerpts from the interview.
BISSA: It was announced that you raised $50 million back in July. Will any of those funds go towards supporting the manufacturing of Motorcycles in Nigeria?
Akpan: No, not exactly. We are not a manufacturing entity. Well, I mean, we have partners who are suppliers and they supply what we need to roll out the bikes.
We also have partners where we assemble locally the bikes and we verify that the bikes meet requirements such as the screen and everything so we have partners who work with us in this regards.
Those partners focus on their expertise while we focus on ours which is operation.
BISSA: Uber’s 2nd-quarter earnings in America showed a $5bn loss. Many have said that the ride-sharing business model is loss-making. Considering the cost of buying Motorcycles and importing them into Nigeria, how do you plan to be profitable without increasing the prices of your rides?
Akpan: It's a long road. No one can say we have to make a profit now because you have to look at the overall picture. The very first thing is, you need to transform the landscape.
For us. Financial Inclusion is very important, in the long term to pay off but in the short term, it may not be so because the kind of market we're focusing on, is for people who have been excluded for many years.
If we focus on financial inclusion as an entity, we are not just in for the money, in the immediate, so it's not a short term thing, it's a long haul. And we're committed to that long haul.
Let's not forget that everything started with Opay. Opay is a payments platform regulated by Central Bank on financial inclusion.
So when we look at all the sectors that we need to play, that's one of the reasons why we also feel that it is needed to invest in the transport sector to empower the typical Okada rider on financial inclusion.
And that also enables people who are the lower levels to be able to also get access to financial service, the kind of service and professionalism that they expect. So it will change over time, I mean profitability is down the road but not in the immediate. Anyone coming into the business expecting to make a quick buck is not going to last. (laughs)
BISSA: Still on the matter of your profitability, what kind of working arrangement do you have with your riders? Is it a contract arrangement or profit-sharing? Are they full-time where they get pensions and healthcare?
Akpan: We have different models for this. The very first is in fact that someone interested in to be the rider normally would get shortlisted. The person will have to go through a verification process including provision of guarantors because we provide the bikes.
When we provide the bikes, the bikes are on lease for 12 months, and at the end of 12 months, when the rider meets the criteria, the rider will own the bike.
So they make returns daily. The returns are shared in a 70:30 ratio. Riders keep 30% in the first year. After the first year, when they own the bikes, they are still part of the network, and then the model changes to 30:70. So they keep 70% of the share while we take 30%.
And then we also have a partnership arrangement with those who also want to invest. They can invest in a bike or rider, and they'll also benefit from the revenue at the end of the period.
We have different models because every company comes with its own expectations and then we look at it together.
BISSA: Is your business model exclusively focused on rides or do you plan on expanding into logistics?
Akpan: Nigeria is still our primary focus market. In the immediate expansion focus, some areas like Abeokuta in Ogun state is going to launch soon.
Other cities like Akure, Aba, Kano are our immediate expansion areas. I'm sure this will happen within August.
BISSA: So, any challenges so far?
Akpan: Certainly, there are challenges. Those challenges are probably with people, riders themselves because you have to train them, you have to change their mindset, you have to educate them about customer service, about being cleaned up, get dressed and professionally, about everything.
Enforcing rules and making sure that the standards are enforced is a bit challenging with people because sometimes Okada Riders need to persuade the riders to wear the helmet even when riders detest it.
There are also challenges on the street with people who have an interest, there are other stakeholders in this also, where you have the unions and all that. I mean, obviously, from time to time they harass the riders, but we are getting all of those stakeholders segment to make sure that all of these challenges are eliminated.
We also have customers and bike riders complaints to attend to. And I think that's the biggest challenge. We respond to them as we see them.
BISSA: You didn't talk about government. Is this why you support the proposed N25 million license fee from the Lagos state government? Many believe existing players in the Motorcycle ride-sharing space support it so they face less competition.
Akpan: There is a lot of talks and there's a lot of things going on around the bike-hailing business.
But as you know, regulation is important. Yeah, you look at the aspect of regulation. If there's no regulation, things fall apart.
For us, we're in engaging the government on how to deal with this, because you must understand that there are risks and issues everywhere.
So nothing has been finalised yet. But I think that we're making progress. And I think that progress will be made. That's the most important.
BISSA: Are there any strategic partnerships you are looking in the near or long term?
Akpan: Partnerships and relationships are important in business and where we find an opportunity to partner, we will partner in whichever sector.
Businesses can grow or expand without the right kind of partnerships. You need people and we will be ready.
BISSA: What’s your view on the capital market and will we ever see a ride-sharing company in Nigeria list on the Nigerian stock exchange to raise capital?
Akpan: Well, we are evolving. Where there are opportunities we will explore those opportunities, I mean, it may be difficult now to say this is when or what we will do. But we are looking at the market and we will decide what the best course of action to take at the right time.
BISSA: Where do you see ORide in the next 5 to 10 years?
Akpan: To be able to make a significant impact on the lives of people who partner with us. Those that will benefit from these moves are from the informal sector.
And as a company that's been a vision and that's been a long term vision. And we will continue to pursue that.