A week ago, Uber unexpectly announced its departure from the Nigerian market after spending over a decade building up its presence in Africa’s most populous country. The ride-hailing platform also announced that it would be winding up its operations in Uganda โ also with immediate effect.
With the exit from both Nigeria and Uganda, Uber now remains operational only in a handful of African countries โ namely Egypt, Ghana, Kenya, and South Africa.
“This decision is limited strictly to these two markets and does not impact our operations across the rest of the continent,” Uber said in a statement, adding that their “immediate priority is supporting drivers, riders, and local team members throughout this transition.”
In the last year, the company also closed shop in Ivory Coast and Tanzania while also cutting its global workforce by 10%.
A difficult market to crack
Uber has not managed to grow across much of the African market despite its massive global scale.
The profit-driven ride-hailing app faces stiff competition from rival platforms, including Bolt, inDrive and SafeBoda, which operate in the Nigerian and Ugandan markets and beyond.
However, it’s not only Uber that is dealing with frustration over the current situation.
Many of its drivers across Africa have been raising complaints about shrinking profit margins amid rising fuel costs, inflation and currency volatility in markets like Nigeria.
In their view, Uber’s business model of pocketing around 20 โ 25%ย of any trip fare in commissions is no longer tenable.
Discontent,ย discombobulated and disregarded drivers
Abbas Olamide, an Uber driver in the Nigerian capital Abuja, said the company’s overall service was “good” while stressing that the high commissions were adding to his existing woes.
He told DW that a ride of 30,000 Naira (โฌ 20) “to the airport means the ride-hailing app would deduct 6,000 Naira as commission,” still leaving him to “then pay a gate fee at the airport.”
“Probably because you do not want to go back to town empty handed, we also pay to park at the airport [to pick another client],” he explained.
“At the end of the day, what’s left is no longer enough.”
Samuel Olatunji, an Uber-driver in Lagos, also shared his concerns with DW following the abrupt announcement of Uber’s exit, saying he will now have to recalibrate his own business more.
The 43-year-old driver says he’ll have to join hundreds of other driver who “have to depend on other [ride-hailing] apps now” to ensure any steady stream of income.
“But the amount I take home won’t add up like before again.”
In recent years, drivers like Olamide and Olatunji have staged protests and strikes over soaring operating costs, low fares, and working conditions as well as Nigeria’s fuel hikes, which this year have been worsened by the surge in prices at the pump following the war in Iran.
Their please and concerns, however, remain unheard as they prepare for a bumpy ride ahead.
Dollars versus naira
Uber meanwhile did not provide a detailed explanation for its decision, however, it comes amid a backdrop of double-digit inflation in many places across Africa, which has eroded purchasing power while pushingย millions of people deeper into poverty and the making them less likely to use the transport company.
Ikemesit Effiong, partner at SBM Intelligence, a consulting firm based in Lagos, explained that “[r]ising costs for such things as fuel, vehicle maintenance, insurance, coupled with a currency that is less valuable now than in 2014 means fares were climbing faster than the average Lagos or Abuja rider’s willingness or ability to pay for the convenience.”
Effiong added that when Uber’s cost base is dollar-linked but the drivers’ revenue base is the shrinking naira, the maths stop working, forcing Uber to operate under unsustainably thin profit margins โ despite the fact that Nigeria’s ride hailing market alone is estimated to be worth around $450 million per year.
“These platforms are trying to hold fares low enough to retain price-sensitive riders, while the driver take-home shrinks in real terms. This pushes drivers toward multi-apping, off-platform negotiation, or exit altogether,” he noted.
Effiong further highlightedย that one of Uber’s local competitors, InDrive, does operateย under a negotiated-fare approach, resulting in “less reliance on the capital-heavy, standardized-fare template that works in wealthier markets.”
The complex economics of ride-hailing
There are some striking similarities between the Nigerian and Ugandan markets: Both countries have huge populations and a growing demand for more transport solution.
But both across both Kampala and Lagos, Uber’s exit creates a loss of a service many users had considered safe and reliable option โ more so than some of the other options.
Mary-Esther Anele, a Lagos resident, told DW that she knows that she is “going to start looking for alternatives.
“But most importantly, I’m going to travel less anyway now because transportation costs are going to increase,” she added.
There also are questions about any knock-on effects beyond the current decision by Uber: Will the California-based multinational leave its remaining African markets? Will its pricing change to bring in more money from the continent? And how will competitors respond?
In some other African countriesย like South Africa, ride-hailing apps like Uber have also long been a thorn in the side of taxi companies and minibuses, whose operators say they don’t want to compete against those drivers, at times resorting to violence as part of local taxi wars.
Will Uber’s shrinking footprint in Africa impact these kinds of developments in other markets?
As countless drivers prepare for an unknown future, the end of their partnership with Uber might โ for many โ spell their journey’s end.
Frank Yiga from Kampala contributed to this report.
Edited by: Sertan Sanderson