Nigeria’s fast-expanding online trading sector is prompting calls for a clearer regulatory framework, as policymakers and industry participants weigh how to sustain growth while addressing gaps in taxation, data visibility and consumer protection.
Interviews conducted with industry experts and market participants in Lagos and Abuja this week point to a sector that has scaled rapidly since the COVID-19 pandemic, when lockdowns accelerated a shift toward digital transactions. The digital economy now contributes more than 19% to gross domestic product, according to estimates cited by respondents, underscoring its growing macroeconomic weight.
In comments to reporters on April 19, Chris Oputa, director-general of the Nigerian Association of Small Scale Industrialists, said the rise of online commerce reflects both necessity and structural change in consumer behaviour. The widespread adoption of smartphones and social media platforms has lowered barriers to entry for micro, small and medium-sized enterprises, enabling merchants to reach customers without the fixed costs associated with physical retail.
“The habit formed during the pandemic has endured because of clear cost and convenience advantages,” Oputa said. “Eliminating expenses such as shop rent and transportation has made online trading particularly attractive for small businesses.”
That shift has broadened participation in commerce, but it has also moved a growing share of transactions into informal, less visible channels, complicating efforts to measure economic activity and enforce tax compliance.
Oputa said the absence of reliable data on transaction volumes limits the government’s ability to accurately assess the sector’s contribution to output and revenue. As more traders operate remotely, often from homes or mobile setups, traditional mechanisms for levies and market dues have become less effective.
“Many traders now operate outside formal structures, making monitoring and taxation more difficult,” he said.
The expansion has also exposed vulnerabilities around fraud and trust. Weak traceability in peer-to-peer transactions leaves room for bad actors, with cases of fake payment alerts and disputed deliveries cited by both buyers and sellers.
To address these risks, Oputa proposed the introduction of a national verification system for online merchants. Under such a framework, registered vendors would be assigned unique identification codes, allowing consumers to distinguish verified sellers from unregistered operators. He also suggested an insurance-backed compensation scheme for victims of online fraud, funded through contributions from participating traders.
Beyond domestic risks, Oputa warned that unregulated cross-border e-commerce could pressure local industries by increasing imports of finished goods, potentially displacing domestic production and jobs.
Separate comments on April 19 by Nathaniel Oladunjoye, a senior lecturer at Obafemi Awolowo University, highlight the demographic drivers underpinning the sector’s growth. Nigeria’s predominantly young population, combined with the rise of remote and flexible work, has reinforced demand for always-on, digital-first retail channels.
“Online platforms align with irregular schedules and offer the flexibility many young consumers need,” Oladunjoye said. “With smartphone penetration rising, adoption will continue to expand.”
He described the shift as broadly positive, citing efficiency gains for both buyers and sellers, but acknowledged the need for baseline regulation. Ensuring that digital platforms and operators are properly registered could improve accountability while opening new tax channels for the government, he said.
Oladunjoye also pointed to infrastructure constraints as a limiting factor. Internet access remains concentrated in urban centres, restricting participation in rural areas and capping the sector’s inclusive growth potential.
“Expanding broadband infrastructure beyond cities will be critical to integrating rural communities into the digital economy,” he said.
Market participants echo a mix of opportunity and friction. A Lagos-based fashion retailer said social media storefronts have eliminated the need for a physical shop, allowing nationwide reach at lower cost. In Abuja, a gadget seller said operating online has reduced capital requirements but flagged persistent issues with fraudulent buyers and order cancellations.
Consumers report similar trade-offs. Some cite time and cost savings from home delivery, while others highlight inconsistencies in product quality and difficulty in resolving disputes with anonymous sellers.
The convergence of these views points to a central policy challenge: how to formalise a rapidly growing sector without stifling its momentum. Stakeholders broadly agree that a calibrated approach is needed, combining merchant verification, improved data capture, consumer safeguards and targeted taxation.
Any framework, they say, must balance oversight with flexibility, preserving the low entry barriers that have driven entrepreneurship while addressing systemic risks that could erode trust and long-term growth.