Getting around in Lagos is not for the faint of heart. Inner-city roads are in a state of disrepair, poorly linked, or, in some cases, unusable, causing even more congestion on the available ones. Scores of Lagos residents leave home at 4 or 5 a.m. just to make it to work by 8 or 9 a.m.
Transport in Lagos has desperately needed a transformation for years, but motorcycle taxis known as okadas have been a fixture, since at least the early 1980s, for navigating the unending traffic. In 2017, bike-hailing startups entered the market, fusing tech with the already-established okada system. The vision for one such startup, called Gokada, was to replicate the success of similar ventures in Southeast Asia; Gojek and Grab — which operate in various countries in the region, including Indonesia, Vietnam, and Malaysia — are currently valued at at least $10 billion each. The late Gokada founder, Fahim Saleh, had co-founded a $100 million mobility service in Bangladesh, called Pathao, with funding from Gojek. He told TechCabal in May that he “wanted to see if there was a future in motorcycle ride-sharing transport in Lagos,” and “decided to go to Nigeria and try it out.”
But these startups were operating in an environment where bikes had not always been welcomed. After a former Lagos governor banned okadas from 475 major routes in the city in 2012, new legislation in 2018 under a different administration muddied the waters and offered entrepreneurs a window of opportunity. According to Lagos’ Transport Sector Reform Law, no one is allowed to “ride, drive or propel” a motorcycle or tricycle on a major highway. But a section within the same law exempts motorcycles from those same restrictions, as long as riders and passengers follow the listed rules, and drivers ride bikes above a 200 cylinder capacity (cc). For the average okada rider, an expensive 200 cc bike would have been an unrealistic purchase — most of their bikes are 150 cc or lower — so the new laws paved the way for cash-rich startups to enter the market. Gokada, ORide, and Max, which first began as a bike delivery service, were major players.
These companies also equipped their employees with crash helmets, real-time tracking, and training courses on traffic laws and safety measures. Between 2015 and 2019, Max raised at least $9 million, including a $7 million series A round in June 2019, as bike hailing in Lagos gained traction. That same month, Gokada closed a $5.3 million round. ORide, meanwhile, benefited from the $170 million raised by its parent company, OPay, in 2019. As investors continued to pour money into these new ventures, media reports followed, unambiguous in their hope that these startups would ease Lagos’ choked roads.
Max co-founder Chinedu Azodoh told Rest of World that the company was aware that having the law on their side wouldn’t necessarily translate to a smooth-running operation. “We tried to stay under the radar to get things right, and as things began to make more sense, we came off the radar,” he said. “We also did proper legal checks, and what we were doing, according to the law, was fine really, accepted.”
The difficulties Max and its competitors endured in spite of their preparation illustrates the dangers innovators face in a landscape of hazy government regulations. With the stroke of a government’s pen, years of building and substantial amounts of investor funding could be rendered illegal. Yet industry insiders are aware of the need to work alongside authorities to stand a chance of success; it’s a balancing act they need to get right.
The story of bikes and bike-hailing regulation in Lagos spans three different administrations, beginning in 2012. The current administration, which was sworn in during May 2019, took meetings with representatives of various bike-hailing companies, hinting at a harmonious working relationship and regulations.
But beneath the veneer of government support, the companies were still operating in a gray area. Lawmakers never developed any laws around ride hailing, which made it impossible for the companies to confidently operate. For some companies, like UberBoda, the government’s unclear stance on bike hailing was enough to discourage them from expanding into Nigeria, despite the draw of a much larger market after seeing success in Uganda and Kenya.
SafeBoda, a Ugandan bike-hailing startup, was also deterred by the government’s flip-flopping. Babajide Duroshola, the manager for Nigeria, was brought on in May 2019 to set up shop in Lagos after the company had also grown in Kampala and Nairobi. He told Rest of World that it became apparent a few months into the job that Lagos was not a viable location for the company. SafeBoda launched in Ibadan instead, a city of 6 million residents located two hours away from the booming metropolis.
Gokada hired a government liaison officer in a bid to win lawmakers over. The courting led to more photo-op-worthy partnerships, furthering their hope for favorable regulations. But on January 27, the government announced a ban on motorcycles and three-wheeled vehicles in major areas of the state, which went into effect five days later. The impact was swift: Commuters in the city waited for buses that never came, forcing many to resort to walking long distances in the absence of the bikes they had come to rely on.
The ban was just as devastating for the startups themselves. Gokada laid off 80% of its staff, including riders and employees from the marketing and software teams, two days after the ban went into effect. ORide’s operations were suspended by OPay. Max let go of nearly 2,000 riders and has $6.7 million in assets — including the expensive 200 cc motorcycles — that now cannot be used in other markets, Azodoh said.
Wasiu Olateju Saheed, a former Max driver, told Rest of World that the ban shows just how difficult the government can make life for its constituents. “They don’t think before they act sometimes,” he said. Saheed now works as an independent delivery provider and said making money daily was a guarantee as a bike-hailing driver, “but now, it’s not certain that you [will] make money” in the face of fluctuating demand for deliveries.
The government said bikes and tricycles were security and safety risks incompatible with its vision of Lagos as a megacity, complete with large-scale public transport. But in a city where officials struggle to provide basic necessities like affordable housing and functioning drainage, the dream seems far-fetched to nearly everyone living there — except those in power.
Lagos State Commissioner for Transport Dr. Frederic Oladeinde acknowledged to Rest of World that, although the government had met with the startups impacted by the ban, it was nonetheless enforced as a safety measure.
Oladeinde, who was named transport commissioner in 2019, also explained that “the vision of Lagos is to develop a multimodal public transport, and that does not include motorcycles or tricycles.” And even though ride-hailing app drivers had been given safety training, he maintained that the ban was still justified, doubling down on the need for safety and security across the state.
“We don’t put business above lives,” he said.
The government has often pointed at motorcycles as a leading cause of accidents. Last year, a top official claimed that, between 2011 and early 2019, more than 11,000 people had been killed in motorcycle-related accidents. The National Bureau of Statistics did not start collecting data on nationwide accident figures until 2017, but its data shows 317 people were killed in all Lagos crashes, a figure that is inclusive of motorcycle-related accidents, between 2017 and 2019.
When asked about Gojek and Grab’s success in Asian markets, the commissioner insisted on the importance of recognizing the kinds of transportation that different geographies demand. “It’s not about copying what is happening in other cities,” he said.
Unless, perhaps, the city in question is London.
“I get frustrated when people say, Oh, they use two-wheelers in Asia,” he said. “So why are they not using two-wheelers in London? Because London is smaller and will not promote two-wheelers. London has gone for mass transit; they have gone for the bus system that would move people safely from one point to the other.”
On a global scale, these regulatory mazes have become a rite of passage. Operators of new modes of transportation routinely confront laws they find restrictive or face pushback from the vested interests they’re disrupting. Pathao, Gojek, and Grab have all faced regulatory challenges over the last five years.
But the about-face from the Lagos government points to a landscape where unclear rules have left entrepreneurs flustered. Azodoh, from Max, said the degree and scale of research his team had done before launching in Lagos, knowing what the rules were at the time, made the ban even more mind-boggling.
“Before we took on capital as a business and before our competitors also raised investments, we knew what the law was,” he said. “We got an opinion on it, and investors got an opinion. And it was clear, according to this law [the Road Traffic Regulations], we are allowed to operate. I think the legality of it and the execution are two very different topics.”
The Nigerian government is also grappling with how to regulate a fast-growing tech sector, and experts say missteps along the way are inevitable.
Mma Amara Ekeruche is an economist and research associate at the Centre for the Study of the Economies of Africa, an Abuja-based think tank where she studies development economics. She told Rest of World that Nigeria’s tech regulations are unclear because policymakers have yet to adapt to a digital economy.
“For traditional sectors, like oil and gas, there are age-long laws, so it’s easier to know what you’re getting into,” she said. “But with these emerging sectors, I think the government is still figuring out a way to regulate them.”
Additionally, she warned that the precipitous drop in oil prices has negatively affected Nigeria’s finances, which means government agencies are looking for new ways to fund public expenditure. “It just seems like a lot of the agencies are trying to beat up Nigerians to cough out money,” she added.
Duroshola, of SafeBoda, believes that “rent-seeking,” in which government entities extract money from businesses without any productive contribution, is a nationwide problem that is exacerbated in Lagos. “It’s driven more by ‘We need a share of this cake or this new thing,’ versus ‘Here are the regulatory guidelines to ensure you guys don’t go and play in the areas that would not benefit the end consumer,’” he said.
According to the government, however, bike hailing was simply not a good fit for Lagos. Oladeinde, the transport commissioner, was adamant that “Lagos does not have a policy for two-wheelers,” a direct contradiction to the 2018 law.
Ekeruche said the lack of clarity from various government agencies indicates that “there’s no long-term plan that everybody is working towards,” and that people are “working in silos, and things are just happening sporadically.”
Investors have also been unsettled by the haphazard revenue extraction from businesses and arbitrary regulation. Brian Odhiambo, West Africa director at Novastar Ventures, a venture capital firm that backs African startups, told Rest of World that he hadn’t anticipated a ban when Max was in the midst of a discussion with the government on how to regulate the industry. (Novastar led the $7 million funding round for Max in 2019.) But Odhiambo still believes working with regulators is the way to go in Nigeria’s nascent tech industry.
“We can’t afford to fight the government or think of the government as an enemy,” he said. “We know the government is slow and a little bit behind in innovation. But we encourage companies to engage with the government.”
Ekeruche said regulatory ambiguity makes potential investors wary of investing in technology, leading some to direct their money toward less risky ventures, like treasury bills.
“It signals to foreign investors that there’s no certainty. That either you can’t invest in this country or, when you invest, you have to be on your guard, and you have to be ready to pull out, if it comes down to it,” she said.