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BUMPY RIDE

Bike-hailing companies are paying a heavy price in bribes and levies to operate in Lagos

REUTERS/Temilade Adelaja
Bikes parked on the premises of Gokada in Lagos
By Yomi Kazeem
Published Last updated This article is more than 2 years old.

Motorcycle-hailing companies became mainstream in Lagos, Africa’s largest city, this year on a simple premise: providing a cheaper way than cars to get around Lagos’ notorious traffic jams and being a safer alternative to the chaotic independent commercial motorcycles known locally as okadas. 

Even though the rapid uptake of the services of these app-based companies, including Gokada, Max and ORide, has backed up the value proposition they offer to Lagosians, bike-hailing startups are increasingly facing hurdles that pose existential threats.

Back in July, the Lagos state government proposed regulation which would see each startup pay annual licensing fees of 25 million naira ($70,000) per 1,000 bikes and then 30,000 naira ($83) per bike after the first set of 1,000. The startups, all of which have over 1,000 riders signed up, will also still be expected to pay annual taxes on revenue.

To be clear, operating in Lagos always meant walking legal thin ice given the state’s long-standing ban on commercial motorcyles with less than 200 cylinder capacity (cc) operating on highways and bridges. But bike-hailing startups, largely buoyed by major funding rounds, have invested in more expensive motorcycles above the cylinder capacity threshold and supported their drivers with safety training and gear to differentiate them from okadas and also convince authorities of their social utility.

Max.ng
$7 million
Novastar Ventures
Gokada
$5.3 million
Rise Capital
ORide
Undisclosed
Opera

News of funding rounds and heavy spending on marketing as well as promotion has likely not gone unnoticed by the authorities. Oride, the ride-hailing service of OPay, the Chinese-owned payments service which operates across several verticals has become ubiquitous as the company has pursued aggressive growth with the service essentially a customer acquisition tool for its payments service. Much of ORide’s growth has been fueled by heavily subsidized promotions which have undercut its competitors and has seen its numbers swell—both by users and signed up rider-partners (motorcyclists).

The downside as these bike-hailing startups compete however is they have inadvertently become vulnerable, high-profile rent-seeking targets.

REUTERS/Temilade Adelaja
A paramedic staff stands next to a bike inside the premise of Gokada bike company in Lagos

Following months of reported harassment by the local transport unions, motorcyclists with bike-hailing startups—easily identifiable thanks to their branded bikes and helmets—will now pay 500 naira ($1.38) in daily levies to allow them freely operate in the state. The levied fees are largely seen as state-sanctioned especially as the powerful transport unions enjoy significant political backing in Nigeria’s economic hub. Around 20% of earnings from the daily levies will also be remitted to local government offices across the state.

And then there’s the prospect of having bikes seized by police officers. Despite the state government’s proposed licensing fees which imply an approval of their services, bike-hailing startups are seeing their motorcycles impounded by a police task force which claims they are operating illegally and allegedly breaking traffic laws. Over 3,000 bikes have been impounded in recent months according to the Lagos police command, but rather than permanently seize them, bike-hailing startups can pay to “bail” their bikes. One company exec privately described the harassment and levies from transport unions and ongoing seizure from the police as a “full extortion ring.”

There’s already one cost of the cost-intensive regulatory environment: SafeBoda, the East-African motorcyle-hailing company which announced an expansion to Nigeria earlier this year, says it will no longer consider Lagos for its operations. “I don’t think Lagos [government] wants motorcycles and everything they’ve done has frustrated motorcycle companies” says Babajide Duroshola, Nigeria country head for SafeBoda. Even though the company still plans to fully launch operations in Nigeria next year, it is now considering other major cities instead, including Ibadan.

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