Lagos State Is Set To Launch Its Ride-hailing Service Following Its Crackdown On Uber And Others

GoverGovernor of Lagos state, Bababjide Sanwo-Olu pictured in a LagRide

Lagos State, Nigeria is arguably the country’s most popular metropolitan city even with its position as the smallest in terms of land mass. The state’s government is all about making reforms and ensuring that the city is at the forefront of technology, and one area that has seen a lot of reforms in the last few years is its transportation sector.

Back in 2008, the Lagos state government first unveiled the first phase of its Lagos BRT scheme. The scheme which started with 220 buses and plied Lagos roads from 6 a.m. to 10p.m conveying an average figure of 200,000 workers daily, grew astronomically and transported 220 million passengers in the first four years. The scheme is largely recorded as a success. The government has subsequently created lanes for these BRT buses which helps them to avoid traffic while providing comfort at all times and at affordable prices.

Over the years, there has been a shift to ride-hailing services provided by global giants such as Uber, Bolt and some other local ride-hailing services looking to compete with these bigger brands.

These brands, although they have set their footprints in the state, are prone to regulatory scrutiny which affects their operations. A quick diversion from cars… In 2020, the Lagos state government placed a ban on bikes which are like the fastest means of road transport in the state. Budding brands like GoKada had to go under the carpet because of reforms like these. Commercial motorcyclists were at the risk of losing their means of making a living as they were banned from major roads.

Now, ride-hailing services are dealing with regulations, amid other problems peculiar to the Nigerian situation (I’m talking about the police, the federal road safety corps, and what have you). Amid all of these, the Lagos state government is set to launch its ride-hailing service – just like Uber or Bolt, only that the Lagos state government will be behind it. It will be the BRT of cars.

The ride-hailing service was first mentioned by the state government in March 2021. The initiative tagged “LagRide” is aimed at providing a seamless transportation service for Lagosians. The Governor also signed a partnership agreement with CIG Motors Company Limited (a sub-brand of GAC Co.) for the take-off of the scheme with a pilot fleet of 1,000 units of brand new Sport Utility Vehicles SUVs.

LagRides spotted on the Third Mainland Bridge

Speaking on the imminent launch of the ride hailing service, Seyi Osiyemi, a former manager at Lagbus currently working with the Dubai transport service, and he had quite a lot to say about the LagRide scheme about to be introduced by the government.

The former Lagbus manager said he had major concerns about the scheme for quite a handful of considerable reasons.

“I get concerned when I see government get involve in business enterprise that should be private sector-led. Government should rather invest its resources in provision of public transport instead of competing with private sector in the ride-hailing business”, he started.

In his opinion, it was a source of concern that the government was looking at participating in businesses that should be handled by private individuals and companies. In other words, the former Lagbus manager deems the venture as unnecessary and unhealthy competition with private businesses. He thinks that at most, it should be a public-private partnership.

He went ahead to raise concerns about the type of vehicles that the government is looking at launching for the initiative. His concerns ran deep into the durability of the vehicles – their ability to survive the harsh roads of Lagos and traffic conditions that may see these cars stay on the roads for long hours. He said that “In my years of travel, I’m yet to visit any city where Chinese vehicles are used for taxis. And they must be a reason for that. The question is, can these Chinese brand vehicles withstand the harsh road and traffic conditions in Lagos? …..only time will tell”.

Techbooky did deep research into CIG Motors Company Limited, the company the Lagos state government is partnering with for cars meant for the scheme. CIG Motors Company Limited is a Chinese Vehicle manufacturer operating under the umbrella of Guangzhou Automobile Group Co.

In March 2021 when the Lagos state government introduced the scheme, the branded SUV vehicles that’ll be offered to drivers through the scheme would typically cost ₦10 million per vehicle. Governor Babajide Sanwo-Olu mentioned that the Cooperative Society in the Lagos Ministry of Wealth Creation will allow drivers to pay monthly instalments for a period of four years. At the end of the period, the cars would belong to the drivers and they can use these cars while being a part of the scheme.

The price tag of these cars and also the rate at which repayment is expected to be done have raised quite a lot of eyebrows. This is because the average Lagos driver does not buy brand new cars for transportation business. They’d rather prefer pre-owned cars commonly referred to as Tokunbo cars because they are cheaper, believed to be durable, their parts can easily be found in the market and there are mechanics with the technical know-how on how to fix these cars when the need be. Other drivers who cannot afford to pay for these “fairly-used” cars resort to hire purchase. The hire purchase system is quite easy for them because the repayment plan is flexible and the price attached in the first place is doable.

Seyi Osiyemi cited concerns relating to the financial viability of the scheme. His concerns surrounded how the average Lagos driver is expected to agree to take a car worth millions and how they are expected to pay within a four-year period.

“I did a quick back of the envelope analysis of the scheme financial viability and the numbers don’t seem to stack up. Interested driver/partner are expected to make upfront deposit of 20% equity (₦1.8m/$3,200). In addition, the driver will pay ₦8,700 ($15) per day towards cost of the vehicle and 25% commission on revenue”, he said.

“Now let’s do the maths. Let’s assume a driver makes a daily revenue of ₦25,000 ($44). A full tank of petrol for the day will cost him about ₦8,000 ($14). He will also pay 25% commission, which is ₦6,250 ($11), plus ₦8,700 ($15) per day towards repayment cost of the asset. So at the end of the day, the driver is only left with ₦2,000 ($3.60) per day. So how’s the vehicle going to be maintained?”he asked. All these they have to take care of while facing competition from bigger global brands already existing in the state and largely preferred by Lagosians.

The former Lagbus manager thinks that the scheme is quite superficial – pretty to look at but is far from being deep and realistic to at least the Lagos situation.

“And lastly, this is not the first time that government will be involved in ‘leasing’ of vehicles for taxis to private individuals. This is usually disguised as ‘empowerment programs’. However, what we don’t know is how this scheme will be different from previous failed projects. But in the meantime, let’s watch this space”, he added.

Seyi Osiyemi raised quite some valid point which others have thrown intimations about in the past. While there are people that think that the scheme may be unnecessary and that the government should be looking at creating an enabling environment for private businesses taking care of one problem or the other in society, others think that it is a good thing that the government is getting involved.

Per a Driver Requirement Document issued by the state government, “Lagos Ride is a smart mobility solution that allows users to book and share the cost of a ride from their preferred pickup to drop off locations respectively. It will link users up based on their preferred  pick and drop off points, each not more than 1km apart respectively, on a pick-up time not more than 5 minutes apart”.

The document went further to say that “We believe this service will contribute to a reduction in traffic congestion in Lagos as it will encourage ride-sharing and therefore reduce the frequency of single occupancy driving. This scheme was set up as part of ongoing effort of Lagos state government to optimize the transit experience of Lagosians. The state though its investment company, Ibile Holdings intervened in the acquisition of 1,000 brand new cars to be used on the Lagos Ride platform.  The cars will be made available to interested partners/drivers after a down payment of 20 percent has been made and balance payment will be deducted from daily fares/earnings over a maximum period of four years.”

For now, we are not sure if the scheme will end up being another abandoned project or if it will be one of those that would revamp the transportation sector. I guess we’ll only find out with time.