Lagos, the largest city in Nigeria and the second-most populous city in Africa with a roughly 23.5 million population (2018 by LASG), kickoffs its e-hailing LagRide initiative, directly competing with Uber and other local ride-hailing companies capitalizing on the city’s commercial advantage.
The Reforms and Regulations of Lagos Transport sector
The large population and the urbanisation rate of Lagos, Nigeria’s commercial hub, makes it the focal centre for startups and tech companies, including ride-hailing providers like — Uber, Bolt, and some others — which the majority of their operating revenue is generated from the city.
Although these brands have set their footprints in the state, they have been subjected to regulatory scrutiny that affects their operations amidst other problems — like traffic congestion, police harassment, federal road safety corps, bad roads, touts popularly called “agberos”, etc. — peculiar to the Nigerian situation.
In January 2020, Babajide Sanwo-Olu, Governor of Lagos State, banned motorcycles (bikes mostly called okada in Nigeria), including the tech-enabled operators, the quickest means of road transportation in the city. Reforms like this forced upstart brands like GoKada to hide their existence for a while before pivoting into a courier delivery service.
Just a few months after the ban, the state government also imposed regulations for ride-hailing operators to acquire a provisional license at USD 26,000 (N10 million) per 1,000 vehicles or less; USD 65,000 (N25 million) for a fleet above 1,000 and renew annually at N5 million and N10 million respectively which both motorcycle and taxi operators had been at regulatory loggerheads with the state government since 2018. Also, the state government ask for a 10% service tax on every ride the operators complete. This, the state term as necessary to reduce security risks, improve safety and curb flagrant flouting of existing traffic laws.
LagRide Scheme Kickoff, Nigerians Reactions
In March 2021, the Lagos state government set up a joint venture agreement with CIG Motor Co. Limited to set up a vehicle assembly plant for the take-off of the Lagos Ride scheme in which 1,000 units of brand new Sport Utility Vehicles SUVs will be deployed within Lagos metropolis in the first phase. For Sanwo-Olu, the new scheme code-name “LagRide” with the tagline “ride in comfort” is projected to improve mobility and create a multi-modal transportation system for Lagos growing commuting populace.
In a statement released, he emphasized that – “The scheme is in fulfillment of our desire to give residents better transportation choices. The modern ride service is one of the State Government’s socio-economic intervention programmes, which will be professionally managed in line with global best practices.”
A few days ago, Nigerians spotted a convoy of branded LagRide cars on the third-mainland bridge, which continues to spur reactions.
It is imperative to know that the Lagos Ride scheme, which is ready to be unveiled, had raised quite a lot of eyebrows, especially when netizens discovered that the branded SUVs would typically cost USD 26,000 (₦10 million in Nigeria), even though Sanwo-Olu revealed that the Cooperative Society in the Lagos Ministry of Wealth Creation would give drivers the room to pay monthly instalments for four years.
This is because the ordinary Lagos driver does not purchase brand new vehicles in the transportation industry. They prefer pre-owned cars, also known as Tokunbo cars, because they are less expensive, are believed to be more durable, have readily available components, and professionals with the technical know-how to repair them when necessary. Other drivers who can’t afford to buy these “fairly-used” cars hire them instead. For them, the hire purchase method is straightforward because the repayment plan is flexible, and the initial price is affordable.
The Background Story of Lagos LagRide Scheme: How It All Started
Let’s recall that in March 2020, a ride-hailing service that looked to rival Uber and Bolt, Ekocab, was founded by two entrepreneurs, Nathaniel Gideon and Segun Cole, in partnership with the Lagos state government.
The introduction occurred when people were still feeling the effects of the motorcycles ban and the lingering regulatory focus on ride-hailing tech companies — Uber, Bolt and the likes.
The debut was met with angry comments and controversy, and the app received negative ratings on the Google Play Store.
UNIVASA, a ride-hailing firm that partners with yellow taxis, began in December 2020, generating even more worries about Ekocab’s future. At the time, Ekocab’s CEO assured everyone that everything was well and that the company was planning to introduce a vehicle financing program in collaboration with banks.
In the long run, these projects slowly died down and were considered a failure by netizens.
Now coming back with LagRide, the state government disclosed that this initiative aims to increase ride-sharing and reduce the frequency of single-occupancy driving and solve the state transportation challenges; many perceived it as Governor Sanwo-Olu’s self-interest agenda.
Meanwhile, extensive research conducted on CIG Motors Co. Limited, the company with which the Lagos state government is collaborating on SUVs for the scheme, shows that the company does not assemble vehicles but handles the distribution network of Guangzhou Automobile Group Co. Ltd (GAC motors), a Chinese vehicle manufacturer.
It is vital to recall that Nigeria already has indigenous automobile assembly companies. Innoson Vehicle Manufacturing and Jet Motor Company are two notable examples.
Maybe it would have made more sense to the angry Nigerians if the government had introduced its policies and vehicle financing schemes towards supporting these indigenous vehicle manufacturing companies.
Expert Reaction
Seyi Osiyemi, a former Lagbus manager who now works for the Dubai transportation service, spoke out about the government’s upcoming LagRide initiative.
The former Lagbus manager expressed severe reservations about the scheme for various reasons.
“I get concerned when I see the government get involved in business enterprise that should be private sector-led. Government should rather invest its resources in the provision of public transport instead of competing with the private sector in the ride-hailing business”, he said.
He also talked about the types of automobiles the government plans to launch as part of the scheme. His concerns centred on the vehicles’ endurance, namely their capacity to withstand the rough Lagos roads and traffic conditions, which may see these vehicles parked for long periods. “In all of my years of travel, I have yet to discover a city where Chinese automobiles are employed as taxis,” he added. There has to be a purpose for this. The concern is whether these Chinese-made automobiles can handle Lagos’s tough road and traffic conditions.
Seyi expressed reservations about the scheme’s financial feasibility. His concerns centered on how the average Lagos motorist is supposed to agree to accept an automobile for USD 26,000 (N10 million) thereabout and pay for it within four years.
“I did a quick back of the envelope analysis of the scheme’s financial viability, and the numbers don’t seem to stack up. Interested drivers/partners are expected to make an upfront deposit of 20% equity (₦1.8m/$3,200). In addition, the driver will pay ₦8,700 ($15) per day towards the cost of the vehicle and 25% commission on revenue”, he said.
“Now, let’s do the maths. Assuming 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 the 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. They have to take care of all these while facing competition from more prominent global brands already existing in the state and primarily preferred by Lagosians.
The former Lagbus manager thinks that the scheme is relatively superficial – pretty to look at but far from being deep and realistic to the Lagos situation.
Seyi Osiyemi brought up several legitimate arguments that others have made in the past. While he believes that the initiative is unneeded and that the government should instead focus on enabling private firms to address various societal issues, others believe that the government’s involvement is beneficial.
New York Medallion (LagRide similar scheme) That Left Taxi Drivers in a Mountain of Debt
It is impeccable to be aware of the woes of thousands of New York Taxi drivers sorrowful over a mountain of debt caused by the city’s decades-long Medallion policies (taxi permits).
In order to own and operate a taxi in New York, drivers must first obtain a medallion issued by the Taxi and Limousine Commission, which oversees both the medallion taxi and ride-sharing businesses in the city. The New York City government set a fixed number of taxi medallions at 13,587 in 1937, which remained unaltered even as the city’s population grew by millions. Historically, the medallion was viewed as a wise investment and a path to the middle class for working-class families.
Now fast forward to recent years, and you’ll see that a lot has changed. Drivers would have had to pay $1.3 million to enter their profession at the peak of the market. In comparison, the average New York driver earns only $34,000 per year. The city made a lot of money during the height of the market, selling 350 medallions for $359 million in 2014. Following a decline in price over the last six years, coinciding with the rise of ride-share applications, many drivers are now in debt to the tune of hundreds of thousands of dollars. A medallion cost about $150,000 in 2020. Despite this, cab drivers who purchased a medallion in 2014 have an average debt of nearly $600,000.
All You Need To Know About LagRide and How It Works
“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,” according to a Driver Requirement Document provided by the Lagos state government. It will connect users based on their preferred pick-up and drop-off points, which must be less than 1km apart, and pickup times must be less than 5 minutes apart.”
How to Apply For the Lagos LagRide Scheme
For a prospective LagRide driver, it is required first to make a non-refundable fee of N17,000 to cover the following services:
- Verification of LASDRI ID (where available or they help procure one)
- Verification of LASRAA ID (where available or they help procure one)
- Medical history check
- Security check
- NIN verification
- Driver’s license verification
If a prospective driver passes the test, he must pay a down payment of nearly N1.8 million, followed by N8,709 every day, or N60,963 per week. This will be done for four years before the vehicle can be owned.
For more details and the application process, click here. The Android or iOS app depending can be downloaded by searching for “LagosRide.”
Things to Know About the Lagos LagRide Scheme
- Maintenance and all insurance considerations shall be executed on your behalf.
- You are required to comply with all maintenance service schedules or calls for maintenance; non-compliance attracts a penalty.
- All maintenance requests or complaints about the vehicle in your possession are meant to be logged in the maintenance module in your mobile app.
- Any cost or damage incurred from taking the vehicle to an unauthorized service centre or without prior notice shall be borne by you.
LagRide Scheme Comprehensive insurance considerations cover the following
- Protection against accident, disability, and/or loss of life
- Health insurance for you and your immediate family
- A pension scheme and a defined contribution scheme are also in place.
So far, the scheme seems laudable. However, we still can’t determine how it will differ from previous failed projects or if it will truly revamp the transportation sector as it louds. With time, it will all be clear.
What are your thoughts about the LagRide scheme?
I will love to listen to them in the comment section and share them with our global audience.
