Why Marketplaces Fail in Nigeria: What Winners Do Differently
In 2024, Chopnownow shut down after burning through over $200,000. HerRyde, a women-focused ride-hailing platform, quietly closed its doors. BuyCoins Pro pivoted away from its P2P trading marketplace. Thepeer stopped operations.
These startup failures followed a pattern: platforms promising to connect buyers with sellers, riders with drivers, or users with service providers launched with fanfare, gained early traction, and then collapsed before reaching scale. Founders waste 12 to 18 months. Talented teams burn out. Users become more skeptical. Understanding why marketplaces fail in Nigeria can save you from becoming the next cautionary tale. By the end of this article, you’ll know what trips most marketplaces in Nigeria and how winners solve the two-sided challenge today.
What Makes Two-Sided Marketplaces Different
A two-sided marketplace connects two groups who depend on each other. Jumia connects buyers and sellers. Bolt connects riders and drivers. Neither side gets value unless the other side shows up.
This creates the chicken-and-egg problem: you can’t attract buyers without sellers, and you can’t attract sellers without buyers. You need both sides to reach a critical mass of activity, called liquidity, before the platform becomes useful. Think of liquidity as “there are always enough cars nearby and enough riders requesting”, so people stop waiting and start trusting the app.
In markets with high trust and reliable infrastructure, you can use incentives to quickly jumpstart both sides. But in Nigeria, where trust is low, infrastructure is weak, and cash transactions dominate, that playbook is much more expensive and harder to execute.
The model looks attractive because it feels asset-light and scalable. That’s exactly why founders underestimate the execution challenge.
Why Marketplaces Fail in Nigeria: What Actually Goes Wrong
Most Nigerian marketplace failures aren’t from bad ideas. The problems these platforms try to solve are real. People do need better ways to order food, book rides, find services, or connect with suppliers. The issue is execution in a market that makes every part of the model harder.
Here are the five main reasons why marketplaces fail in Nigeria:
1. The Chicken-and-Egg Trap Gets Worse in Fragmented Markets
Nigeria’s informal economy is massive and fragmented. Aggregating independent vendors onto a platform is expensive and time-consuming.
HerRyde focused on connecting female riders with female drivers for safety. Real need. But finding, verifying, and onboarding enough female drivers in each city required resources they didn’t have. Without enough drivers, riders couldn’t rely on the service. Without enough rides, drivers left.
Compare this to the U.S., where Uber launched in San Francisco and digitized existing black car services. In Nigeria, you’re often building the supply chain from scratch (startup category creation in Nigeria).
Founder signal: If onboarding takes days per vendor and you need hundreds to reach liquidity, you’ll burn runway before you reach density.
2. Trust is Harder to Build Here
Nigerian consumers have been burned before. Delayed deliveries, poor service, and scams. New platforms inherit this trust deficit.
Without a strong brand reputation, verified users, or reliable dispute resolution, platforms struggle. Cash on delivery remains dominant because people don’t trust prepayment. Both buyers and sellers are skeptical, and building trust infrastructure takes time and money.
Founder signal: If 20 percent or more of orders trigger refunds or disputes, you’re leaking trust and cash.
3. Logistics and Infrastructure Kill Margins
Last-mile delivery is expensive. See the World Bank’s Logistics Performance Index for comparative benchmarks. Bad roads, traffic, fuel costs, and inconsistent addressing drive up costs. A 15 percent commission on paper becomes single-digit margins after logistics.
Food delivery is especially challenging. Restaurants have thin margins. Delivery costs are high. Average order values (AOV) are small. Without operational excellence and focused geography, the unit economics rarely work. Platforms like Chowdeck have made it work by owning their logistics infrastructure and starting narrow, but it requires significant capital and execution discipline.
Founder signal: If delivery costs exceed 12 to 15 percent of AOV, your commissions won’t cover ops. See related guidance on startup models to avoid in Nigeria.
4. The Funding Environment Doesn’t Support Long Runways
African tech funding fell from $2.4 billion in 2023 to $1.1 billion in 2024 (Disrupt Africa 2024 report). Marketplaces were hit hardest. Investors shifted toward fintech, healthcare, and energy (sectors with clearer profitability paths). See TechCabal’s State of Tech in Africa H1 2025 for recent trends.
This created a crisis for marketplace startups expecting to raise again in 2024. When capital didn’t materialize, many shut down or pivoted. Even platforms with real traction couldn’t survive if their unit economics weren’t already positive. For more context, see our overview of the Nigerian startup ecosystem.
Founder signal: If your plan assumes a top-up round within 9 to 12 months, you’re exposed.
5. Unit Economics Break Before Scale
Many founders assume “we’ll lose money now but make it up in volume.” Use subsidies to attract users, reach scale, then raise prices once network effects kick in.
This has two problems in Nigeria. First, price-sensitive users churn when subsidies end. Second, you rarely reach the scale needed for positive unit economics before running out of money.
Chopnownow burned over $200,000 trying to build liquidity in Lagos. They subsidized orders and built logistics. But order frequency was low, order values were small, and delivery costs were high. When capital ran out, there was no sustainable business underneath.
Founder signal: If CAC payback exceeds 6 months on either side, you’re scaling a loss.
The Money Trap: Why Funding Doesn’t Always Help
Funding can accelerate death as easily as it can accelerate growth.
Bootstrapped founders can’t afford subsidies or heavy marketing. This forces focus on unit economics from day one. The downside? They often can’t grow fast enough to reach liquidity before competitors with more capital capture the market.
Funded startups grow faster using discounts and ads. But subsidies create brittle businesses. Users who come for discounts often leave when the discounts end. When the 2024 funding winter hit, heavily funded marketplaces that had not yet reached profitability were in trouble. They scaled ops on the assumption of another round. When that dried up, they had to cut the subsidies, driving transactions, and transaction volume collapsed.
Rule of thumb: If 60 to 70 percent of weekly transactions rely on discounts, you don’t yet have product-market fit. To keep a close watch, track your burn rate and runway.
The survivors were platforms that had figured out sustainable unit economics before needing more capital.
How Winners Solve the Two-Sided Challenge
Here is how Nigerian winners solve the two-sided challenge, from controlling supply to fixing trust and unit economics. Here’s what they did:
Moniepoint: Own the Supply Side First
Moniepoint started by building agent banking infrastructure. They visited small shops and kiosks, converting them into banking agents for deposits, withdrawals, and transactions.
They controlled the supply side before they needed demand. By the time they expanded into merchant payments, they had thousands of agents across Nigeria. They had distribution, trust, and transaction volume.
When they launched merchant-facing products, they didn’t have a cold-start problem. Their agent network became the channel to onboard merchants. The marketplace worked because they’d built one side first.
Key metric mastered: Distribution density per LGA before merchant push.
Lesson: Owning or controlling one side before connecting both sides gives you a massive advantage. See also our primer on the fintech business model in Nigeria.
Moove: Solve the Supply Problem, Not Just Matching
Moove finances vehicles for ride-hailing drivers. But they don’t just connect drivers with financing, they own and manage the vehicles.
They buy cars, lease them to drivers with rent-to-own terms, and handle maintenance and insurance. Drivers use the cars on Bolt and Uber. Moove gets paid through weekly deductions from earnings.
They solved the core constraint on the supply side. Many want to drive but can’t afford cars. Banks won’t finance them without collateral. Moove took on the risk using driver earnings as repayment.
Key metrics mastered: Default rate and asset uptime.
Lesson: Marketplaces that solve underlying supply constraints work better than those that just match existing supply and demand.
Sabi: Focus on B2B, Not B2C
Sabi connects informal retailers with distributors and manufacturers. Instead of focusing on end consumers, they concentrated on business-to-business trade.
B2B transactions have higher order values, lower churn, and more predictable repeat behavior. A retailer restocking inventory is a recurring need, not a one-time purchase. The economics work at a lower volume.
Sabi also digitized existing trade networks rather than creating new ones. The relationships existed. Sabi made them more efficient.
Key metric mastered: Monthly repeat order rate from existing retailers.
Lesson: Enhance existing behaviors rather than trying to change them entirely.
Chowdeck: Start Narrow, Own the Experience
Chowdeck proves that even food delivery, one of the most challenging marketplace categories, can succeed with the right execution. Unlike Chopnownow, which spread across Lagos too quickly, Chowdeck focused on specific high-density areas first.
They built their own delivery infrastructure rather than relying entirely on third-party riders. This gave them control over delivery times and customer experience. Their brand promise is speed and reliability, and they invested in operations to actually deliver on it.
They also timed their funding well, raising funds before the 2024 crunch and using that runway to achieve better unit economics before needing additional capital.
Key metric mastered: On-time delivery rate as the north star.
Lesson: Consumer marketplaces can work, but you need operational excellence, not just a matching algorithm. Explore more in our guide to consumer startups in Nigeria.
The International Player Advantage
Before you compare yourself to Bolt, Uber, or Glovo, understand that these platforms have structural advantages most Nigerian founders can’t replicate. They have multi-billion dollar global backing, operations across dozens of countries for economies of scale, and the ability to subsidize losses indefinitely. Bolt can lose money in Nigeria for years because they’re profitable in Europe. Glovo diversifies across food, groceries, and pharmacy in multiple African cities.
Nigerian startups don’t have these luxuries. Your runway is measured in months, not years. Your capital comes from African VCs with smaller fund sizes. The homegrown survivor playbooks (Moniepoint, Chowdeck, Sabi, Moove) are more relevant because they succeeded with constraints similar to what you’ll face. Study them, not the international giants. For founders planning beyond Nigeria, see: Nigerian startups going global.
Quick comparison at a glance
| Aspect | Homegrown survivors | International players |
|---|---|---|
| Supply control | Agents, assets, or distribution owned or tightly managed | Heavy subsidies, global playbooks, and less local ownership |
| Runway | Months must reach sustainable unit economics quickly | Years, can cross-subsidize from profitable markets |
| Geography strategy | Start narrow, expand after liquidity | Launch broadly, spend to win share |
| Trust | Verified users, escrow, on-the-ground ops | Brand spillover from other countries |
| North-star metrics | On-time delivery, repeat order rate, and asset uptime | Gross bookings and MAUs at scale |
| Advantage | Local insight, operational discipline | Capital depth, economies of scale |
Common Threads Among Homegrown Survivors
What survivors share:
- They controlled one side before scaling the other (or focused intensely on one geography)
- They focused on trust and reliability before growth
- They built offline networks (physical presence matters)
- They monetized early (didn’t rely on future scale to fix economics)
- They owned critical infrastructure (logistics, financing, or distribution)
Should You Build a Marketplace? A Reality Check
Before committing time and resources, run through this checklist:
✅ Build if:
You have 18+ months of runway. Through funding or revenue from another business, you can sustain yourself during the time needed to achieve liquidity. This is the hard gate, without runway, everything else is irrelevant.
You already control one side of the market. You have an existing supplier network, fleet, distribution channel, or captive user base. You’re not starting from zero.
You’re solving a B2B or recurring-transaction problem. Business customers have higher lifetime value and more predictable behavior than consumers.
Your vertical is underserved. You’re not launching the fifth food delivery app in Lagos. You’re solving something that hasn’t been digitized yet.
Your margins work at low volume. Even at low transaction counts, each deal contributes positively or breaks even.
❌ Don’t build if:
You need both sides to show up at once. Pure matching problems are hardest to solve in Nigeria right now.
You’re bootstrapping with little capital and no existing network. The cold-start problem will kill you before you gain traction.
Your margins are below 20%. Low-margin marketplaces need massive volume. That’s hard to achieve here without significant capital.
You’re relying on subsidies to grow. If your strategy depends on giving away value until you reach scale, you’re playing a dangerous game. Read more on startup models to avoid in Nigeria.
You’re copying a foreign model without adapting it. “Uber for X” ideas fail when market conditions are completely different.
Ask yourself: “Can this business survive if user growth is 50 percent slower than expected?”
If no, you’re building something too fragile for Nigeria’s realities. Nigeria doesn’t need more marketplaces. It needs better-timed ones.
If You’re Going to Build One, Do This
If you’ve run through the checklist and you’re still confident, here’s how to improve your odds:
1. Start Narrow
Don’t launch across multiple cities simultaneously. Pick one neighborhood in one city. Solve deeply for a small market before expanding. It’s easier to create liquidity in Lekki Phase 1 than across the entire Lagos area.
2. Own Liquidity Before You Scale
Focus on depth of transactions, not vanity metrics. Ten merchants completing 50 transactions per month beat 100 merchants completing two transactions per month.
Active usage matters more than downloads. Build real usage patterns before geographic expansion.
3. Design for Trust
Trust infrastructure is part of your product:
- Verified users (phone and ID verification)
- Transparent pricing (no hidden fees)
- Reliable dispute resolution (fix problems fast)
- NDPA compliance (data protection builds confidence)
These things don’t typically appear in pitch decks, but they’re what keep users engaged.
4. Leverage Partnerships for Hard Problems
Unless you’re solving logistics, payments, or financing directly, partner with someone who already has these capabilities. Don’t build your own logistics network. Work with existing providers. Your competitive advantage is likely in aggregating supply or understanding your niche, rather than in logistics infrastructure.
5. Track Unit Economics Early
Know at any moment:
- Customer Acquisition Cost (CAC): Cost per active user on each side
- Average Revenue Per User (ARPU): Monthly revenue per user
- Gross margin per transaction: What’s left after direct costs
- Payback period: Time until revenue covers acquisition cost
If every transaction loses money, scale multiplies your losses. Understanding your burn rate and runway is critical. The survivors figured out profitable transactions before they scaled.
The Model Isn’t Broken, the Execution Is
Two-sided marketplaces succeed in Nigeria when founders apply the winners’ playbook on supply, trust, and unit economics. Moniepoint, Moove, Sabi, Chowdeck, and others prove it. But they didn’t succeed by copying Silicon Valley playbooks.
The winners blend technology with strong on-ground execution and a deep understanding of local realities. They own their ecosystem rather than just hosting it. They solve supply-side problems rather than just connecting existing supply and demand.
If you’re building a marketplace here, the question isn’t whether the model works. It’s whether you’re building it right for this market. Start smaller, move slower, and focus on unit economics before scale. Own one side before trying to grow both. Treat logistics and trust as product features, not operational details.
The platforms that succeed won’t be the ones with the most funding or flashiest tech. They’ll be the ones that created real value on both sides without burning through their runway first.
This article is part of PlanetWeb’s series on startup mistakes in Nigeria. For more insights and founder-focused resources, explore:
