What was billed as an attempt to regulate motorcycle-hailing companies aka Bike-Uber, which had become mainstream in Lagos, Nigeria’s largest city, has quickly turned into something much greater; a vast and intricate web of political and corporate racketeering, involving millions of naira being extorted and funneled to Lagos state governor, Babajide Sanwo-Olu and his cronies in the transportation unions, and elements of the police task force who are impounding and releasing the motorbikes on “bail.”
The racket, which has been fleecing the bike-hailing startup companies and their shareholders out of millions of naira, in annual licensing fees, daily levies and taxes now pose an existential threat, sources tell Huhuonline.com. But this has not dented the appetite of those connected to the scam to demand and receive bribes, in cash, or sometimes in the form of expensive trinkets, including $500 bottles of champagne and wine; described as low-tech kickbacks, to keep it off the books.
Bike-hailing company sources told Huhuonline.com that the arrow head of the racketeering scheme is the Lagos state Commissioner for Transportation, Dr. Fredrick Oladeinde, who is overseeing efforts by the state government aimed at a strategic repositioning of the roads to ease traffic congestion. While the rapid uptake of the services of these bike-hailing, app-based companies, including Gokada, Max and ORide, underscores the value proposition they offer Lagosians as a safer alternative to the chaotic, private commercial motorbikes aka Okadas, Oladeinde claims without evidence that these bike-sharing companies, which provide a cheaper way than cars to get around Lagos’ notorious traffic jams are responsible for the over 60 traffic gridlock junctions and areas across Lagos state.
Back in July, the Lagos state government proposed regulation which would see each bike-hailing 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 1,000. The startups, all of which have over 1,000 riders had no choice but to sign up; and they are still be expected to pay annual taxes on revenue. “This is just plain extortion and criminal,” a bike-sharing source told Huhuonline.com; adding that: “with all the taxes and fees, it is going to be difficult for the companies to break even or get any return on their investments.”
But another source close to Governor Sanwo-Olu, who elected anonymity, because he had not been authorized to comment on the issue, explained that operating in Lagos always meant walking legal thin ice, given the state’s long-standing ban on commercial motorbikes with less than 200 cylinder capacity (cc) operating on highways and bridges. The source disclosed that bike-hailing startups, largely buoyed by major funding, 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 the state government authorities of their social utility value. “The fact that the government has allowed them to operate despite the ban on bikes shows the government recognizes their contribution to help ease the problem of public transportation in Lagos…but if you shine your eye as we say in Lagos, you will realize that the people opposing them are the transport unions who are afraid of competition. The governor has nothing to do with it.”
Huhuonline.com investigations revealed that the bike-hailing companies have been fighting long running battles with the transport unions. Following months of reported harassment by the local transport unions, motorcyclists with bike-hailing startups, easily identifiable thanks to their branded bikes and helmets, finally agreed to pay N500 in daily levies to freely operate in Lagos state. The levied fees are widely perceived as state-sanctioned especially as the powerful transport unions wield significant political clout in Lagos and backed Governor Sanwo-Olu’s election. Besides, about 20% of earnings from the daily levies will be remitted to local government offices across the state.
As if harassment and extortion by Lagos authorities and transport unions were not enough; there’s also the prospect of bikes being seized by police officers. Despite paying the state government’s licensing fees which imply an approval of their services, motorbikes belonging to bike-hailing startups are constantly being 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 executive privately described the harassment and levies from transport unions and ongoing seizure from the police as a “full extortion ring.”
The downside as these bike-hailing startups have inadvertently become vulnerable, high-profile rent-seeking targets is scaring away foreign investors in the sector. Already, the cost-intensive regulatory environment has led to SafeBoda, the East-African motorcycle-hailing company which announced an expansion to Nigeria earlier this year, to say 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, Benin, Port Harcourt and Calabar.
One bike-hailing company exec told Huhuonline.com that the motorcycle-hailing companies were victims of their own success. He said the huge amounts of money raised in startup funding attracted the attention of the authorities and everyone seems to want a piece of the action. In 2019 alone, the three major bike-hailing companies raised over $20 million – Gokada whose leading investor is Rise Capital raised $5.3; Novastar Ventures raised $7 million for Max, while Opera raised a huge undisclosed amount for ORide - the ride-hailing service of OPay, the Chinese-owned payments service.
“News of these funding rounds and heavy spending on marketing as well as promotion could not have gone unnoticed by the authorities,” the source noted. ORide, the ride-hailing service of OPay operates across several verticals and has become ubiquitous as the company has pursued aggressive growth with the service essentially a customer acquisition tool for its payments service, OPay. Huhuonline.com also learnt that much of ORide’s growth has been fueled by heavily subsidized promotions which have undercut its competitors and has seen its numbers dramatically increase -both by users and signed up rider-partners (motorcyclists).
However, Lagos state Governor, Sanwo-Olu, has dismissed the complaints, saying his priority is to rid the state of traffic gridlock. In a statement by his Chief Press Secretary, Gboyega Akosile, on Sunday, Sanwo-Olu, while inspecting the removal of the 2nd Lekki Roundabout, explained the clampdown on bike-hailing activities as part of efforts to ensure a free vehicular movement in Lagos state.
According to him, the state government has embarked on the removal of some roundabouts identified as the major causes of traffic gridlock being experienced by motorists. Huhuonline.com understands that four roundabouts, including Ikotun, 2nd Roundabout on the Lekki-Epe Expressway, Allen Avenue Roundabout and Maryland, will be removed to pave way for road expansion and free flow of traffic.
The governor urged the contractors handling the project to keep up with the current pace of work, so as to ensure its completion in record time. He commended the state’s Environmental Task Force, who are clearing up illegal structures built on the Right of Way (RoW) on the Lekki Coastal Roads, saying that the government would immediately start work in the area to avoid further encroachment and illegal occupation of the large expanse of land.