The market for ride hailing in Lagos State is huge but investors & founders would need to terms with the intricacies of a fairly complex industry in the light of the political and commercial interests of the Lagos State Government in the transportation sector in Lagos State.Here are some key considerations
- The system design for provision of bus services by Lagos State is akin to a net cost route contract, albeit with local distinctions around royalty and subsidy payments.
- If your business is to provide bus services, bear in mind that route regulation exists for bus services. Transport routes in Lagos have been franchised to operators who have the contractual right to grant a sub-franchise to third party bus operators. Aside from the risk of regulatory action, there exists legal basis for an existing operator to sue a new entrant where such new entrant provides bus services on a franchised route. It’s important for investors to be deal with the proper counter-party.
- There is also a new Bus Law that creates/empowers a statutory corporation, – separate from the Lagos Metropolitan Area Transport Authority (LAMATA) – to be responsible for reforming the public bus sector in Lagos. The corporation has extensive powers to create and franchise bus routes, own bus depots and install intelligent transport systems. There exists the possibility of an overlap with a portion of LAMATA’s mandate but there is a greater opportunity for both agencies to work together synergistically.
- Lagos currently adopts an existing franchising system that requires taxi-hailing companies to register/obtain licensing as franchisees and for all taxi cabs to also undergo taxi licensing.
- There is a concern that the existing regulatory framework for taxi-hailing services does not adequately reflect the operational realities of a taxi-hailing service. This concern is valid. Here’s why, in summary – The existing legal framework works mostly on the key assumption that taxi ownership is central. i.e. X buys/provides ‘1000’ taxis and with government approval, brands the taxis a certain colour. X applies for and obtains a taxi franchise and then provide drivers, who must meet certain operational requirements, including displaying taxi badges and rate/fare cards in the Taxi. The taxis must be affixed with a sealed/government-approved Taxi-meters and use taxi-stands created by government on highways. The key assumption is valid only in a traditional sense because owner and user decentralization is typically a key element of the ride-hailing model. Regulators will need to better understand the scope of the decentralisation that technology presents within the transport sector, in order to deliver intelligent regulation. We expect that separate regulations would subsist for both models.
- Safety considerations remain the biggest concern for regulators in regard to bike hailing business in Lagos, hence the existing prohibitions for operating commercial motorcycles on roads within Lagos State. Industry would have to propose/implement a higher level of personal safety precautioning, to get concessions in this area from the government
- Financial projections and operations modelling will need to recognise and be sensitive to the additional costs arising from prevalent infrastructure gaps in Lagos.
- Price regulations are feasible across board. The relevant laws allow government agency to determine the fare price, time/days of service for the provision of Bus Services
- Driver qualification regulation across board including provisions including maximum driving hours for each driver
- There is still a lot of value lost to sub-optimal route utilization. We expect that Lagos State will prioritize route optimization as one of focal points of ongoing reforms
- Industry players need to take responsibility for their industry and engage the regulators proactively and strategically to prevent overregulation
Kindly reach out to your Balogun Harold contact for additional information or via support@balogunharold.com[/vc_column_text][/vc_column][/vc_row]
