The verdict in three sentences
In Lagos, cash on delivery (COD) still accounts for roughly 60% of orders because it reassures buyers who don't yet trust online sellers. But it drives returns to 18-30%, ties up your cash for 5-10 days, and makes you eat ₦2,000-4,000 per failed delivery. The real question isn't COD or prepaid, but how to gradually move buyers to prepaid while keeping a safety net.
COD vs prepaid: the 2026 numbers
Cash on delivery is never free: every refused parcel comes back to the hub, the rider is paid anyway, and the money you counted as revenue doesn't exist. Here are the orders of magnitude seen in Lagos in 2026.
| Metric | Cash on delivery | Prepaid (transfer / card / USSD) |
|---|---|---|
| Return / refusal rate | 18-30% | 4-8% |
| Time to cash | 5-10 days | Instant |
| Cost of a failed delivery | ₦2,000-4,000 | ~₦0 |
| Working capital locked | High | None |
| Fraud / fake-buyer risk | High | Low |
| Transaction fee | 0% (but logistics cost) | 1.5-2.5% |
| Share of 2026 orders | ~60% | ~40% |
Prepaid costs 1.5-2.5% in fees but removes the heaviest line item: parcels that come back. On 100 COD orders at ₦12,000, 20 refusals can cost up to ₦70,000 in wasted deliveries — far more than mobile-money fees on the whole basket.
Levers to shift toward prepaid
Banning COD overnight kills conversion. The right move is a gradual shift:
| Lever | Expected effect on prepaid share |
|---|---|
| 5-10% discount for paying upfront | +10-15 points |
| COD only for repeat, already-delivered buyers | +8-12 points |
| Visible COD fee (₦500-1,000) | +6-10 points |
| WhatsApp confirmation before dispatch | -30% fake buyers |
| One-tap prepaid link (pre-filled) | +5-8 points |
A realistic 2026 goal: move from 60% COD to 35-40% within six months without breaking trust.
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Mini case study
Chidi sells phone accessories in Lagos, 200 orders/month at ₦12,000. At 100% COD he suffers 24% returns — 48 failed parcels at ₦3,000 = ₦144,000/month lost, plus 7 days of locked cash.
By offering 7% off for paying upfront, 55% of buyers go prepaid. Returns drop to 12% overall. New returns cost: ~₦72,000. Discount cost: 55% × 200 × ₦12,000 × 7% = ₦92,400… but he's paid instantly and recovers ₦72,000 of parcels. Above all, his cash frees up and goes back into stock. Net working-capital gain: several hundred thousand naira freed up.
FAQ
Will COD disappear in Nigeria by 2026? No. It stays near 60% of orders because online trust builds slowly. The goal is to reduce it, not kill it.
What does a failed delivery really cost in Lagos? Between ₦2,000 and ₦4,000 depending on zone: rider paid, fuel, return to hub and sometimes re-stocking. At 20% returns it eats your whole margin.
Is prepaid mobile money reliable for e-commerce? Yes, at 1.5-2.5% fees with instant settlement. A pre-filled payment link sent over WhatsApp converts far better than manual entry.
What return rate should prepaid target? Between 4 and 8%, versus 18-30% for COD. The gap comes mostly from fake buyers and unconfirmed impulse orders.
Should I charge a fee on COD? Yes — a visible ₦500-1,000 nudges buyers toward prepaid while covering part of the logistics risk.
Let's talk about your project. We set up your store to collect prepaid and cut returns from the first month. WhatsApp +221 77 596 93 33.
Mohamed Bah
Fondateur, Kolonell
Passionate about digital and entrepreneurship in Africa, Mohamed has been helping Sénégalese businesses with their digital transformation since 2020. Founder of Kolonell, he believes every SME deserves a professional and accessible online présence.
