Growth in retailing in Nigeria is outpacing the country’s GDP and the sector is set to enjoy even greater success thanks to a steady and ever-growing demand from its burgeoning middle class, reports Joseph Dika
Nigeria has attracted investment of around $1.3bn in the retail sector over the last two years and is a major driver of economic growth, job creation and wealth generation. Minister of Industry, Trade and Investment Olusegun Aganga stresses that Nigeria offers great opportunities for both existing and new investors.
“The retail sector is the glue that binds economic activities together, by connecting the final consumers to products from the producers. The impact of retail in Nigeria cannot be over-emphasised because, like anywhere in the world, it is a major driver of the economy.”
He goes on to say: “Nigeria is a retailer’s delight. With a population of 167 million people (the seventh-largest in the world), consumer spending well in excess of $100bn a year and a fast growing middle class, this is definitely the most promising market on the continent. In addition, more than 80 million Nigerians live in metropolitan areas, creating huge opportunities for formal retail to thrive. The pace of developments within Nigerian retail has really been breath-taking.”
In February last year, Aganga presided over the launch of the inauguration of the Retail Council of Nigeria, which he said would accelerate the growth and development of the nation’s retail sector, adding that his ministry would work with all the stakeholders to strengthen the industry.
He comments: “The launch of the Retail Council of Nigeria is consistent with our mandate on facilitating domestic and international trade and will accelerate our national agenda to develop the retail sector. This inauguration could not have come at a better time, given the fact that, for the first time ever, my ministry recently developed strategies for domestic, African and international trade; I am pleased to inform you that having a modern retail sector is central to our domestic trade strategy.
“Our domestic trade strategy promotes large trade aggregators and hubs, such as formal shopping malls, sizeable wholesalers and a modernised retail sector in general. We, therefore, need to work together, both the public and private sectors, to fully develop Nigeria’s retail sector as part of this strategy.”
According to a report released by research firm McKinsey Global Institute, Nigeria’s consumption could rise to $1.4 trillion a year by 2030 from its present level of $388 billion, an average annual increase of eight per cent.
This rise in consumption will be driven by higher income levels, with the report forecasting that 35 million households will be earning more than $7,500 a year by 2030, greatly expanding the middle-income bracket. This increased affluence is expected to result in a 7.1 per cent annual growth in sales of both food and non-food consumer goods. The rise of non-food goods such as personal care products will record an even sharper rate of growth, with sales predicted to rise by 10.6 per cent a year through to 2030, compared to 6.8 per cent for food.
Today, retail has gone beyond merely meeting purchasing needs. The concept of present-day shopping is a major improvement on what it used to be, especially with exciting one-stop shopping that presents the convenience and unique experience of retail, leisure, entertainment, movies and games all under one roof.
It is no surprise, therefore, that the latest shopping phenomenon in Nigeria is the mega-mall. The first site was inaugurated in 2005, when South African grocery chain Shoprite and other retailers began trading from the Palms Mall in Lagos. The mega-mall concept has been hugely popular in Nigeria as it has become the place to be seen for aspiring Nigerians. These malls have also further increased the trend towards modern retailing.
Although there are now eight shopping malls spread across Nigeria, retailers have found the high rent at these locations to be a major deterrent, leading to a steady turnover in merchants. Also, many of the Nigerians who love to “see and be seen” at the mall cannot afford the products being sold at the high-end international retail stores that are based there.
Leading store operators in the country include Shoprite, Justrite, Silverbird and Mr Price; then there are the online retail sites such as Konga, OLX, Ju’mia and V-Connect, which have begun to make their presence felt, recording strong growth since 2012. This is a particularly attractive proposition since it means that shoppers can avoid the appalling traffic chaos that besets the major urban areas.
The Silverbird Galleria, a huge shopping and entertainment centre, which first launched at Ahmadu Bello Way, Victoria Island, has recently established an even bigger version of the same in Abuja and is working with regional governments to set up locations in other states. Then there is the Tinapa complex, a retail development in Calabar, Cross River State associated with the Calabar Free Trade Zone. It is being developed in four phases under a Private Public Partnership promoted by the Government of Cross River State.
The sky is the limit when it comes to the prospects of the retail sector in Nigeria, because of the huge potential market occasioned by the country’s large population and the growing middle class. Centre Manager at Ikeja mall Sander Norman expresses optimism about the development of shopping malls noting: “What matters to us is great service delivery in order to achieve maximum satisfaction for our customers”. He firmly believes that, given Nigeria’s vast human and material resources, the number of shopping malls will definitely increase in future.
CEO of property consultant Cluttons’ Nigeria HQ, Erejuwa Gbadebo, says that she foresees an increasing number of retail chains making their entry into this attractive market.
“More foreign investors will come in to compete, franchises will arrive from the US, Europe and South East Asia, especially Singapore, over the next few years. These enterprises will be encouraged by the success stories of retail chains and the steadfast appetite of Nigerians for consumer goods,” she comments.
She notes: “Local brands will enjoy the benefit of being introduced in the formal supply chain. They will become more more competitive in terms of price and quality. The trickle-down effect will include better packaging and presentation of Made in Nigeria products.”
Meanwhile, Chief Executive Officer at Delightsome Gifts Concept in Lagos Modupe Shopeju says: “Nigeria’s retail environment has achieved considerable growth over time and this can mainly be attributed to its population, which is generating increasing demand for a variety of different products.”
Another factor of growth within Nigeria’s retail industry is the level of sophistication shown by national consumers; since the local population has more highly evolved tastes nowadays, there is therefore the tendency towards a growing demand for more quality products and trusted brands.