Nigeria is on the march, it seems, towards a consumer society. Nigeria is developing a large consuming class.
This rise in consumption will be driven by higher income levels, with a report by research firm McKinsey Global Institutes forecasting 35m households to 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 phenomenal growth in the disposable income level of Nigerians.
Over the past three years, retail sales in the country have risen by 50 per cent from $106 billion in 2011 to $160 billion in 2014 according to Business Day sources.
An independent feasibility study conducted in Abuja by real estate investors shows that within the 9km trade area of income groups in Abuja, ranging from lowest to highest, 50 per cent of the households were in the high income group category, with 78,000 of them earning income of over $150,000 per annum.
In Lagos, within 8km radius of the Ikeja City Mall, there were roughly one million households spending about $1,500 per household per month across various expenditure classes, giving about $18,000 per annum per household.
Analysts estimate that sales would further rise to $198 billion by 2016.
Global investors and business leaders are paying increasing attention to Nigeria and Africa as a whole, which is widely regarded as the next frontier for this type of transformative growth.
“What China did 10-15 years ago, we’ll see happen with Nigeria, the biggest consumer market in Africa,” says Nicolas Clavel of commodities specialist, Scipion.
World-class retailers such as Prada, Carrefour, Pick n Pay and high-end watch brand Cartier are looking to the opening of more retail outlets in the country.
Today, Nigeria’s consumer market is worth nearly $400 billion per year and, based on this expanding consuming class with a lot more disposable income could more than triple by 2030, to almost $1 trillion according to a report released in July by research firm McKinsey Global Institutes.
There has also been a lot of movement in the high-end consumer market lately.
Only last year, German car manufacturer Porsche opened a new luxury showroom in Nigeria’s most exclusive neighbourhood, Victoria Island. It hopes to sell roughly 300 units every year.
Luxury alcohol is another sector in which there has been a lot of activity. The market pulling in the most interest is Nigeria. The country is now the second-fastest growing market in the world for Champagne. In 2012, Champagne consumption in Nigeria was worth $59m and it could reach $105m, or 1.1m litres, by 2017.
In April, a distribution agreement between Pernod Ricard Nigeria and the CFAO Group in Nigeria came into action, which covers Pernod Ricard’s whole portfolio but a few brands.
The growth potential of this sector has attracted investment by high-end consumer goods makers and retailers from around the world, a trend that is only likely to increase as Nigeria grows wealthier. In 2012 and 2013, foreign direct investment in retail totalled $1.3 billion (N205.4bn).
Nigeria’s cognac market is now bigger than Canada’s and the country is in the top 10 largest markets for Hennessy cognac.
Online retail continues to provide an exciting opportunity, in terms of convenience, for Nigeria’s growing consumer class. Longer working hours, digital awareness and the desire to avoid traffic congestions, particularly in Lagos and other major cities, has brought about an increase in demand.
According to reports by Euro-Monitor International 2014, “Non-store retailing current retail value growth of 24 per cent in 2013 was fuelled by the rapid growth, over the last five years, of the internet retailing channel, which recorded current retail value growth of 33 per cent in 2013”.
With a huge consumer market, increasing disposable income and digital awareness, Nigeria represents one of the biggest opportunities for the retail sector in Africa.
DAN OJABO
