Over a decade ago, Nigeria was at cusp of an economic boom as investors had wagered that the country’s rapidly expanding middle class, and a copious young population that craved for consumption would spur growth.
Developers began to respond to the aforementioned benign environment and positive optimism by building American style shopping mall, home to famous end brand stores, movie theatres and large supermarket chains.
In short Chinese developers and other Asian investors were looking to invest in the country’s malls.
However, the economic recession of 2016 that stoked a severe dollar scarcity that paralyzed business activities have crimped consumer spending, and the once thriving malls are not a shadow of themselves.
Nigerians are getting poorer as over 50 percent of a population of 200 million live on less than $1.98 a day; little wonder the country has overtaken India as the world’s poverty capital.
Unemployment rate is at an all-time high of 23 percent, and to further exacerbate the already anaemic situation of consumers is the incessant fuel hike and devaluation of the currency.
While inflation rate has fallen to a 12 month of 11.22 percent in May, the figure is below the central bank’s target range of 6 percent and 9 percent.
Gross domestic product in Africa’s largest oil producer expanded by 2.01 percent in the three months through March from a year earlier. That compares with 2.4 percent expansion in the fourth quarter. The median estimate of five economists surveyed by Bloomberg was for growth
Because consumers have refused to open their purse spring, tenants are finding it practically difficult to meet their obligations to landlords.
Most malls charge dollar rents—around $55 per square meter monthly—tenants were soon paying more than before given the sharp fall of Nigeria’s naira currency.
A tenant, who is a wife to a publisher of the one of the top Nigeria Newspapers, and who doesn’t want her name mentioned, said that the economic uncertainty served to limit budget of consumers and that most shoppers focus on buying basic goods and have reined on spending on non-essential goods.
“A of my customers, who are high earned consumers, have relocated from the country to seek greener pastures. The situation is worrisome, we can’t even break even,” she said.
Experts have preferred solutions to of high rent for would be tenant retailers.
Dolapo Omidire, lead researcher at Estate Intel, said investors would have to build less elaborate and smaller malls of around 7,000 square meters —around half of the size of typical large malls—and simply focus on delivering space at affordable rates.
”If I build a $100 million mall and people are showing up just to take pictures, then it’s a big problem” said Omidire, in a recent interview with Quartz.
Embattled retailers at the Apapa shopping mall have refused to open their stores while tenants are shrinking their foot sprints more quietly by choosing not to renew expiring lease.
A total of 22 out of the 36 outlets of the two storey malls are empty, and perhaps more worrisome is that only one tenant- Spectranet- occupies a tranquil and deserted top floor that houses 15 shops, while 7 have no occupants downstairs.
Ruff N Tumble- baby cloth merchant-, Cash and Carry-a luxury, clothes and accessory firm- exited the building two years ago while Ren Money- a loan and investment firms- left last year.
Other retailers that had exited Apapa malls include Samsung/Sports, Bheergz Café, Sunta- a first class clothing firm- and Homely.
In 2018, the retail industry in Nigeria posted slow growth in value terms at constant 2018 prices due to harsh and unpredictably macroeconomic environment and a volatile currency.
Accroding to experts, the retail sector contributes as much as 16 per cent to Nigeria’s Gross Domestic Product (GDP).
A report by McKinsey and Company, a New York-based management consulting firm, also estimated that the growth opportunity in food and consumer goods in Nigeria will reach $40 billion in 2020.
Analysts at Euro Monitor are of the view that the country is expected to record solid value growth, but growth is expected to pick up following the inauguration of a new government, supported by anticipated economic growth and a rise in disposable incomes.
A young technology savvy people that prefer the comfort of a mall to the brink and mortals shops will be a major driver of retail activities.
However, the lack of policy direction and delay in implementing strategic policies by the President Muhammadu led administration have been a prang to economic growth.
For instance, it took the president six months to appoint his cabinet, a habit that has prevented foreign investors from investing their money in Naira assets.
The refusal to float the currency at the zenith of the economic crisis of 2015-16 stalled foreign investment and aggravated a dollar scarcity as investors fretted that they it could be difficult for them to repatriate their money. The consequences were that manufacturers, who were unable to source dollars to import raw materials and equipment, lay off staff.
BALA AUGIE
