What do Nigerians look out for in banks?

BusinessDay deployed a comprehensive survey to determine the pattern of behavior, age structure, expectations and preferences of Nigeria’s banking public. The survey was conducted in the six geopolitical zones of the country. 

The pattern of responses captures the traditional distribution of Nigeria’s banking public. Twelve percent of respondents are from the South-South and south-East; Fifty-eight percent from the South-West while the combination of North-East, North-West and North-Central make up 30% of respondents.

According to the National Population Commission, 167 million people live in Nigeria, of this lot 28.6 million adults have bank accounts, according to the 2012 EFInA Access to Financial Services report (39.7% of the adult population remains unbanked).

Clearly, Nigeria has the largest population of people who use banks in sub-Saharan Africa the country may also have the highest number of potential customers and there are potentials for growth.

Our survey brought to the fore the need to strengthen the traditional pillars of banking, as a vast majority of respondents drew attention to financial stability and trust as the basis of their choice of certain banks. Major factors which turn off customers include long queues (57%), non functioning ATM machines (27%), prohibitive charges (19%), etc (please see chart 1). Recommendations from friends, and accounts opened for salary purposes dominate the choice of banks which customers patronize.

 We asked respondents the question: “If you had a billion Naira, which bank would you keep it?.” A number of banks stood out from the pack, we then drilled further by asking why they chose particular institutions, 95% of respondents said they chose the banks because of security. While only 16% said they consider the interest element.

We believe that among other things, the element of stability and financial strength affect the psyche of Nigeria’s banking public, we therefore recommend the emphasis of stability in bank advertising, albeit with proof. We also see prospect for banks which can differentiate themselves by offering competitive deposit rates, both for fixed and saving deposits; though the constraints to banks are clear.

Through the data, we discovered that there is a preponderance of savings accounts in the banking system with fixed deposits representing a far smaller portion of accounts. Ninety percent of respondents have savings accounts while 63% have current accounts. Only 10% of respondents have fixed deposits with banks.

Most respondents who have current accounts also have savings account. Our conclusion is that the probability that a Nigerian who has a current account, also has a savings account could be as high as 0.8.

Preference for savings accounts may not be unconnected with the fact that these days, more savings accounts are assuming Current Account features while Current Accounts continue to maintain “prohibitive” charges (according to respondents). Respondents however stick to particular banks as their main banks.

A cloud view of the open ended question posed to respondents  shows that certain words standout, chief among these words are Customer, ATM, Friendliness, long queue an Internet banking. Some of the most pointed comments made by respondents listed below (they are repeated just as they were said):

• Please increase security for online transactions.

• Zenith Bank should focus more on customers’ satisfaction and efficient and quality service delivery, there is still a lot of catching up to do

• Communicate more on why your e-services should be used

• Banks should increase the number of their ATM machines and make available loans to public servants

• keep up the good work

• The recent First Bank upgrade is not working-always, no network. Do something before we change their name to no network bank

• Banks should always respect customers, no matter how rich or poor the customer may be

• General overhaul of the banking system, training for staff, better equipments and facilities, more ATM machines and branches

• better customer services

• give loans to small businesses especially to people like me who do business with little amount

• We need more banks in Numan, Adamawa state

• GTBank should improve more on their ATM, the so called e-transact centers are nothing to write home about. One or two machines will be working out of seven machines. They really need to buckle up on their ATM terminal. It is a good bank however; especially their online banking is superb.

• My main bank being First Bank, should wean itself of civil service mentality as well as the belief that they are doing small depositors like us a favour by keeping our money, since they have the multinationals and big depositors with them.

One thing is clear; Nigeria’s bank customers more than ever are interested in performance, security, service and quality. They demand better services. But most bank customers stick to their banks for period higher than 5 years and above. 

A comprehensive version of the survey responses is included in our banking report 2013 which is to be published next month.

The future of soft drinks

Factors like perceived and actual health implications of content, and changes in our demographic structure will determine the most profitable soft drink businesses in the future. As Nigerian consumers becomes more concerned about their sugar intake (see chart 1), those producers who effect the right changes to their existing products, packaging and marketing models will have first mover’s advantage. 

A kaleidoscope of patterns emerged when we researched into the expectations, changing tastes and preferences of consumers. One of the most striking is that the Nigerian consumer is becoming increasingly averse to ‘normal sugar variants’ of the soft drinks he has consumed for decades. There is a growing preference for low sugar variants.

Changing tastes in a changing world

Whether it is from the point of view of gender or age, there is the overwhelming shift to low sugar brands (see chart 3 and 4). In terms of age, as individuals grow older; there is this bias for less sugar. The younger generation (which makes up about 42% of the population) has higher preference for low sugar variants.

Unlike in the United States where women are more favourable to low sugar brands, than men. Our research shows that more men (88%) favour low sugar brands than their female (60%) counterparts in Nigeria. In more developed and knowledge driven societies, the desire to maintain a svelte figure drives women to watch their consumption pattern more closely. This trend is yet to take strong root in Nigeria.

Like Selling snow to Eskimos?

We discovered that there is a strong awareness of the existence of low sugar brands in urban centers but an endemic drought in such knowledge in rural areas (see chart 5). Over 70 percent of urban city dwellers (like Lagos, port Harcourt, Benin and Warri) are aware of low sugar brands while less than 40 percent of consumers in less urban places know about low sugar brands.

When we visited Badagry, near Lagos city, even some sellers were ignorant of NBC’s Coca-Cola light. But the consumers were enthusiastic about the prospect of a Cola drink with less sugar. Amazingly, men in such places believe that sugar has negative effect on libidinal levels.

We are of the opinion that selling low sugar is much easier than selling snow to Eskimos. The missing link lies in supply and availability. Clearly, the rural market is largely neglected (see chart 6)
Emerging opportunities

As things stand currently, while most low sugar brands are packages in plastic bottles and sell for between N100-N200/50cl (depending on the location), most Nigerians are more familiar with normal sugar varieties which are packaged in glass bottles and sold for between N50-N100/35 cl. Producers who will act outside the box are those who will seize the moment by repackage low sugar variants into regular glass bottles and hence meet the need of a growing sugar-phobic Nigeria.

Advertising will do a lot of good to skew the market in the direction of this set of producers. In particular, some malt producers have done so already. But jingles which advertise these new brands of low sugar malts and soft drinks as “that malt when get less sugar” or “that mineral when get less sugar” will do a great deal at sensitizing ‘the not so educated consumer’.

Again, is the question of what particular drink has a low sugar variety? Currently, only cola drinks and some malted drinks have low sugar variants. NBC’s Fanta and Sprite do not have low sugar variants neither do SevenUp Bottling Company’s Mountain Dew or Mirinda. The evolution of the market may make it inevitable to produce low sugar variants of these brands in the future.

A few years ago, the United State’s Center for Disease Control linked “excessive intake of sugar drinks to poor diet quality, weight gain, obesity, and, in adults, type 2 diabetes”. Also, Term Life Insurance, an American insurance company published a report which highlighted the harmful effects of excess soda on various parts of the body these concerns will inevitably affect production and consumption in the future.

The identification of a gap in the market is the first inkling of an opportunity. It must not be mistaken that since respondents are willing to pay more for low sugar brands (see chart 7), then it makes business sense to maintain the status quo, the soft drink makers must satisfy changing tastes.

Listen to the king

The customer is referred to as king, so the research process gave room for consumers to bare their minds through an opened question. It must be pointed out that it is difficult to classify all responses to an open-ended question in a research that involved over 1050 respondents. Some of their answers to the question ‘Do you have any advice for the producers’ are below:

• As a health fanatic and fitness freak, I really don’t like carbonated drinks, mostly for their sugar content. But if it is possible to manufacture one with little or no sugar, I’d be grateful. Have you considered using sucrose? It is easily broken down by the body.

• We need to ensure the products are truly low sugar because consumers are often deceived with much noise about product content, what does low sugar mean really? Please tell us the level of sugar in the normal brand and the sugar in the so called low sugar brand.

• Ensure that these products contain what they claim

• Quality control should be taken seriously as particles are sometimes found in soft drinks

• If the drink is tagged low sugar then let them maintain it

• We want natural flavoured drinks with low sugar content and affordable prices

• Both high and low sugar should be produced so that people can enjoy both whenever they like

• Low sugar and normal sugar should be the same price. Coke had low sugar but it dried up in my area, we don’t see it anymore

• Please help me talk to the producers of soft drinks to produce more of low sugar because of my children, their teeth

• Too much sugar leads to hyperglycemia while low sugar in the body leads to hypoglycemia so the producers should come up with products that are with less sugar content

• They should be real when they say its low sugar it should be low sugar. If possible there should be none-sugar

• I prefer carbonated drinks that bubble in the mouth

• Increase the sugar contents in all the drinks

• Sugar is dangerous for adults above 30

• I m indifferent about sugar contents but most adults care, so produce low sugar

• Producers of low sugar versions should make versions of low sugar less expensive
Methodology

We sampled respondents which cut across Nigeria’s demographic stata and asked them questions which bother on the genre of soft drinks they preferred. Questionnaires were distributed via survey sites as well as on a face to face basis. 

Respondents were drawn from cities including Lagos, Porth-Harcout, Warri, Benin, Onitsha, Yola, Ibadan and Abuja. Rural dwellers were also sampled. Analysis was done using two statistical packages, SPSS and Microsoft Excel for Windows.

20:2020: From vision to mirage?

Unlike inthe Judeo-Christian religion, when visions are conceived in economies, there is a need for effective econometric modelling and planning to determine the variables and necessary actions which will make the visions come true. The case of Vision 2020 is that of a lofty vision which was not domiciled on the right sacrifice to make it come true.

Our econometric simulations on the Nigerian economy reveal that if the current rate of growth of GDP and population is sustained in the next eight years, Nigeria’s GDP per capita will be a mere $2,384 by 2020. Sadly, this was the average GDP per capita of the top 20 economies (which Nigeria seeks desperately to be like) as at 1997.

Our forecasts which are based on data provided by the World Bank also indicate that by 2020, if the top economies are to maintain the average growth rate which they have exhibited in the last 10 years (that is if the developed economies can shake off the current economic doldrums), they will have average per capita income of about $60,525 by that time.

If the status quo does not change in Nigeria, the country will remain far behind. The problem of Nigeria’s slow GDP growth and high population growth is an old one. Not that population growth is the major problem, but if we continue to grow population without corresponding GDP growth and reduction in corruption, our future is threatened.

Historic data from the World Bank indicates that on average, nations in the first 20 economic group attained GDP per capita in excess of $1,223 (which was our per capita income a few years ago) around 1960. France, Norway, and the UK had per capita income of $1,320, $1,441; $1,382 by 1960, and have consistently grown since then. One fully understands that Vision 20:2020 is a wild goose chase when one reckons with the reality that the goal is to attain an economic standard which we could not attain in 50 years, in just eight years.

As of 1960, Nigeria’s GDP per capita was a mere $91 and has just managed to grow by 25 per cent in the last 50 years. In the same period, Norway grew per capita income by 59 per cent; while France gained 34 percent. On average, the High Income Countries (HIC) recorded 30 per cent increase in GDP per capita in the last 50 years; while Nigeria saw a rise of a little less than 25 per cent.

Our simulations reveal that Nigeria needs to grow at an uninterrupted rate of between 9.5-12 per cent per annum in the next eight years or miss vision 20:2020 altogether. And since this is unlikely to happen, we can as well come up with a better and more realistic vision.

Given the current circumstances, there are two choices for Nigeria. If the country cannot automatically implement policies that will grow the economy at a faster pace, then it has the option of shifting the goal post. Clearly, the idea of merely believing that developing infrastructure will grow the economy is not good enough.

Infrastructure is a necessary but not sufficient condition for development. We need to start asking ourselves the questions: From which sector of the economy will our economic miracle emerge?  What policies are we putting in place to make the identified sectors realistically viable?

Policy makers and governments within Nigeria need to answer these questions. Nigeria’s political elite should in a sense start thinking like the Chinese. What the Chinese did was to set targets for different sectors of the economy and work towards those targets.

Nigeria has the capacity to attain high growth if the country fires on all cylinders. But all economic indicators point to the fact that Vision 20:2020 cannot be attained. If we must attain some level of improvement in the next 8 years, our growth should be all-inclusive, well coordinated and not restricted to one sector. The country needs to explore all its growth frontiers.

Nigeria’s policymakers have to implement fundamental policies which foster inflow of FDI in a coordinated manner. This inflow of FDI should be coordinated to attain predetermined economic targets. When the right policies are well implemented, the result will be growth and consequently development.

The truth is that Nigeria has not done too badly in terms of growth in the past six years. The problem however is that this growth has not trickled down to the masses. There are prospects for Nigeria’s economic ‘resurgence’, but things will not work by mere uncoordinated visions. We have to do more.