Consumer Demand, E-commerce Drive Nigeria's N200bn Retail Market by Eromosele Abiodun
Investment in the Nigerian retail market has reached an all time high,
attracting over N200 billion in the last two years owing to rising
purchasing power and the huge potential of the Nigerian economy.
Experts believe investors are flocking to the sector as a result of
Nigeria’s potential–a large population, positive macro-economic growth
and a strong appetite for consumer goods.
The recent growth e-commerce is also said to be responsible for the
continued expansion of the retail sector. THISDAY checks revealed that
there are 300 e-commerce sites running in Nigeria. THISDAY’s
investigation also revealed that local and foreign investors have so far
invested $15 million into the industry.
Meanwhile, a report by the Oxford Business Group (OBG) indicate that
both foreign and local investors are dramatically expanding their
domestic retail footprint in the country.
According to OBG, “By the end of June, Shoprite, the continent’s
biggest retailer opened its fifth shop in Nigeria, and another two are
on the cards for the middle of next year. Shoprite, has outlined plans
to open up to 700 stores in the country, and Massmart, South Africa’s
second-largest retailer and partly owned by Walmart, has announced that
it intends to increase its presence from two to 20 stores.
“Also, Spar, Europe’s largest retail network, has partnered with
Nigeria-based Artee Group to tap into the local market, cutting ribbons
at a new outlet in Lagos and one in Abuja. Looking ahead, the firms aim
to increase their Lagos network and expand into Port Harcourt and Ota in
Ogun State over the next six months."
They added that the growth in retail space and opportunity has been
accompanied by strong economic indicators released by the International
Monetary Fund (IMF).
“Real GDP for the year is forecast to grow at around 7 per cent,
according to the IMF. This has had a positive impact on people’s ability
to spend, with GDP per capita levels estimated at $1656, up from $1541
in 2011 and $390 in 2001, according to Renaissance Capital, a
multinational brokerage. The firm also said that the country’s
middle-class segment earns about $6000-7000 per year, bringing the
purchase of modern household goods within range.
“But as development of formal retail gathers momentum, investors are
becoming increasingly attuned to factors that could limit growth.
Firstly, retailers decry the lack of adequate space. Modern outlets are
dependent on the standards of newly built, large shopping malls.
However, cumbersome access to land, high costs and the short duration of
bank financing is constraining developers’ appetite.”
Outside of Nigeria’s commercial centre, the situation is little
different. In Abuja, despite the opening of four malls in the past five
years, it has taken until June 2012 for the Grand Towers to open with
the standards required by international retailers. Other cities, such as
Port Harcourt and Calabar, have yet to see the arrival of their first
city mall.
Inflation, currently at 12.9% and expected to rise to 13.57% by the end
of the year as a result of higher prices following the partial removal
of the fuel subsidy at the start of 2012, is likely to constrain
purchasing power. Furthermore, with more than half of the population
living on less than $1 per day, the inequality of income distribution is
a potential impediment to the growth of formal retail, limiting the
size of the consumer market.
However, scepticism regarding the potential of Nigeria’s modern retail
sector has so far been brushed aside. “Even if you have 60% of the
population living in poverty, 40% of the Nigerian population is still
bigger than the South African population,” Basson said in a statement.
Retailers feel the government has a crucial role to play and have
called for incentives for real estate developers, alleviation of land
access procedures and a greater regard for retail in the country’s
economic policies. “The government should encourage retail as an
industry. It is labour intensive and accessible to workers with basic
levels of education; it is the world’s biggest employer,” Keswani said
in a recent interview with local media.
culled from THISDAY, written by Eromosele Abiodun
