Whats happening in Nigeria's retail market? (1)

In a four part series Obodo Ejiro examines trends in Nigeria's retail market

 Retail in Nigeria was once confined to traditional open markets and small local store keepers who serviced communities, which are also loosely referred to as the informal retail sector of the Nigerian economy. Today, Nigeria is experiencing a tremendous shift to a more sophisticated structure as formal or organized retail continues to gain ascendency. The distribution chain and the organization of outlets continue to reflect that of a rapidly evolving economy as standards of living improve and as the population continues to snowball. Indeed, the old structure of retail continues to give way to the new.

 

Data provided by the National Bureau of Statistics (NBS) shows that between 2001 and 2004, the retail sector of the economy grew by 10% per annum. By 2006, the combined contribution to Gross Domestic Product (GDP) of the retail, wholesale and hospitality industries was almost 16%.

Once adjusted to account for over 90 percent of the retail paraphernalia in the country, the old exchange structure has been largely diminished by government policy, changes in the structure of the population, changes in the income level of incomes and increasing sophistication of the Nigeria consumer. More than ever, the Nigerian consumer is interested in a decent shopping environment, neatly arranged and labeled commodities and the experience that goes with buying at an organized shopping outlet. This change is accounted for by a combination of factors including the stable political environment, consistently high oil prices, population growth, expansion of the middle class and sustained economic growth.

In the midst of the Nigerian retail revolution, the traditional method has not fully given way to the new, but there are indications that the future of formal retail in Nigeria is bright. This throws up a number of opportunities for institutional retail investors, who are taking advantage of the market.

The opportunities in the retail sector stem from the fact that demand for commodities which constitute raw material for the retail industry have continued to soar. Based on the structure and level of development of the economy, the average Nigerian household spends as much as 80% of its income on consumables like food and drinks, clothing, transportation, shelter, education, electronics and power supply. Devotion to consumption has played a major role in elevating Nigeria as a 167 million people populated power house for retail.

Nigeria has evolved from a country which had a population estimated at 150 million people with no real mega retail store in 2005, to that with a population of 167 million people with a fair number of mega stores scattered across its major cities and smaller yet organized stores which are boosting the retail trade.