Nigeria was in the news last week for two big reasons. About 100 girls were allegedly abducted by the Islamist group Boko Haram, which is also believed to be behind a recent attack on the country's capital, Abuja, that left 71 people dead.
Meanwhile, other reports about Nigeria last week covered the recent revision of its gross domestic product (GDP), making it Africa's biggest economy, with a GDP of $510 billion, surpassing South Africa, now Africa's second-largest economy, with a GDP of $310 billion. These two news-making events highlight the two states that the country precariously teeters between: crippling unrest and everybody-wins prosperity.
Nigeria's challenges are well and widely acknowledged. Many of its citizens live in poverty, unemployment rates are high, there's a lack of infrastructure, electricity is sporadic at best, politicians are corrupt, ethnic division continues to disrupt the country -- the list can go on. But Nigeria also has a lot going for it. It's home to Africa's biggest population; the country is resource-rich; its population is eager to work and is highly entrepreneurial; and there's an emerging middle class. All these are a few of the key reasons that Nigeria is one of Goldman Sachs' "Next 11" -- the 11 countries with the most potential to be among the largest economies in the 21st century. It's no wonder that several large companies have made moves into Nigeria -- Porsche and Intercontinental Hotels were early movers, and most recently, on the beauty side, MAC Cosmetics has moved into Nigeria, and L'Oréal will soon.
With all its strengths and weaknesses, Nigeria feels like it's in one of those so-close-yet-so-far situations. It has all the "fixins" to be great. All the pieces are just lying there, waiting to come together. And those pieces seem obvious to those on the outside looking in, but not so obvious to those on the inside.
Plenty of money is being made in Nigeria. According to Bloomberg, "Nigerian millionaires will increase in number by almost 47 percent over the next four years." But much more money can potentially be made. Narrow-sightedness at very high levels is choke-holding the country's financial possibility.
The powers that be in Nigeria don't seem to be thinking big enough or long-term enough. Nigeria having a large GDP and a population that's predicted to surpass that of the United States is wonderful; it makes it an eye-catching investment opportunity.
But if that huge population doesn't become a population with purchasing power, a population that consumes, investors will be few and far between. Precious foreign direct investment will be limited, while Nigeria's growing population becomes more of a liability than an asset.
But if the stars were to align and all the pieces of the "Naija" (as it's colloquially called) puzzle came together, imagine what Nigeria as a leading nation would look like. Imagine what that would mean.
With 62 percent of its almost 170 million citizens living below the poverty line, according to the United Nations, a prosperous Nigeria would obviously be a huge win in the battle against poverty. Also, if Nigeria pushes past its hurdles and gets to where it could be, a blueprint will be lain for other African Nations to follow.
But in addition to the trickle-down monetary effects of industry and job creation, there's also an intangible trick-down effect that can benefit people in and outside of Nigeria. If Nigeria becomes the international power player that it could be, it would change the face of prosperity and power. Who might that inspire? How much more of the world's population might that empower?
It's one thing to exist and not know what you're made of, but it's another to know. Knowing what you can be and where you can go is, in and of itself, a mandate to get going.
The headlines that tout Nigeria as "Africa's New Number One," juxtaposed against those of bombings and abductions, shouldn't be read only as acknowledgements of the nation's current state and its possibility but as urgent calls to action for those leading the country to start seizing opportunities that are being overlooked due to shortsightedness and to start viewing an enabled Nigerian population as an imminent requirement and not some distant theory.
Thursday 24 April 2014
Wednesday 23 April 2014
What do Nigerian households buy?
Obodo
Ejiro
In whatever direction you look, this is a mega retail
market. Though data from most developing markets will confirm that food often constitutes
the bulk of purchases in such markets, Nigeria offers a far more interesting
mix.
Apart from corroborates the pattern of consumption
in developing markets, Nigeria exhibits impressive sales number in such
commodities as electronics, cars, cosmetics, imported packaged foods, children consumables,
etc.
Data made released by GFK, an international market
research company with office in Lagos, shows that as at year end 2013, some 25.6
million units of new mobile and smart phones, 853,124 flat panel TV sets and 363,928
audio home systems were sold across 40 cities in Nigeria (which could proxy 90
percent of total sales).
More phones were sold in the Northern zones than
in the southern zones (excluding Lagos). While 10.5 million phones were sold in
Lagos along, 7.9 million were sold in the northern zones; in the southern zones,
that is excluding Lagos, 7.1 million were sold.
Based on BusinessDay Research and Intelligence
Unit’s (BRIU) calculations, assuming, the average phone costs N7, 000, it will
be safe to assume that over N178.9 billion was expended on phones in Nigeria last
year.
As for flat panel TV sets sales, an interesting
patter is emerging, according to Kenneth Doghudje, Managing Director, GFK
Nigeria, of the 853,124 units sold last year, “what is most remarkable is the
preference for bigger screen sizes. Nearly 8 out of every 10 TVs sold is 32
inches and above.
This shows a remarkable shift from the previous cathode ray
tube TV models that were mostly 21 inches and below that were in use in most
Nigerian homes”. BRIU estimates that TV sets worth about N42.6 billion were bought
by Nigerians last year, based on an average price of N50,000 per unit.
The distribution of sales in the TV market pretty
much follows that of the mobile phone sales pattern. Some 399,778 units sets
were sold in Lagos alone; the south (excluding Lagos) recorded 282,050 sales
while the northern states recorded 171,296 units in sales.
As with smart phones and the TV sets, audio home
system sales in Lagos exceeded all the others states. We estimate that at least
N60 billion was expended on audio home systems.
But this is a modicum of what Nigerians households
spend money on in retail outlets daily.
Rebased consumption figures show that final consumption
expenditure of households rose from N37.6 trillion in 2010 to N49.8 trillion
last year, our estimates is that the figure could hit N52.2trillion by full
year 2014.
Recurring household expenditure is majorly classified
as food or non-food expenditure. Surveys by the National Bureau of statistics (NBS)
have shown that grains and flours, starchy roots, plantain, nuts and seeds,
vegetables, meat, fish, milk and milk products, fats and oil make up the bulk
of items on the food budget. These account for as much as 80 percent of the
food consumed by the average household in the country.
In Q3 2013, Nigeria’s import bill was N2.084 trillion; buoyed among other things by a food and live animals bill which
increased by N51.5 billion or 35.7% compared to Q2 of the same year. Import of prepared foodstuffs, beverages, spirits and vinegar cost the country N355.6
billion.
On the
other hand, expenditure on energy and fuels, water, personal care products, toiletries,
mortgage, transportation, clothing, electronics
and more recently, recharge cards, internet service, make up a reasonable chunk
of non-food expenditure.
For a
medium income country, as the African Development Bank classifies Nigeria, with
a population of 171 million (by year end 2013), the huge population means a lot
of spending on food items.
But what
is even more interesting is that items which were hitherto thought to be
luxuries are increasingly becoming classified as essentials in most households.
(A recent NBS publication shows that expenditure on internet bundles and mobile
phone recharge cards has assumed a more prominent position in household spending.)
Data based on two nationwide surveys NBS/World
Bank Survey show that on average household size in Nigeria is 5.7. Average
rural household (6.1) is larger than the urban household (5.2). Families in the
North-East are the largest with an average of 7.7 while the smallest families
are in South-East and South-West (4.6).
Generally, rural dependency ration is
higher than urban dependency ratio. The NBS data further shows a combination of eye
opening facts and opportunities for business, especially as regards consumption.
It is rather strange that while the national average is 45.6 percent for
households who consume milk/milk products, the south-East and south-south have
higher percentages of families which consume milk/milk products (63.6 percent
and 56.1 percent of households respectively). This spells an opportunity; there
are other commodities which follow this pattern.
We believe that it is gratifying that the
consumption landscape is expanding, but, we hold that it will be more
gratifying if the outputs of locals constitute the bulk of what is consumed,
especially as it pertains to agricultural products.
Our visits to several parts of Nigeria have shown
that much of the agric output does not make its way safely into supermarkets
because of the constraints involved with packaging, storage and distribution.
In a response to one of our articles, a respondent
posted the following comment “…. Furthermore policy direction must lay emphasis
on high level of local contents on retailers’ shelves and shop floors. This way,
local producers and farmers will benefit from the influx [of] world class
retailers into the country”.
We believe that improvement in the distribution
infrastructure, storage (like the Gombe government is planning to do),
standardisation and measurement (like the State of Osun’s government is doing) will improve the distribution
and pricing of agric output and further improve the livelihood of farmers and
local manufacturers who use farm outputs as inputs.
But food and household consumables are just part
of what Nigerians consume daily. In this economy, there are households that are
expending huge sums on an assortment of sophisticated machines, cars, and
luxury goods.
Thursday 10 April 2014
More Household Spending plus Increased Investments in Natural Resources and Infrastructure Mean Higher Growth for Africa
For the past 19 years Sub-Saharan Africa has continued to make impressive strides in sustaining economic growth. After five years of prolonged weakness in the global economy, most countries in the region have continued to register relatively vigorous growth.
Despite emerging challenges, economic activity throughout the region continues to expand: GDP growth is projected to reach 5.2% in 2014, compared with 4.7% in 2013, and will rise to 5.4% in 2015, according to the World Bank’s new Africa’s Pulse, the twice-yearly analysis of the economic trends and latest data on the continent.
According to Africa’s Pulse, the growth in the region is broad based and the prosperous economic activity is supported by strong public and private investment demand and robust household consumption. The rise in commodity prices, and the surge of foreign capital spurred by accommodative monetary policies in high-income economies, is key to the region’s sustained growth since the mid-1990s, the report notes.
“Although Sub-Saharan Africa’s exports remain concentrated in a few strategic commodities, the region’s countries have made substantial progress in diversifying their trading partners,” says Francisco Ferreira, Chief Economist for the World Bank’s Africa Region. “Over the last decade, exports to emerging markets such as the BRICs—Brazil, Russia, India, China—have grown robustly, primarily due to the prolonged boom in commodities demand. The BRICs received only 9%of Sub-Saharan Africa’s exports in 2000 but accounted for 34% of total exports a decade later.”
Across the region there has been a rapid growth in foreign direct investment (FDI). Two investment trends are central to driving this expansion—the extended commodities boom brought about by the unprecedented scale of development in Asia, and the massive expansion of moving international trade activities offshore. The new wave of FDI not only delivers investment and employment but also opens up new opportunities through deeper global trade integration.
Patterns of growth in Sub-Saharan Africa show considerable variation across countries, with resource-rich countries growing at a faster pace than non-resource-rich countries. In fact, the best growth performers in the region (in terms of median annual rates) grew nearly four times as fast as the slow-growing nations in Africa (3.3 and 0.9 percent per annum, respectively, during 1995-2012). Among best performers, resource-rich and non-resource-rich countries such as Rwanda and Ethiopia had comparable growth rates (that exceed 4 percent per annum).
Natural Resources and the Services Sector
Africa’s Pulse shows that the resources and services sectors are Sub-Saharan Africa’s best performers: The share of the resources sector rose from 9%during 1995-99 to 12.5%during 2007-11 while that of services grew from 40% to 47%.
Sub-Saharan Africa’s exports grew at a robust pace, driven by the region’s natural resources. During 1995-2012, the region’s total exports increased from $68 billion to over $400 billion. Most of this increase came from natural resources export. For example, petroleum, minerals, and metal exports ballooned from $38 billion to $300 billion during this period.
While high commodity prices have helped the region in recent years, the heavy reliance on resource-based exports also makes the region highly vulnerable to the shocks in commodity prices.
Growth and Trade Patterns
Export diversification has been limited, mirroring sectoral shifts in the region’s economies, but there has been substantial progress in diversifying trading partners. Strong growth in countries in the region have characteristics that are associated to the structure of production, advances in structural reforms, the influence of the country to the world economy, or sound macroeconomic frameworks.
The challenge for many African countries, particularly oil exporters, is to diversify their exports. Oil-exporting countries rely heavily on a single commodity as their revenue source. For example, Angola, Chad, Equatorial Guinea, Gabon and Nigeria received, on average, more than 92% of their export earnings from oil during 2010-13.
Although, the export revenue share from minerals and metals may not be as high as that from oil, it is still high for some nonoil resource-rich countries—Botswana, Guinea, Mauritania, and Sierra Leone—with earnings more than 50%of their revenue from natural resources.
Some countries have had success in diversifying exports. An example is Tanzania. The country saw major increases in and diversification of output and exports. The production and export of traditional agricultural cash crops (such as cashew nuts, coffee, cotton, tea, sisal, and tobacco) declined considerably in importance. The geographic distribution of Tanzania’s exports also changed considerably over the last decade. Exports to the EU fell, while regional trade, especially with the East African Community (EAC) and South Africa, increased.
Looking Into the Future
There are broad areas in which Sub-Saharan Africa governments need to invest to ensure that growth continues and is shared among entire populations. The report suggests that good governance and institutions; investing in the people of Africa—especially the youth; promoting infrastructure across the region; reducing barriers to trade and investment; and making sure there are adequate services and infrastructure for the rapidly expanding urbanization of African cities and secondary cities are key to maintaining and sharing growth within the region.
Globalization of services is a potentially important source of growth for the Africa region. Several favorable trends that support this view include: services trade is the fastest-growing sector within global trade; the share of modern services is rising; and the share of developing countries in world service exports has been rising. Technology and outsourcing are enabling traditional services to overcome their old constraints such as physical and geographic proximity. Modern services, such as software development, call centers, and outsourced business processes, can be traded like value-added, manufactured products, enabling developing countries that focus on such services, innovation, and technology to leverage services as an important driver of growth.
The question that the region faces is, “Has Sub-Saharan Africa tapped this potential?” The region’s services exports, which total $50 billion, trail all other developing regions; however, these exports are expanding annually at about 12%, on average. Traditional services such as transportation and travel have declined from 73% of total services in 2005 to less than 64%in 2012, while modern services exports in the region have increased their share by over 10 percentage points from just over 26%of total services to about 36% over the same period.
In some countries such as Mauritius, Rwanda, and Tanzania, modern services recorded annual growth rates of over 10%between 2005 and 2012, with Rwanda starting from a low base of less than $40 million in modern services exported in 2005 to over twice that amount at almost $85 million by 2012. In both Mauritius and Rwanda, rapid expansion in modern services is a result of increased activity in tradable business and financial services. Over 60% of those employed in large companies in Mauritius work in the service sector, which offers more employment opportunities than either agriculture or manufacturing. While these countries have experienced the fastest increase in modern services, others like Kenya are also emerging as places where modern services are becoming drivers of growth and development.
“This,” says Punam Chuhan-Pole, Lead Economist in the World Bank’s Africa Region, and author of Africa’s Pulse, “is exciting news for other African countries looking to expand into the globalized services business.”
culled from the world bank website
Despite emerging challenges, economic activity throughout the region continues to expand: GDP growth is projected to reach 5.2% in 2014, compared with 4.7% in 2013, and will rise to 5.4% in 2015, according to the World Bank’s new Africa’s Pulse, the twice-yearly analysis of the economic trends and latest data on the continent.
According to Africa’s Pulse, the growth in the region is broad based and the prosperous economic activity is supported by strong public and private investment demand and robust household consumption. The rise in commodity prices, and the surge of foreign capital spurred by accommodative monetary policies in high-income economies, is key to the region’s sustained growth since the mid-1990s, the report notes.
“Although Sub-Saharan Africa’s exports remain concentrated in a few strategic commodities, the region’s countries have made substantial progress in diversifying their trading partners,” says Francisco Ferreira, Chief Economist for the World Bank’s Africa Region. “Over the last decade, exports to emerging markets such as the BRICs—Brazil, Russia, India, China—have grown robustly, primarily due to the prolonged boom in commodities demand. The BRICs received only 9%of Sub-Saharan Africa’s exports in 2000 but accounted for 34% of total exports a decade later.”
Across the region there has been a rapid growth in foreign direct investment (FDI). Two investment trends are central to driving this expansion—the extended commodities boom brought about by the unprecedented scale of development in Asia, and the massive expansion of moving international trade activities offshore. The new wave of FDI not only delivers investment and employment but also opens up new opportunities through deeper global trade integration.
Patterns of growth in Sub-Saharan Africa show considerable variation across countries, with resource-rich countries growing at a faster pace than non-resource-rich countries. In fact, the best growth performers in the region (in terms of median annual rates) grew nearly four times as fast as the slow-growing nations in Africa (3.3 and 0.9 percent per annum, respectively, during 1995-2012). Among best performers, resource-rich and non-resource-rich countries such as Rwanda and Ethiopia had comparable growth rates (that exceed 4 percent per annum).
Natural Resources and the Services Sector
Africa’s Pulse shows that the resources and services sectors are Sub-Saharan Africa’s best performers: The share of the resources sector rose from 9%during 1995-99 to 12.5%during 2007-11 while that of services grew from 40% to 47%.
Sub-Saharan Africa’s exports grew at a robust pace, driven by the region’s natural resources. During 1995-2012, the region’s total exports increased from $68 billion to over $400 billion. Most of this increase came from natural resources export. For example, petroleum, minerals, and metal exports ballooned from $38 billion to $300 billion during this period.
While high commodity prices have helped the region in recent years, the heavy reliance on resource-based exports also makes the region highly vulnerable to the shocks in commodity prices.
Growth and Trade Patterns
Export diversification has been limited, mirroring sectoral shifts in the region’s economies, but there has been substantial progress in diversifying trading partners. Strong growth in countries in the region have characteristics that are associated to the structure of production, advances in structural reforms, the influence of the country to the world economy, or sound macroeconomic frameworks.
The challenge for many African countries, particularly oil exporters, is to diversify their exports. Oil-exporting countries rely heavily on a single commodity as their revenue source. For example, Angola, Chad, Equatorial Guinea, Gabon and Nigeria received, on average, more than 92% of their export earnings from oil during 2010-13.
Although, the export revenue share from minerals and metals may not be as high as that from oil, it is still high for some nonoil resource-rich countries—Botswana, Guinea, Mauritania, and Sierra Leone—with earnings more than 50%of their revenue from natural resources.
Some countries have had success in diversifying exports. An example is Tanzania. The country saw major increases in and diversification of output and exports. The production and export of traditional agricultural cash crops (such as cashew nuts, coffee, cotton, tea, sisal, and tobacco) declined considerably in importance. The geographic distribution of Tanzania’s exports also changed considerably over the last decade. Exports to the EU fell, while regional trade, especially with the East African Community (EAC) and South Africa, increased.
Looking Into the Future
There are broad areas in which Sub-Saharan Africa governments need to invest to ensure that growth continues and is shared among entire populations. The report suggests that good governance and institutions; investing in the people of Africa—especially the youth; promoting infrastructure across the region; reducing barriers to trade and investment; and making sure there are adequate services and infrastructure for the rapidly expanding urbanization of African cities and secondary cities are key to maintaining and sharing growth within the region.
Globalization of services is a potentially important source of growth for the Africa region. Several favorable trends that support this view include: services trade is the fastest-growing sector within global trade; the share of modern services is rising; and the share of developing countries in world service exports has been rising. Technology and outsourcing are enabling traditional services to overcome their old constraints such as physical and geographic proximity. Modern services, such as software development, call centers, and outsourced business processes, can be traded like value-added, manufactured products, enabling developing countries that focus on such services, innovation, and technology to leverage services as an important driver of growth.
The question that the region faces is, “Has Sub-Saharan Africa tapped this potential?” The region’s services exports, which total $50 billion, trail all other developing regions; however, these exports are expanding annually at about 12%, on average. Traditional services such as transportation and travel have declined from 73% of total services in 2005 to less than 64%in 2012, while modern services exports in the region have increased their share by over 10 percentage points from just over 26%of total services to about 36% over the same period.
In some countries such as Mauritius, Rwanda, and Tanzania, modern services recorded annual growth rates of over 10%between 2005 and 2012, with Rwanda starting from a low base of less than $40 million in modern services exported in 2005 to over twice that amount at almost $85 million by 2012. In both Mauritius and Rwanda, rapid expansion in modern services is a result of increased activity in tradable business and financial services. Over 60% of those employed in large companies in Mauritius work in the service sector, which offers more employment opportunities than either agriculture or manufacturing. While these countries have experienced the fastest increase in modern services, others like Kenya are also emerging as places where modern services are becoming drivers of growth and development.
“This,” says Punam Chuhan-Pole, Lead Economist in the World Bank’s Africa Region, and author of Africa’s Pulse, “is exciting news for other African countries looking to expand into the globalized services business.”
culled from the world bank website
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