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.