Retail sales rise 50% to $160bn on back of growing disposable income

The phenomenal growth in the disposable income of Nigerians has in the last three years seen sales in the country’s retail market rise 50 percent from $106 billion in 2011 to $160 billion in 2014.

An independent feasibility study conducted on Abuja and Lagos by real estate investors shows that within the 9km trade area of income groups in Abuja, ranging from lowest to highest, 50 percent of the households were in the high income group category, with 78,000 of them earning income of over $150,000 per annum.

In Lagos, within 8km radius of the Ikeja City Mall, there are roughly one million households spending about $1,500 per household per month across the various expenditure classes, giving about $18,000 per annum per household.

Retail market watchers estimate that sales would further rise to $198 billion by 2016.

According to Michael Chu’di Ejekam, director, real estate at Actis, the rising disposable income of the population would continue to attract international companies and world-class retailers such as Carrefour and Pick n Pay, leading to the opening of more retail outlets.

Gbenga Olaniyan of Estate Links Limited says that quite a lot is happening in the retail market with new malls such as Osapa Mall, and Maryland Mall which is rising from the ashes of former Maryland shopping complex.

“We have about 55 percent commitment in Maryland Mall even though we are yet to break ground. The rentals are going up in retail. Osapa is going for $900 per square metre with Shoprite as anchor tenant; Genesis is also there,” Olaniyan says in an interview with BusinessDay.

Ejekam notes that there is a major shift from the purchasing of essentials to more income elastic items which, according to him, gives impetus to the planned entry of many brands that resonate well with Nigerians.

BusinessDay Research and Intelligence Units (BRIU), in its report on the Nigerian Real Estate Market 2014, notes that in 2000 there were no malls in Nigeria, but the number has gone up to 30 in the last decade.

“Though not a big number, it still indicates rising demand for shopping outlets and spaces. However, it might be interesting to note that Lagos has only three ‘A’ Grade shopping malls for its population of over 18 million in comparison to Johannesburg, South Africa, with a population of 4 million, yet it has 72 malls,” BRIU says in the report.

BusinessDay had, in an earlier report, noted that this market was not growing as it ought to, explaining that the growth was held down by challenges in real estate space, the development of which was in turn hampered by issues in land acquisition and the right location.

Ejekam further says the retail revolution remains at its early stages, pointing out, however, that the possibilities are thrilling, which is why groups such as Actis would continue to play a major role in developing world-class retail centres to accommodate the expected expansion of retailers in the marketplace.

“A major hindrance would be the ability of brands to secure local franchisees or joint venture partners. At the moment, there are only a few local players with the expertise and the financial wherewithal to fund working capital to roll out stores,” he says.

BRIU describes the Nigerian real estate sector as a goldmine with ill-equipped miners owing to the multitude of issues the sector is faced with, including unavailability of favourable financing from banks, high interest rates, transfer rates, double taxation, etc.

The report notes that investing in Nigerian real estate is challenged by corruption, unavailability of fundamental data and poor environmental sustainability programmes for the construction of large-scale properties.

“The complex land tenure system in Nigeria has been stifling the growth of the real estate industry. The Land Use Act calls for the governor’s consent for mortgages and land transfers which is expensive as well as tedious,” the report notes.

CHUKA UROKO