Despite the widely accepted perception that Nigeria is exclusively an oil economy, according to a recent report by the McKinsey Global Institute, only 14 percent of Nigeria’s gross domestic product (GDP) comes from resources. While 70 percent of tax revenue and 90 percent of export revenue still come from oil and gas, retail and wholesale trade are in fact the biggest drivers of economic growth in Africa’s largest economy.
The report, “Nigeria’s renewal: Delivering inclusive growth in Africa’s largest economy”, claims the Nigerian consumer market is worth almost $400bn and could be worth as much as $1.4-trillion a year by 2030. Seni Adetu, former MD and CEO of Guinness Nigeria, is a leading expert on consumer behaviour in that country. He has identified four major trends shaping its consumer market in the next five years.
First is the emerging middle class, with its favourable demographics in terms of population size and youthfulness. More than 60 percent of the population is less than 25 years old. A burgeoning consumer market is attracting increasing levels of foreign direct investment. This brings with it higher rates of employment and improved levels of income, which in turn drive further consumer behaviour. Adetu also highlights a significant increase in Nigerians returning from abroad, which, together with improved global communications, is accelerating the development of a brand-led consumerism in Nigeria, with links to Western products and services.
Second, only half of the Nigerian population is urbanised, and as urbanisation increases, so will consumption and the need for convenience purchases.
Third, Nigeria’s large population is characterised by “Generation Y”, with the majority younger than 25. This group is more sophisticated, tech-savvy, media-literate and demanding of quality and comparative pricing. Strategies and branding need to target this market specifically and not generically.
Last, Adetu highlights the growing relevance of women as consumers in Nigeria. Traditionally, women stayed at home to look after the household. Increasing female empowerment, which has brought with it rising employment and financial independence for women, has seen a significant increase in income and a growing female market.
Despite seemingly endless opportunities, retailers and fast-moving consumer goods still face challenges when seeking to take advantage of this rising consumer market.
Adetu flags the highly regulated and taxed market, the stubbornly poor state of infrastructure in Nigeria, especially rail, road, water and power supply — 90 percent of companies use back-up generators — problems with governance and corruption, as well as limited access to potentially lucrative markets in the so-called Muslim north due to insurgencies and insecurity.
Inequality is also a serious concern. For example, residents of Lagos, estimated at about 21-million people, or 12 percent of the population, earn on average twice as much as Nigerians in the rest of the country.
The country is further divided into 36 federal states, each with its own rules and taxes.
The Nigerian market is also complicated by language and culture. More than 500 local languages are spoken by the country’s 250 ethnic groups. This is a challenge to companies developing marketing and communication strategies to access the broad Nigerian market.
Regardless of these challenges, with a GDP of $568bn, a population of about 180-million and favourable economic growth over the past decade, Nigeria is undoubtedly one of the most exciting retail prospects in Africa. But experience shows that companies need to immerse themselves in the intricacies of the market, and embrace the nuances in culture and consumer behaviour that define Nigeria today.
Lyal White & Liezl Rees
White is director of the Centre for Dynamic Markets at the Gordon Institute of Business Science; Rees is the manager.