Huge opportunity for investors as only 2% of Nigerians shop in formal retail

Despite the Nigerian challenging business environment, a huge investment opportunity exists in the country’s retail sector as only 2 percent of its over 170 million population do their shopping in formal retail supermarkets, meaning that 98 percent others are out there waiting to be served.

This opportunity is however awaiting investors who are willing to take a long-term approach to investments.

Retail trade presently accounts for about 30 percent of the world’s GDP, which is about $22 trillion of retail sales each year. Omotola Mobolurin, chairman, Purple Capital Partners Limited, quotes an official government data as saying Nigeria attracted over $1.5 billion in investments into its formal retail sector over the last three years.

Available statistics also show that over 80 million Nigerians now live in metropolitan areas, creating huge opportunities for formal retail to thrive. The observable growth seen in the retail sector up to the last quarter of last year, when unfavourable government policies started taking toll on the sector, was driven largely by the country’s strong demographics.

Gavin Cox, Retail Portfolio executive at Broll Nigeria, is of the view that with the emerging economic status, favourable demographics comprising large, young, growing, urbanising population, opportunities for investment and growth exist in the African retail environment as a whole.

Yet, with these compelling fundamentals, investment inflow is quite deficient of expectation and analysts see this as a major challenge that should be of grave concern to the government of the country.

“Though this is a huge opportunity for investment in this sector, it is also a major challenge for the country because, at 2 percent, Nigeria is trailing its peers like South Africa, Kenya and Ghana where 60 percent, 30 percent and 4 percent respectively of citizens shop in formal retail supermarkets”, says an analyst who pleaded anonymity.

The analyst blames this on the difficulty in doing business in this country coupled with the challenges associated with import and access to foreign exchange.

Recently, Nigeria was ranked 168 out of 189 in the World Bank Index. It was adjudged one of the most difficult countries to do business globally and, in more ways than one, this has contracted the volume of both local and foreign investment in the country.

In the real estate generally, the country lags behind countries like Ghana, Thailand and New Zealand in ease of registering property which explains why its mortgage sector has the least contribution to Gross Domestic Product (GDP) relative to other countries of the world.

Registering a property in Nigeria takes an average of 12 procedures, lasts nearly four months and costs about 15 percent of the property value as against neighbouring Ghana, where it requires just five procedures, 34 days and 1.3 percent of the property value.

 “We have to up our game in the way we do business in the country – in Lagos state in particular,” Ademola Abass, special adviser, Lagos State Office of Overseas Affairs and Investment (Lagos Global), advised at a ‘Stakeholders’ Forum on Ease of Doing Business in Nigeria’ held in Lagos recently.