After recording seven straight years of decline, Nigeria’s total retail sales improved marginally by 3 percent to $108 billion in 2021, according to a new report.
According to the 2021 Global Retail Development Index (GRDI), Nigeria’s total sales had been trending south falling to $105 billion in 2019 from $109 billion in 2017, $125 billion in 2016 and $135 billion in 2015. But in 2021, it rose to $108 billion.
Analysts at Kearney, a global management consultancy firm, say the Nigerian economy is making a steady recovery from COVID-19, with GDP growth in 2021 expected to be about 2.5 percent and about 2.7 percent in 2022.
“This growth is underpinned by recent government measures including social schemes, cash transfer programmes, and proposed ramped-up spending of $39.7 billion in 2022 by the government. Real household spending growth is expected to accelerate in 2021—growing 1.4 percent year-over-year, up from about 0.9 percent year-over-year growth in 2020,” they further note.
The index ranks 35 emerging countries based on a set of 26 factors, including four key variables: country risk, market attractiveness, market saturation, and sales growth. Data for 2018 and 2019 were absent as the firm now produces it bi-yearly.
Although Nigeria improved in its sales, its ranking dropped by four places to 34th position, scoring 91.9 for market saturation followed by 22.2 for time pressure, 14.8 for market attractiveness and 14.4 for country risk. Its total average score was 39.4 from 35.6 in 2019.
The ranking further highlighted Morocco, Egypt, Ghana, Senegal and Kenya as the top five African countries scoring 52.2, 52.0, 51.9, 48.3 and 45.1, respectively.
Wholesale and retail trade is the second biggest sector by output production. It can be likened as the barometer of consumer purchasing power. The higher the level of consumption, the better the sector performs.
The sector has been touted by economists as an important tool in the quest for development, as it contributes roughly 15-16 percent to the GDP.
But in Africa’s biggest economy, it had been in and out of negative growth territory since 2016 over myriad challenges e.g. macroeconomic volatility, rapid naira’s depreciation, weak purchasing power and household incomes. But it returned to positive growth in Q2 ‘2021, ending eighth consecutive quarters of contraction.
A recent report by FBNQuest shows that Nigeria’s real household consumption as a proportion of Gross Domestic Product (GDP) rose to 76 percent in 2021, the highest level since 2010. According to the report, the surge led to a fast recovery post pandemic for Nigeria’s consumer’s industry.
“People have started coming out more and they have been able to spend on other items beyond the discretionary ones. Also, e-commerce has made it possible to increase the portfolio of what people buy,” Uchenna Uzo, consumer expert and faculty director at the Lagos Business School, states.
Uzo also adds that since the pandemic, new forms of retail have developed such as retail on demand and On-the-Go type, which has now become more accessible to people.
Before the two recessions experienced in the last five years, Nigeria’s retail sector was once a formidable consumer market due to a fast-growing middle class, rising consumer income and urbanisation, which made it an attractive retail investment destination for local and foreign investors.
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But increasing cost of business, inflation and volatility made foreign retailers exit the country e.g Truworths, Mr. Price, Shoprite and Massmart.
“Consumer demand is the fulcrum of retail performance and this had impacted adversely on their performance,” Damilola Adewale, a Lagos-based economic analyst, says.
But last year, Burger King, the world’s second-biggest burger chain, came to Nigeria to set up stores despite the tough business environment.
Apart from Burger King, other retailers that have invested and entered the country recently include Swarovski and South Africa’s Pick n Pay. “International brands such as Mango, Zara, Hugo Boss, Lacoste, and Nike operate in Nigeria under franchise agreements,” analysts at Kearney note.
They also note that e-commerce, an up-and-coming channel in Nigeria, is expected to grow at a compound annual growth rate (CAGR) of 13 to 15 percent from 2020 to 2025, with the high growth being attributed to the fast-growing and youthful population, which are more accustomed to buying online.
