• Friday, March 29, 2024
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BusinessDay

Nigeria’s consumption expenditure and retail opportunity

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The National Bureau of Statistics (NBS) in collaboration with the World Bank recently released its general household survey (Panel) report for 2012/ 2013.

Five-thousand (5,000) households were selected from the NBS’ annual General Household database (cross-sectional, covering all six geo-political zones), and surveyed by the NBS for generating the data.

We have decided to extrapolate the expenditure data from the sample, and see what they tell us about expenditure patterns by Nigerians for certain key items, as well as the companies that are set to benefit as the country’s average 7 percent economic expansion leads to higher consumer spending in the future.household-chart

29.8 million Households, (2012/2013)

The NBS estimates that the average Nigerian family had 5.7 people per household. Using a population of 170 million as at year end 2013, we come to an enlarged household size of 29.8 million people for the entire country.

Several interesting facts from the data-set jump out at us as we tried to analyse and make sense of it. According to the NBS data spending on recharge cards by the average Nigerian household, eclipsed spending on petrol, soap and washing powder and personal care foods.

Recharge card spending by Nigerians is also moving to essential from discretionary spending as 72.3 percent of the sampled households, reported making expenditure to recharge their phones, higher than personal care foods (52.2 percent), and petrol (30.9 percent).

The obvious play for investors are the four telecoms firms (MTN, GLO, AIRTEL, and ETISALAT), who are the major beneficiary, as Nigerians collectively spent N449.7 billion ($2.77 billion) a month, on recharge cards. Unfortunately none of the four firms are currently listed on the NSE, although one could buy MTN group in non-liquid OTC trades.

The average Nigerian household spent N33, 373 a month on house rent, equivalent to N149.1 billion a month in the enlarged BusinessDay sample. With the prospect of increasing household formation as the Nigerian population grows to 400 million by 2050, this is a perfect opportunity for firms in the building material space such as Dangote Cement to continue growing revenues as developers race to meet the estimated 17 million housing deficit.

Soap and washing powder is the quintessential essential commodity as 90.9 percent of Nigerian households reported making a purchase of these items in the past month. Total monthly national household expenditure on soap and washing powder came to N149.2 billion. Unilever, Procter & Gamble and PZ are some listed names set to benefit from the growth of this sector.

The average household spent N13, 860 a month on petrol reflecting the growing middle class as more Nigerians buy cars, as well as the crushing energy deficit as most expenditure on petrol is invariably used to power generators for homes or businesses. When the Dangote Refinery comes on stream (due 2016), it will be well positioned to fill some of the firm demand for petrol.

Household expenditure on mortgages was un-surprisingly disappointing. BusinessDay used the statistically significant 0.2 percent of households reporting expenditure on mortgages, as a basis for calculating the national expenditure number of N3.09 million. The poor spending on mortgages shows both the underdevelopment of the sector as well as the opportunity for financial services firms with the recent establishment of the Fannie Mae modeled Mortgage Refinance Corporation.

By: PATRICK ATUANYA & BALA AUGIE