Over the last decades, Nigeria’s retail industry has witnessed impressive growth. This growth has been driven by investments from both foreign investors and retailers who found the country’s huge population and growing middle class extremely attractive.
A McKinsey Global Institute report titled ‘Nigeria’s renewal: Delivering inclusive growth in Africa’s largest economy’ says Nigeria can build on the past momentum of the past decade and, if all goes well, achieve 7.1 per cent annual GDP and could exceed $1.6 trillion in 2030 and be among the top-20 economy.
In an interview with BusinessDay, Tobias Wasmuht, SPAR’s CEO, said the reason for the influx and expansion of foreign retailers into Nigeria is because they see a lot of opportunities in the country’s retail market which, he said, is underserved when compared to other markets in Africa.
With a population of 50 million, South Africa has over 5,000 modern supermarkets and modern trade stores, which when compared with Nigeria’s population, reveals the reason for growing interest in Nigeria.
Like many African countries, informal retail still dominates sales in Nigeria where over 50 per cent of sales are done through distribution channels such as kiosks, table-top sellers, street hawkers and markets. The country’s informal retail sector is believed to be worth billions in Naira but, unfortunately, this is unaccounted for in the nation’s GDP.
However, the industry is in the process of modernising with a number of western-styled shopping centres taking shape across the country, though most of the malls are anchored by South African retailers. According to Dirk Prinsloo, managing manager of Urban Studies, South Africa has the sixth highest number of shopping centres, behind only US, Japan, Canada, the UK, and China.
The retail industry is the accelerator to overall economic development and contributes massively to GDP as the sector is connected to all sectors, be it -telecommunication, manufacturing, agriculture, healthcare, banking, real estate, SME development or human capital development.
Retail is a major mass employment driver for Nigeria with the lowest entry barrier to employment for the youth. One shopping mall plaza employs around 8,000 people directly and indirectly.
According to Euromonitor, the retail sector experienced a sluggish growth in 2017 even though value sales in 2017 were higher than in 2016. The slower growth was due to the general increase in prices as a result of the recession in 2016 with late economic recovery in 2017.
Retail is part of the service sectors and the largest employer worldwide. According to a 2014 data obtained from a recent report by Retail Council of Nigeria, the service sector employed 79 per cent of people in the United Kingdom, 77 per cent in Brazil, 33 per cent in India and 34 per cent in Indonesia.
With an urban and semi-urban population of about 45 million, Nigeria has an appetite for 450 shopping plazas and malls with a job creation opportunity for 3.5 million people. According to a report by Retail Council of Nigeria, this has the capability to create revenue of N9 trillion per annum and contribute to government revenue through taxation of N1.4 trillion per annum.
Despite the decline in commodity prices, dwindling revenues and fragile currencies, a report by PricewaterhouseCoopers (PwC), which shows maximum growth potentials for retail and consumer businesses in Sub-Sahara Africa countries, named Nigeria among the top 10 choice markets for expansion.
Haresh Keswani, MD Artee Group, in a report, said an increase in population, innovation and investment in retailing and other related infrastructure, coupled with rapid urbanisation of many cities are factors expected to boost the retail industry in Nigeria over the forecast period benefiting all related industries at large.
The snowballing effect of retail development will help enrich lives of several individuals, taking them through the career from being a successful employee to an entrepreneur and finally employer.
Retail revolution has the capacity to make Nigeria self-sufficient with an efficient and effective workforce and can propel Nigeria towards an export oriented economy.
