The phenomenon of an ‘Africa Rising’ has captured a great amount of attention from global businesses with this development evident in the region’s growth figures. The increasing wealth among Nigerians is believed to be fuelling growth in the luxury end market on the continent.
Little wonder recent developments in Nigeria’s retail landscape indicate that the stirrings of a retail revolution are underway. Analysts see Nigeria’s retail sector as an untapped market for retail brands (including luxury brands). The demand for retail and luxury retail brands is gradually on the rise.
Nigeria’s burgeoning middle class, with an ever-increasing amount of disposable income and Lagos, the nation’s most populous city, expected to have more than $25 billion annually in household spending available to it in 2020, point to Nigeria’s retail sector as being on the brink of change.
Lagos, Nigeria’s commercial nerve centre is estimated to host over 10,000 dollar millionaires, according to a recent report by African Business Magazine. In the same vein, Nigerians is home to be the third- highest non-EU spenders in London in 2012, according to the World Wealth Report 2014.
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Wealth Insight forecasts that the number of ultra-wealthy individuals in Nigeria will nearly double over the next ten years. Ultra wealthy individuals are individuals with a networth in excess of $30 million (N4.85 billion). More than 200 Nigerians are currently estimated to be worth more than this amount.
In March 2013, Germany’s luxury carmaker Porsche opened a new dealership on Victoria Island. This is the wealthiest district of Nigeria’s capital Lagos. Its immediate catchment area is home to one of the biggest concentrations of millionaires in the world. What is more, they have a seemingly insatiable appetite for luxury brands.
According to Euromonitor International, “These high net worth individuals (HNWIs) are mostly oil industry executives, entrepreneurs in commodities such as sugar and cement, owners of booming consumer-driven businesses (Nigeria’s economy has grown by an average annual rate of 7 percent in the last five years, and by 8 percent in Lagos) and well-heeled politicians.”
Over the last five years, Nigeria’s HNWIs have done most of their shopping in Milan, Paris, London and Dubai. The retail infrastructure of Lagos has never really been seen as hospitable to luxury brands despite the apparent demand but things are changing.
In April 2014, Italy’s luxury menswear label Ermeneglido Zegna opened a franchise store on the same strip as Porsche (five years down the line this strip could be Lagos’ equivalent of Bond Street or Calle Serrano). Two months earlier, Hugo Boss opened a franchise store in the Palms shopping mall (located on a 45,000 square metre plot of land in Lekki Peninsula).
Other global brands are certain to follow. Prada, for example, has confirmed plans to open in Angola and is a good bet for Nigeria in 2014.
Remarkably, Nigeria is now one of the top 10 biggest markets in the world for Hennessy. The brand launched a commemorative bottle in honour of Nigeria’s 50th anniversary of independence last year, which shows just how important the market has become to its global strategy. In 2014, consumption of cognac is forecast to break the 1 million litres mark (which is higher than in markets such as Mexico, Canada and South Africa).
This is the nub of luxury goods demand in Nigeria. There is a fast growing bling-fuelled consumption culture, driven mainly by men and characterised by a hunger for luxury brands that are big on logos and even bigger on prestige credentials.
In that sense, Nigeria is fairly typical of any fledgling luxury goods market unlike in China, Russia and Brazil where the sophistication (and the spread of wealth) tends to come later.
Peter Harrison, chief executive, Richard Mille Europe, Middle East and Africa, believes that Nigeria is the force today given its enormous population size and lot of available raw materials. As proof of this affluence, Harrison cites the example of a limited edition watch costing about £55,000 and made in a series of 10 that was marketed in Angola’s capital, Luanda, and sold out in days.
Swiss company Ulysse Nardin says a presence in the region is helpful in building awareness, even if big purchases are made elsewhere with its presence in Abuja, Nigeria’s capital.
What definitely bode well for luxury goods in Nigeria are the youthful demographics. The average age of the population in 2012 was 22 compared with 32 in Brazil, 38 in China and 40+ in a number of developed markets. This suggests there will be at the very least an organic expansion of the wealthiest classes.
“Social classes A and B, for example, are forecast to swell by almost 5 million between 2012 and 2020, compared with less than 3 million in the USA and Brazil, for example. Globally, only India and China are forecast to see a bigger expansion of social classes A and B in real terms. By 2020, the total AB class in Nigeria will total around 25 million– that is around 23% more than projections for Germany and the UK combined,” Euromonitor International report stated.
With all eyes on the African continent, home to an estimated 1 billion people and investors coming in their numbers in search of yields, Africa’s own giants are starting to emerge. Until now, the continent is hardly synonymous with wealth and luxury, but the African Development Bank (AfDB) believes this is about to change.
Increasing wealth on the African continent is also fuelling the African luxury market. The number of Africans with $30million in assets is set to grow by 53 percent to 2,858 by 2023, far outstripping the average pace of growth across the rest of the world, according to the Wealth Report 2014.
The Knight Frank Wealth Report 2014 which identifies areas of growth for luxury brands over the next ten years, reveal that the African continent leads the way in luxury brand with Ghana, South Africa, Nigeria, Kenya and Zimbabwe all appearing in the top 10.
Africa’s growth potential is further highlighted in the new Luxury Opportunity Index report, which tracks growth in four areas-Luxury retail footprint, Wealth Creation, Premium air travel and Economic growth. The index show that of the top 10 locations identified in the index, five are in Africa.
Anne Agbaje
