Seizing Nigeria’s retail opportunity
These are exciting times for retail in Nigeria! Product offerings is expanding, investment is pouring in from around the world, sophisticated outlets are springing up, and more funds are available to serious “retail practitioners” to access.
Interestingly, development in the sector is not confined to reports and government statistics. The data available from the National Bureau of Statistics as well as the Central Bank corroborate the facts on ground. More than ever, what we are seeing is evidence that the sector is gathering and sustaining momentum.
Unlike in the wholesale and retail sector, the past two years has seen oil’s growth and contribution to Nigeria’s GDP diminish in the face of vicious attacks from crude oil thieves.
In the first halves of 2011, 2012 and 2013, wholesale and retail contributed 15.58 percent, 17.05 percent and 18.44 percent respectively to Nigeria’s GDP. Also, in terms of growth rate, the sector grew by 19.89 percent, 14.72 percent, and 14.51 percent respectively within the same period.
On the flip side, the oil sector recorded negative growth by half year 2012 and 2013. Indeed, retail outperformed all other sectors, including building and construction which traditionally grows fast in a developing country which is serious about progress.
It’s interesting that the changes taking place in the sector offer a number of outstanding opportunities, not just for the demand side of the sector but also the supply side. To the demand side, opportunities have come in form of availability of a broader consumption spectrum, better environments for shoppers, and competition which has made services from retailers better.
On the supply side, a huge market, moderate returns and the guarantee that once brought in, products will be sold is significant comfort for savvy businessmen. But as the market develops there is more to it than this especially in the area of financing. Indeed, more funds are available at the disposal of those who are worthy and really need it to grow their retail businesses.
One of such is the special Market Modernization Fund (MMfund). The MMfund is a financial instrument introduced and financed by the UK department for Development (DFID) and managed by the GEMS Wholesale and Retail Sector Programme (GEMS4). It is a £3.5 million private sector development matching grant fund aimed at stimulating economic growth, improved performance, employment opportunities, and increased incomes in the wholesale and retail sector in Nigeria, with a focus on the foods and fast moving consumer goods (FMCG) important to Nigeria’s poor and women.
Grant funds are awarded to eligible firms through a two- stage competitive application process. Successful bids can receive up to a maximum of £250,000 depending on the funding window. The competition is open solely to organizations registered and operating in Nigeria for proposals to be implemented in Nigeria.
For a market which has as a major challenge, the availability of funds to SMEs, this fund is a relief for eligible firms who meet the criteria for engagement. Ultimately, the MMfund seeks to encourage private sector participation and investment in the development and adoption of new and inclusive business models by demonstrating innovative and successful ways in which businesses operating within the Wholesale and Retail sector can operate commercially and profitably, and work with and for the poor.
The Fund intends to support businesses engaged in the wholesale and retail sector; and related support service providers (such as distribution, intelligence, merchandising and exchange (trade),financial services, and ICT) to pilot or scale up successful projects that meet the eligibility criteria and contribute to the achievement of the fund’s objectives.
But not all funds are coming from external sources; a number of local banks including Diamond bank, Fidelity bank, First bank among others are in the forefront of promoting the activities of retailers, through a variety of tailoured services, including interest sensitive loans.
The retail sector in Nigeria is fast becoming a new frontier for growth in the economy and also in the global retail economy.