Wholesale and retail trade in Nigeria

In the 1980s, the Structural Adjustment Programme (SAP) significantly shattered the middle class and sapped the supermarkets; traditional open markets, street vendors and kiosks moved in to the fill the space. Consequently, supermarkets, small groceries and traditional open-air markets share of the retail food space is 1 percent, 34 percent and 65 percent, respectively.

However, a ‘retail revolution’ is in motion. Shopping malls – from Lagos to Kano – are replacing traditional open-air markets to attend to the emerging middle class. Shoprite, Massmart and Spar are dominant in Nigeria.

Speaking on acquisition activity in sub-Saharan Africa’s agriculture sector, Standard Bank lists food processing and packaging, food retail, and breweries and beverages as the top three – 85 percent of M&A targets between 2006 and 2011. Examples include Tiger Brands’ acquisition of Dangote Flour and the Nigeria Flour Mill’s flurry of acquisition and consolidation late 2012 and early 2013.

Contribution of the wholesale and retail trade sector to GDP has increased to 19.4 percent in 2011, from 16.2 percent in 2007. Nigerian consumers spent 74.1 percent on food, clothing/footwear and household goods in 2009/2010. Nigeria’s retail universe consists of small wholesalers, supermarkets, mom and pop stores, kiosks, quick service restaurants and distributors.

In addition, Nigeria’s population is young. 84 million are under the age of 20 and by 2015 this age group will account for 52 percent of the country. This makes Nigeria the largest consumer market in Africa generating demand for mobile phones, personal care and grooming products.

From packaged foods to clothing items, changing demographics, increasing household income and lifestyles have increased demand for consumer goods. Nigeria’s population is young and urban and convenience is priced.

Urbanisation is leading to sophistication. Aspirations, influenced by globalisation and easier access to information, are pushing demand for convenience, e.g., safe delivery of goods ordered online. A good experience – bargain price and speedy delivery – motivates repeat purchase.

In 2010 Nigerians spent 73 percent of their earnings on food, of which 34 percent is spent on bread and cereals. Nigeria’s wheat import matches consumption of bread and cereals as percentage of total food expenditure. Approximately 97.6 percent of Nigeria’s total wheat demand of 4.8 million tonnes is met through imports. And demand for wheat in Nigeria is expected to rise by 50 percent to 7.2 million tonnes (32 percent of SSA demand) by 2015. At around 6.5 million tonnes, Nigeria’s current milling capacity, 80 percent of which is controlled by three companies, will have to expand to meet growing domestic demand.

Accenture, a consultancy, reckons that “social media is exploding and changing the way we work and live”. Because most Nigerians access the internet via mobile phones, mobility and ubiquity are influencing the Nigerian consumer – people trust the recommendation of others. In Africa, Nigeria has the most number of people on Facebook.

As a result, online retail is growing, albeit from a low base. Online retail companies like Jumia, Konga, Gloo, Buyam are springing up. A few of them have attracted foreign capital to expand their business across Nigeria.

The growth in online retail across the country will rely increasingly on an efficient logistics system. Actually, behind their colourful websites lie warehouses, trucks, and management systems that ensure the products ordered are first available and then delivered on time.

By: BusinessDay