Rising middle-class marks new wave of consumerism in Nigeria

In the light of the Nigerian government’s ‘Vision 20: 2020,’ aims at increasing the shares of the manufacturing sector in economic output to between 15 percent and 30 percent, and the services sector to between 45 percent and 75 percent, while lowering the shares of agriculture and oil, the country has been making steady progress in diversifying its economy away from the oil sector.

Apart from providing sources of economic growth, diversification also helps the country reduce its reliance on oil exports. On the back of disruptions to oil production due to terrorists attacks, Nigeria’s oil sector posted negative growth in the last two years. Thanks to the stable growth momentum of the non-oil sector, Nigeria was able to maintain an annual growth rate of 7.4 percent in 2011, down from 8 percent in 2010.

The services sector has been a major contributor of the country’s economic growth, with most sectors under this group posting double-digit growth in 2011. In particular, the telecoms sector recorded some 30 percent growth. This sector, together with the banking sector, has created a considerable amount of high-paying jobs, fuelling expansion of the middle-income population in recent years.

Nigeria’s wholesale and retail trade sector, which accounts for some 20 percent of GDP, has been growing at double-digit rates in recent years, reflecting the buoyant retail market in the country. The growth in retail trade has also stimulated the development of the real estate and construction sectors. Currently, there are only three modernised shopping malls in the whole of Nigeria. Nonetheless, the boom of the non-oil sector has resulted in an expanding middle-income class, thereby touching off new waves of consumerism, and creating a growing demand for modern retail channels such as shopping malls and hypermarkets.

Mall operators indicate that there is a long waiting list for consumer brands wishing to become mall tenants, as demand for mall space will continue to outstrip supply in upcoming years, despite the construction work of several shopping malls being underway.

Retail trade aside, Nigeria’s hospitality sector, is on the rise, thanks to increasing inter-city business travel and growing influx of foreign investors. Decent hotels and restaurants are a scarcity, driving up the room charges for reasonable hotels, say to some $300, which is a considerable fortune in Nigeria compared with the cost of living there.

In addition, more and more private business owners have found a good fortune of running successful businesses.

A recent survey on Nigeria’s middle-class reveals some 40 percent of the middle-income people run their own businesses.

According to the African Development Bank, the middle-income class makes up about 20 percent of the Nigerian population, which is estimated at more than 167 million, and these people are expected to pursue a quality lifestyle and consumer products. Given its small manufacturing sector, consumer products are mostly imported. In 2011, imports of consumer goods accounted for some 8 percent of total imports, with average annual growth rates of 63 percent during 2008-2011.

According to Nigeria’s National Bureau of Statistics, China is the second largest source of Nigerian imports, trailing only the US. Nevertheless, Nigerian imports of Chinese products consist of a higher proportion of consumer goods compared with those imported from the US. There is little wonder to see Chinese consumer products dominate in the Nigerian retail market, in particular, electronics goods.

Chinese consumer products have found a good following in Nigeria’s mass market, given their low price and reasonable quality. Surging demand for Chinese products has prompted Nigerian traders to visit the Chinese mainland for sourcing popular products, with many Nigerians reportedly living in Guangzhou.

Nigeria will become one of the most important markets in Africa in the coming decades. While whetting their appetite for the upbeat retail market in Nigeria, Hong Kong companies should position themselves strategically with an optimal mix of price and quality, while fine-tuning product design to suit the African taste.

Setting sight on Nigeria’s middle-class, Hong Kong companies should strive to differentiate their products from those low-price items from the Chinese mainland. With an apparent shortage of modern and organised retail channels in Nigeria in the offing, a well-planned distribution strategy is always the key to success in the Nigerian market.

Anne Agbaje