A recent outcry from retailers claiming the government is not utilising the full potentials of the retail sector in Nigeria. Asking for a greater regard for retail in the country’s economic policies and eliminating red-tapped challenges such as low incentives for real estate developers and alleviation of land access procedures and a greater regard for retail in the country’s economic policies.

Investment in the Nigerian retail market has reached an all time high, according to the Minister of Trade and investment Olusesgun Aganga attracts over N200 billion in the last two years owing to rising purchasing power and the huge potential of the Nigerian economy. Experts believe investors are flocking to the sector as a result of Nigeria’s potential–a large population, positive macro-economic growth and a strong appetite for consumer goods. The recent growth e-commerce is also said to be responsible for the continued expansion of the retail sector.

According to THISDAY checks revealed that there are 300 e-commerce sites running in Nigeria and further investigation also revealed that local and foreign investors have so far invested $15 million into the industry.

A report from the Oxford Business Group (OBG) indicate that both foreign and local investors are dramatically expanding their domestic retail footprint in the country.

According to OBG, “By the end of June, Shoprite, the continent’s biggest retailer opened its fifth shop in Nigeria, and another two are on the cards for the middle of next year. Shoprite, has outlined plans to open up to 700 stores in the country, and Massmart, South Africa’s second-largest retailer and partly owned by Walmart, has announced that it intends to increase its presence from two to 20 stores.

“Also, Spar, Europe’s largest retail network, has partnered with Nigeria-based Artee Group to tap into the local market, cutting ribbons at a new outlet in Lagos and one in Abuja. Looking ahead, the firms aim to increase their Lagos network and expand into Port Harcourt and Ota in Ogun State over the next six months.”

They added that the growth in retail space and opportunity has been accompanied by strong economic indicators released by the International Monetary Fund (IMF).

“Real GDP for the year is forecast to grow at around 7 per cent, according to the IMF. This has had a positive impact on people’s ability to spend, with GDP per capita levels estimated at $1656, up from $1541 in 2011 and $390 in 2001, according to Renaissance Capital, a multinational brokerage. The firm also said that the country’s middle-class segment earns about $6000-7000 per year, bringing the purchase of modern household goods within range.

“But as development of formal retail gathers momentum, investors are becoming increasingly attuned to factors that could limit growth. Firstly, retailers decry the lack of adequate space. Modern outlets are dependent on the standards of newly built, large shopping malls. However, cumbersome access to land, high costs and the short duration of bank financing is constraining developers’ appetite.”

Outside of Nigeria’s commercial centre, the situation is little different. In Abuja, despite the opening of four malls in the past five years, it has taken until June 2012 for the Grand Towers to open with the standards required by international retailers. Other cities, such as Port Harcourt and Calabar, have yet to see the arrival of their first city mall.

Inflation, currently at 12.9% and expected to rise to 13.57% by the end of the year as a result of higher prices following the partial removal of the fuel subsidy at the start of 2012, is likely to constrain purchasing power. Furthermore, with more than half of the population living on less than $1 per day, the inequality of income distribution is a potential impediment to the growth of formal retail, limiting the size of the consumer market.

 

 

2014-01-04