The Nigerian Retail Report 2014/2015 1 The Nigerian Retail Report 2014/2015 2 The Nigerian Retail Report 2014/2015 Nigeria Sector Report 2014/2015 3 The Nigerian Retail Report 2014/2015 BusinessDay Research and Intelligence is a unit of BusinessDay Media Limited, specialising in the gathering and analysis of economic and financial data as well as forward-looking intelligence on Nigeria and West Africa. We have a complete database and valuation of all Nigeria-listed firms, with the aim of expanding it to include listed companies in West Africa over the next 12 months. We provide in-depth analysis of different sectors of the Nigeria and West African economy, drawing extensively from our network of industry contacts to provide insights which are not publicly available. 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The opinions/ conclusions and suggestions in this report do not represent investment or other advice and should therefore not be construed as such. 5 The Nigerian Retail Report 2014/2015 ACKNOWLEDGEMENTS Acknowledgements Obodo Ejiro Senior Research Analyst Tel.: +234 805 074 5774 Email: [email protected] Peter Ehigiator Senior Creative Artist Tel.: +234 802 325 1964 Email: [email protected] 6 CONTENTS The Nigerian Retail Report 2014/2015 Contents Pages Overview 09 The Nigerian Economy 10-12 • Oil and the Nigerian economy 13-14 • Manufacturing in Nigeria 15 • Social-economic characteristics of the population 16-18 • Rebasing and the new face of the economy 18-20 Developments In Africa’s Retail Market 21-24 Profiling Nigeria’s retail outlets 25-27 Classifying Nigeria retail outlets • The traditional open market retail outlets 29 • Unit neighbourhood stores/supermarkets 29 • Multiple branch supermarket/franchises (convenience 30 stores) • Mega supermarkets/shopping malls 30-31 • The Grocery Bazaar Model 32-33 • The Best Choice model 33 Nigeria’s retail power houses 34-39 Nigeria’s major retail markets • Lagos, Ibadan and the South West 40-41 • Kano, Kaduna and the North West 41-42 • Port Harcourt, Benin and the South-South 42-43 • Aba, Onitsha and the South East 43 • Abuja 43-45 Online retail in Nigeria 46-48 • Profiles of Nigeria’s key retailers 49-50 Interview 51-52 ‘Online retail is waxing stronger’ Winning in Nigeria’s retail market 53-55 Facts For Investors 56-57 Abbreviations 58 7 The Nigerian Retail Report 2014/2015 ACRONYMS AND ABBREVIATIONS 8 The Nigerian Retail Report 2014/2015 Overview Retail in Nigeria was once confined to traditional open markets and small local storekeepers – loosely referred to as the informal retail sector of the Nigerian economy – which serviced communities. Between 1960 and the early 1980s, there were standard retail malls which operated chain stores across the country; their number reduced because of the harsh business environment and the decline in business in that era, leaving the country without standard malls for retail business. This gap led to the growth of the informal or traditional retail market, which traditionally constitutes a formidable part of the retail structure in Nigeria. Today, Nigeria is experiencing a tremendous shift to a more sophisticated structure as formal or organised retail continues to gain ascendency. The distribution chain and the organisation of outlets continue to reflect those of a rapidly evolving economy as standards of living improve and as the population continues to snowball. In the past eight years, Nigeria’s population has grown from 150 million, as established by the population census conducted in 2006, to a country with an estimated population of 171 million people by 2013. In the midst of this, the middle class continues to expand even as 51 percent of the country’s population now lives in cities. The rise of organised retail has been rapid in Nigeria in the last two decades. NBS data shows that between 2001 and 2004, the wholesale and retail sector grew by 10 percent per annum. By 2006, its contribution was 16 percent. In the first halves of 2011, 2012 and 2013, it contributed 15.58 percent, 17.05 percent and 18.44 percent of GDP respectively. The old or traditional retail system which is adjudged to account for almost 90 percent of retail activity in Nigeria has continued to decline because of government’s policy, changes in the composition of Nigeria’s population, rising income level and increasing sophistication of the Nigerian consumer. In the last decade, the stable political environment, consistently high oil prices, and rise in GDP have had positive impact on per capita income, which has in turn moved more Nigerians into the middle class. Today, more families shop together and organised facilities which meet their need are attracting more shoppers. Therefore, the old or traditional structure of retail continues to give way to the new. More than ever, the Nigerian consumer is interested in a decent shopping environment, neatly-arranged and labelled commodities and the experience that goes with buying at an organised outlet. Opportunities in wholesale and retail stem from the fact that demand has continued to rise. NBS data shows that based on the structure and level of development of the economy, the average Nigerian household spends as much as 80 percent of its income on consumables like food and drinks, clothing, transportation, shelter, education, electronics and power supply. The average amount devoted to consumption has played a major role in elevating Nigeria to the status of a 171 million-populated retail powerhouse on the African continent. Nigeria has evolved from being a country with 150 million population with no real mega retail store in 2006 to one with 171 million people who have about 20 mega retail stores in less than 10 years. The country has the capacity to support even more malls across its major cities. 9 The Nigerian Retail Report 2014/2015 The Nigerian economy NIGERIA’S ECONOMY is one of the most promising on the African continent. The World Bank put the country’s GDP Nigeria is considered a lower at $262.6 billion, the second-largest middle-income economy by on the African continent, in 2012. But the rebasing process of the economy the AfDB, which groups Nigeria which was concluded in early 2014 among African countries with put the value of the economy at $510 billion, making it the biggest in Africa. GDP per capita of between $786 Rebasing the economy became and $3,115 in 2013 imperative as its structure evolved over the last three decades. Nigeria has the highest population Chart 1: GDP per capita (current US$) on the African continent, estimated at 170 million in 2013, based on Nigeria Ghana South Africa Egypt, Arab Rep. a population growth rate of 3.2 4E-11 percent per annum. The country is 4E-11 considered a lower middle-income 3E-11 economy by the AfDB, which groups 3E-11 Nigeria among African countries 2E-11 with GDP per capita of between 2E-11 $786 and $3,115 in 2013. 1E-11 5E-11 Administered as a democracy, 0E-00 Nigeria has maintained a stable macroeconomic environment since 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 1999. Between 2008 and 2012, in the heat of the global recession, Decline in the growth of the oil the Nigerian economy maintained industry is largely attributed to stable growth rates. The economy non-passage of the PIB, a piece of has grown at an average rate of 6.7 legislation which is designed to percent in the past decade. restructure operations and taxation in the oil and gas industry. In the non-oil In the past, growth was fuelled sector, high consumer demand and primarily by the oil sector but increase in agricultural output are in the last five years, the non-oil responsible for driving growth. sector has continued to grow at unprecedented rates therefore Chart 3: Growth rate of the Nigerian economy skewing the economy in the direction of the non-oil sector. Real GDP growth Oil (crude petroleum/natural gas) Non-oil 10 Growth in the oil and gas industry 8 took a sudden dive in the last 6 quarter of 2011 but began to re- 4 emerge in the fourth quarter of 2 2013. However, the contribution of 0 0.3 oil to GDP growth has been below -2 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 its actual capacity in recent times.