MORE than 500 Nigerians fly to Dubai every day to shop. This translates into more than $1bn being shipped from Africa’s biggest market to the tiny emirate. That is a retailing market gap by anyone’s standards. These statistics do not include the world’s other shopping meccas so favoured by wealthy Nigerian shoppers, such as London, New York and even Johannesburg. Despite the size of this obvious opportunity, international companies in the retail sector have been slow to go into Nigeria. Most of the hesitation has been based on perceptions that it is too difficult to do business there.
For those who have been interested, the opportunity was blocked by a prohibition on importing a large array of goods, including clothing, shoes, selected foodstuffs, plastic goods and so on, imposed in 2003. It was intended to stimulate local production and has been successful in some instances, such as food production and furniture. But it simply increased the smuggling of cheap clothing from Asia and the local textile industry collapsed under the weight of illegal imports and high manufacturing costs.
Clothing was removed from the list late last year and Nigeria has seen a flood of interest as a result.
South African retailers that have expanded into other African countries have been champing at the bit. This is unsurprising given the growing demand due to a large population, rapidly expanding middle class, returning diaspora and high growth rates.
A representative of Broll Nigeria, which leases space in offices and malls in the country, told the Nigeria Economic Forum in Sandton last week that about 200000m² of new retail space is scheduled to come on stream over the next few years.
Malls are being built in the Nigerian cities of Lagos, Enugu, Port Harcourt, Abuja, Ilorin and Kano. Shoprite, with plans for 16 more stores in Nigeria by next year, is a key anchor tenant in these, alongside Game and other South African retail brands.
The Palms in Lagos was the first western-style mall in Nigeria and the entry point for Shoprite and Game. Despite being small by SA’s standards, it has changed how Nigerians shop.
The availability of new shopping nodes is a boon for and the Pepkor group, which are hoping to trade in Nigeria before year-end in centres alongside Nigerian-owned retailers, service providers and cinemas, and international franchises.
Pepkor Holdings chairman Christo Wiese said last week that the group planned to invest R100m in the first phase of its Nigerian expansion and was looking at 50 stores in time.
Woolworths CEO Ian Moir says the chain is looking at re-entering Nigeria, along with Angola and Mauritius, to boost its African income stream. Woolworths was a casualty of the import prohibition, imposed without warning — it had just entered the market at the time and had to pull out.
Large companies already in fast- moving consumer goods are getting on the growing consumer bandwagon. Last week global brewing giant had the earth-turning ceremony for its new R700m brewery . South African packaging multinational will be spending R30m this year to boost capacity in Nigeria as well.
Competition is rife in the brewing sector in particular, with Heineken and Guinness dominating the market, but it is also starting to emerge in the retail sector. International entered the market last year in partnership with a local retail group, while Walmart is eyeing Nigeria as a key driver of its African expansion.
There are significant upsides for Nigeria apart from retail benefits for consumers. They include upfront benefits such as employment, training, more taxes as well as greater demand for agricultural products.
There is no doubt there are still major challenges. Millions must be spent on generators and diesel — the ailing state power utility is a standby option only. Other challenges include currency volatility, congested ports, difficulty of securing land, and high costs of finance and construction.
But the performance of the retailers could be the catalyst in changing negative perceptions about doing business in Nigeria.