Michael Chu’di Ejekam Nigeria’s Expert Retail Developer – extols the potential of the retail market in Nigeria and broader Sub-Saharan Africa
Michael Chu’di Ejekam, a recognized authority in retail real estate development, discusses a recent article about the planned entry of a major grocery chain into Nigeria and the problems faced by prior attempts by other retailers: Click here.
Though some retailers have struggled and exited the Nigeria market, those with the appropriate business models can survive and thrive.
In many respects, Nigeria represents the perfect storm for retail as well as real estate investment; Large and growing population of 180 million, burgeoning middle class, rapid urbanization, high growth in household consumption. The same positive trend apply to many markets in Sub Saharan Africa.
Nigeria’s population is forecast to grow to 400 million population 2050 in a land mass about 30% larger than the US state of Texas. Nigeria is the largest retail market in Africa with nearly $200 billion annual total retail sales forecast for 2016. Only 5% of groceries sales for example is via formal retail channels. Kenya in contrast has 30% formal penetration.
Despite huge demand vs supply imbalance for Nigeria retail, retailers struggle to scale. Retail scalability is limited due to challenges in securing land, high construction costs, difficulty in securing equity and debt financing, high rental rates, dearth of development expertise, limited pool of tenants with appropriate business models for the country.
The impact of the underdevelopment of retail is felt by the general population. High food prices is a major problem: Approximately 60% of Nigerian household expenditure is devoted to food consumed at home vs 6.5% in USA.
Nigeria is merely at the first step of retail growth (development, leading to the next stage of acceleration and then consolidation thereafter). Despite the short term challenges in the Nigeria market including currency, retailers entering or operating with the correct business models will reap the rewards for decades to come.