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Michael Chu’di Ejekam Comments on the Compelling Appeal of Longer-Life Private Equity

Michael Chu’di Ejekam Comments on the Compelling Appeal of Longer-Life Private Equity


Michael Chu’di Ejekam, commercial real estate expert shares his insights on the recent Wall Street Journal article on the Atlas Partners Longer-Life Private Equity Fund which raised one billion dollars.


Michael Chu’di Ejekam, an expert private equity investor, provides insight on the emergence of longer-life private equity funds such as Altas.

In a recent article printed in the Wall Street Journal by Chris Cummings, it was reported that the emergence of longer-life private equity funds such as Altas recently hit a new benchmark by raising one billion dollars. Altas as well as other powerful groups, such as Blackstone and Carlyle, are working on similar longer-life funds. Longer-life PE funds allow managers to hold each investment for far longer than the typical 5-year hold period per investment and typical 10-year total fund life. In the Altas case, each investment can be held up to a whopping 17 years.


The typical “medium life” PE model has proven to be highly successful with attractive risk-adjusted returns, however, Michael Chu’di Ejekam believes the model can be optimized, particularly in emerging market like Africa. “Following my several years of PE investing in sub-Saharan Africa, I am convinced that longer term life funds would be an improvement on the PE model for emerging markets such as Nigeria” Michael Chu’di Ejekam explains.

“When a PE fund is compelled to exit after a 5-year hold period, though the returns may achieve certainly attractive 25+% gross IRR or 2.5 to 3 times multiple on equity invested, I believe tremendous additional value may be left on the table.” The expert demonstrated his point by saying, “Originating, executing and investment managing attractive investments is a challenging process – why be forced to sell/exit a highly attractive investment after only 5 years, only to be saddled with pressure to find another outstanding deal to originate to start the process over again?”


Of course, some other models have emerged to address the standard PE model challenges. For example, in the case when an arm of a PE fund family invests in greenfield deals seeking “opportunistic” higher returns, and the completed projects are transferred to “core” vehicles of the same fund family which are seeking lower, more stable, longer term returns. “It could be more powerful and efficient to have one fund vehicle simply hold the investment for the longer term”, said Michael Chu’di Ejekam. This is especially important in emerging markets, where the deal process is more challenging and deals could take years to originate and close in the first place.


There is also increasing investor interest and PE capital raised for Africa for example, therefore deals have become more competitive and could take years to originate and close. “After so much heavy lifting, why sell after only 5 years?” he asked. “I have been involved in a few highly successful full-cycle investments and exits – though the returns were highly rewarding and the possible carried interest/profit distributions exiting, the reality is that excessive additional upside was surrendered to the new owners.”


Charlie Munger, one of Warren Buffet’s longest serving colleagues is quoted as saying: “The ‘know-nothing’ investor should practice diversification, but it is crazy if you are an expert. The goal of investment is to find situations where it is safe not to diversify. If you only put 20% into the opportunity of a lifetime, you are not being rational.”

“Why sell after only 5 years if you are already enmeshed within a great investment?” Michael Chu’di Ejekam continued. “Part of the answer lies in the reality that PE funds need to demonstrate exits/returns to potential Limited Partners (LPs) in order to raise fresh investment funds, and LPs are accustomed to the well-defined and tested cookie-cutter PE “medium life” model.” Of course, there is a desire to exit to realize profits so that carried interest distributions can be made – the perfectly reasonable lifeblood of private equity, from which Ejekam has benefited. Thankfully, there are other acceptable avenues to achieve this objective. According to the finance whiz, longer-life PE funds would be an improvement for for emerging markets such as Africa. He thinks it would be helpful if more potential LPs bought into the concept and support the investment strategies of managers with longer-term views.


Mr. Ejekam offered a few closing remarks. “The most successful entrepreneurs and investors in emerging markets such as Africa, hold longer term views. They do not think in 5-year chunks. They think in terms of decades. This is how to generate outsized returns.”


About Michael Chu’di Ejekam

Michael Chu’di Ejekam is an honors graduate of the Wharton School at the University of Pennsylvania, where he earned a BSc in Economics, with a concentration in Finance. His early days were spent on Wall Street, as an investment banker for Merrill Lynch, after which he moved into private real estate investments in New York, and then onto work with Nigeria’s Actis. During his seven-year tenure as their Director Real Estate for West Africa, he became known as a leader in the “retail revolution,” helping to bring multiple million-dollar malls into underserved areas throughout sub-Saharan Africa.

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Nigeria: Claiming the African M&A crown

Nigeria: Claiming the African M&A crown

Nigeria is home to the world’s seventh-largest population (with 173 million inhabitants), which is expected to surpass Brazil’s by 2030. And with increasing disposable incomes and a GDP growth rate around the 6% mark for the last 10 years, it isn’t hard to understand why Jim O’Neill, former Chairman of Goldman Sachs Asset Management International, included Nigeria as one of the new wave of emerging economies, alongside Mexico, Indonesia and Turkey — the MINTs — that have massive growth potential and offer attractive international investment opportunities.


What are the five key boom drivers for Nigeria?

  1. Between 2008 and 2014, 105 M&A deals were completed in Nigeria. With more than two-thirds (70) of these deals completed between 2011 and 2014, the market is gaining momentum. Some of this growth is due to more domestic activity, but a large proportion is accounted for by international buyers and investors. A recent example is in November 2014, the Carlyle Group paid US$157m for a stake in Lagos-based Diamond Bank. Nigeria has seen compound growth of the value of foreign direct investment projects of nearly 20% since 2007, according to EY’s recent Focus on Nigeria report.
  2. Statistically, energy, mining and utilities (EMU) has been Nigeria’s most important investment area. In 2013 alone, there were six EMU deals valued at almost US$1.5b. In 2014, volume halved while value doubled, as the total of three EMU deals were valued at US$2.5b. This makes it the highest sector by both value and volume according to Mergermarket data. Deals in 2014 included Singaporean Temasek Holdings’ acquisition of Seven Energy for US$150m in April. This deal activity follows the liberalization of the power market in 2013, which acted as a tool for driving Nigeria’s growth. In a market that produces less grid electricity than the Republic of Ireland, and where — according to consulting group Adam Smith International — 50% of the population receives no electricity at all, the country’s lack of power infrastructure has hampered economic advancement. Adam Smith International estimates that US$70b of investment is needed to bring electricity supply to the same levels as Brazil and South Africa, leading to a sector ripe for further corporate finance activity.

Yet, while the energy sector offers investment potential, the development of a reliable power network is opening opportunities in other sectors. “The privatization of the power market and the establishment of new distribution companies create a lot of opportunity in Nigeria for investors,” says Michael Chu’di Ejekam, Real Estate Director at the Lagos office of private equity firm Actis. “If power becomes less of a risk for developers, for example, Nigerian growth could reach up into double digits.”

  1. Underpinning opportunities in Nigeria is the population’s growing affluence. In EY’s 2013 Africa Attractiveness Survey, Nigeria’s population was given lower-middle income status. While oil and gas FDI projects account for the largest share of FDI capital (52%), according to the EY Focus on Nigeria report, a breakdown by number of projects suggests a greater diversity by sector. Technology, media and telecommunications (TMT) accounts for 24%, retail and consumer products for 21% and business services 8%. MTN, the pan-African mobile telecoms operator, illustrates the growth in consumer spending on TMT. It recently announced a near 10% increase in subscribers to 207.8 million, with Nigeria registering a 20% increase in numbers.


“Nigeria reflects the trend seen in many other African countries — an economic diversification and steady emergence of consumer spending power,” says Michael Lalor, Head of EY’s Africa Business Center. “We have already seen a surge of investment into service sectors such as telecoms, financial services and consumer products. As African economies continue to grow and develop, we also anticipate growth in private investment into infrastructure —particularly power and logistics — and manufacturing, with the automotive sector, for example, having already experienced strong growth over the past five years.”

  1. “The large population with increasing disposable income means that two sectors in particular will shine,” says Azevedo. “Fast-moving consumer goods, where we are now seeing a lot of investment by large companies, and M&A as they acquire local operators; and financial services, as people increasingly seek financial inclusion.”

Real estate is another sector to benefit. “Back in the 1990s, the middle class was severely reduced, but now it is surging back,” says Chu’di Ejekam. “In 2000, just 34% of households had discretionary income. In 2020, this is forecast to be more than 50%, demonstrating a fundamental shift. These households are now able to spend on retail and housing.” More than 25 new shopping malls opened across Nigeria in the last four years, with up to a further 60 in either planning or construction phase.

  1. A large number of expatriate Nigerians are now returning home (there are an estimated 15 million people in the Nigerian diaspora), boosting local talent. One of the areas attracting returnees is oil and gas. Reforms to the industry stipulate that international oil companies (IOCs) must work with local companies, sparking fast growth of home-grown oil companies. Many of the IOCs are selling assets. For example, Shell’s Nigerian subsidiary disposed of its 30% interest in Oil Mining Lease 24 to Nigerian company Newcross Exploration and Production. These companies need capital to expand and are tapping international capital markets as a result. Nigerian oil group Seplat, for example, raised US$500m in a London-Lagos IPO in April 2014, which valued the company at US$1.9b. Its listing success is something of a trailblazer for indigenous oil companies looking to consolidate the market.

Not all boom: the challenges of business in Nigeria

Despite the market’s promise, Nigeria is not an easy country to target. Lack of infrastructure can hamper companies’ growth prospects, and instability in the northeastern region deters some investors.

In addition, corruption is still a major issue in Nigeria. The country was ranked 144th out of 177 in the Transparency International Corruption Index, with 44% of respondents admitting to paying a bribe in Nigeria. Investors and corporates need to take caution and understand the risks of operating in a country that is still in the nascent stages of economic development.

The country is also exposed to oil price fluctuations — as oil accounts for 70% of Nigeria’s export revenue and 35% of its GDP, according to OPEC. However, as the country’s economy diversifies, exposure will reduce. “We are already seeing the growth of other businesses, such as agribusiness, services and light industry,” says Azevedo. “The development of these sectors means the government will have to ensure the country has basic infrastructure for growth.”

2013: Defining moment for the Global property market

Globally, the outgoing year was, indeed, a defining moment for the property market with many regions of the world, notably Africa, Asia, Europe, United Arab Emirate (UAE), etc, recording significant recovery and growth across various segments of the market.

In Africa, particularly in sub-Saharan Africa including Nigeria, Ghana, Sierra Leone, Cote d’Ivoire, among others, 2013 saw continued growth driven by demographics, rising spending power and the softening in the economy of the developed world.

In South Africa, the story was, however, different with price index for medium-sized apartments falling by 2.01 percent year-on-year to third quarter (Q3) 2013 and, according to Global Property Guide’s Q3 2013 housing prices survey, prices declined by 15.5 percent in the country during the global financial crisis.

Dubai, Nigeria, UK and the US markets which were badly affected by the global economic crisis had struggled through that period to the last quarter of 2012 when, in a dramatic way, prices started climbing with investor-appetite growing to appreciable level.

Global Property Guide, a research house and website dedicated to residential property, reports that of the 24 European housing markets included in their survey, 19 performed better in Q3 2013 than the previous year, disclosing that prices rose 1.8 percent in the UK.

Dubai, the survey adds, remains the best performer, explaining that house prices soared by 21.37 percent during the year to Q3 2013, such that luxury residential towers in Dubai now sell like pancakes. It cited Skai Properties, a new luxury apartment complex located on the Palm Jumeirah that sold 98 percent of its 702 units in September 2013.

The survey says United States saw prices rise by 6.1 percent, adding that overall house prices rose in 32 of the 51 advanced and emerging market economies in the IMF’s Global House Price Index.

In Nigeria, it was not just a story of visible recovery, but also of growth, especially in the commercial segment of the market where analysts estimate that investor-confidence and interest soared, seen in the quantum of investment in the development of retail centres and office buildings.

“Across the country and also West Africa, there has been continued growth in retail. It is happening most in countries like Nigeria, Ghana, Cote d’Ivoire, etc. New retail facilities are being built and new retailers are coming in. That is one major thing that has happened in 2013,” said Obi Nwogugu, head, real estate unit, Africa Capital Alliance, an institutional equity investment firm.

Nwogugu, who spoke in an interview with BusinessDay, added that the office space market has also seen continued growth, estimating that “in Lagos, between Ikoyi and Victoria Island where you have business hub, there are close to 250,000 square metres of office space coming into the market”.

Across various segments, there was some level of movement, even though Erejuwa Gbadebo, former CEO, Broll Property Services Nigeria, sees “a bandwagon thing” in the movement in some of the segments. She, however, agrees there was a difference from what obtained in the market in 2012.

In the residential segment of the market, UAC Property Development Company (UPDC) plc and Lekki Gardens were quite bullish, addressing the narrow upper-end market with their mega million naira products.

Estate Links Limited, a local and international real estate services provider, also made a little impact with its 18-unit ‘The Lofts’ which targeted the middle-income earners, selling at N25 million per unit.

Growth in low-income housing was quite remarkable as a few developers found meaning and sense in addressing this largely un-served market with blocks of flats, apartments and bungalows. Analysts observe that this new interest was driven by rising vacancy rate in the high-end market.

A good number of low-cost housing came into the market from Common Sense Company with its 100-unit Signature Estate comprising one-bedroom bungalows available in detached, semi-detached and terraces at N3 million as minimum entry level.

Avenue to Wealth (A2W), a cooperative partnership scheme, also offered studio apartments selling for N3.4 million on outright payment, while Multi-Purpose Infrastructure Development Construction (MIDC) also came into the market with 1,000 low-cost housing units at its Teju Royal Garden in Lagos.

In what Chudi Michael Ejekam described as a revolution, the commercial properties were a toast of investors in the outgone year with retail malls and office buildings delivered and new ones initiated.

Heritage and Cocoa Malls in Ibadan, Oyo State, opened for business; Omais Homes’ Trinity Mall in Lagos also opened for business, while UPDC started construction on its N5 billion Festival Mall in Festac Town, Lagos. Actis, an international private equity investment firm, is building the Ado Bayero Mall in Kano and the Jabi Lake Mall in Abuja with Duval Properties.

While The Mansard Place and The Brook were completed within the year by Mansard Insurance and BusinessDay Media Limited, respectively, Actis started work on its 14-floor Heritage Place in Ikoyi, and RMB Westport also took off with its 15-floor The Wings.

Another significant development in this market was the mortgage sector reform which saw the primary mortgage banks (PMBs) migrate from the statutory N100 million to N2.5 billion and N5 billion for state and national operations, respectively.

Of more significance was the setting up of the Nigerian Mortgage Refinance Company (NMRC), a private sector-led secondary mortgage refinance company being promoted by the Federal Government with $300 million seed capital provided by the World Bank. It is expected that when the company becomes operational from the first quarter of this year, it would change the face of mortgage banking and housing finance in the country, giving hope of improved homeownership level in the days ahead.

Supermarket brand, DIA expands in Nigeria

Supermarket brand, DIA expands in Nigeria

Spanish supermarket brand, DIA is expanding further in West Africa, with its Nigerian operator planning to open more than 100 stores by 2020. The Supermarket brand has already opened two outlets in Lagos,

Samuel Abiola-Jacobs, Chief Operating Officer at First Master Retailers Ltd, the Nigerian company that owns the local rights to run DIA stores, indicated that more could be added at the rate of 25 a year, Mail & Guardian Africa reported.

Modern retail is not well-developed in the country, with around 95% of shopping purchases made in open-air markets, but Abiola-Jacobs said there was opportunity for retailers to prosper as consumers switched to formal stores.

“When you go into emerging markets and lower income areas, you have a number of people, maybe six or eight, living in one household, so what you need to look at is the combined spending power, rather than the individual spending power,” he said.

“When you combine it, you find that there’s good purchasing power.”

High property costs and poor infrastructure have deterred foreign food retailers from establishing a presence in Nigeria; the Dutch Spar brand and South Africa’s Shoprite are among the few sticking the course.

There is an appetite for modern retail, however. Michael Chu’di Ejekam, head of real estate in Nigeria for private equity company Actis, has said that Lagos could accommodate 20 malls – there are currently only two – if the appropriate space was available.

Consulting firm McKinsey has also suggested that foreign brands entering Africa adopt a city-based strategy and cautioned against attempting to build a presence across entire countries.

But Abiola-Jacobs was firmly focused on Nigeria as whole, comparing DIA’s presence in neighbouring Senegal where there are now 60 outlets “and they haven’t even gone throughout all Senegal, so you can see the potential is massive”.

Proposed Jabi Lake Mall targets N55bn from Abuja shoppers

Proposed Jabi Lake Mall targets N55bn from Abuja shoppers

By 2015 when the Jabi Lake Mall opens, Abuja shoppers will be spending roughly $340 million (about N55bn) annually to patronize retail outlets in the mall, developers of the mall have said.

Analysis from a site feasibility audit conducted by Actis, the private developers of the mall, in 2012 showed that there were roughly about 2.04 million people living within the Mall’s catchment area and this population combined had $145 million (about N23bn retail spend per annum.

Actis Director, Real Estate Mr. Michael Chu’di Ejekam said its analysis showed that the population would have risen to 2.4 million by 2015 and that would translate to a corresponding growth in annual retail spend to roughly $340 million when the mall opens thus making the Jabi Lake Mall the fourth in the series of West African world class retail centres.

Located on the eastern shore of Jabi Lake in the Jabi district of Abuja and only a ten-minute or 8km drive west of Abuja’s business centre, the Mall will be the first of its kind in Abuja, offering 25,000 square metres of grade-A shopping space from a unique waterside location on the shores of Jabi lake.

With a 22-month construction period, the main construction started in January 2014 and it is scheduled for completion in October 2015.

The Mall is a joint venture between Actis, a private equity investment company; Duval Properties Limited and development management led by Laurus Development Partners. The mall is expected to gulp roughly $120 million.

Speaking on the impact of the project to the country’s economy, Mr. Ejekam, said a total of 900 jobs were created during construction with 97 percent Nigerians making up the entire construction workforce.

1000 post construction jobs directly related to the shopping centre are expected at the completion of the mall. The jobs will includes shop keepers, security staff, cleaners and other ancillary services.

He equally informed our reporter that Shoprite, one if the mall’s anchor tenants pre-letting 5,000 sq metres, will procure about 73 percent of all of its goods from Nigerian suppliers.

The dramatic vistas and hilltops play into what the company said it is looking to go from pure shopping centres “to an area where you can go shop, relax and spend time with your family and also increase the dwelling time. So, instead of just picking up an item and leaving you will be compelled to sit.”

$100m Abuja Retail Mall To Generate 1,000 Jobs

$100m Abuja Retail Mall To Generate 1,000 Jobs

The Jabi Lake Mall, Abuja, which is being built at a cost of $100m, will generate 1,000 jobs and increased revenue for the government through taxes when it opens for business in 2015, the firm handling the project, Actis, has said.


A director of Actis, Mr. Michael Ejekam, stated that the 900 workers had been engaged during the ongoing construction of the mall, adding that the facility would further generate 1,000 jobs with dramatic multiplier effects on the economy of the Federal Capital Territory and the country.


Ejekam, who said this during an inspection tour of the project on Tuesday, explained that the retail centre would be Nigeria’s largest and would offer grade-A shopping experience for Abuja residents and visitors.


He said the mall, which consists of over 100 shops, followed the success of other Actis malls in the country namely: The Palms and Ikeja City Mall in Lagos.


According to him, the two-storey mall being built on 30,000 square metres of land on the shores of the Jabi Lake will feature contemporary architecture and a lakeside boardwalk, with beautiful views over the water.


He explained that the building would offer cinemas, restaurants, cafes and a children’s arcade, adding that big stores such as Shoprite, Game and a Walmart subsidiary had already signed up as anchor tenants for 10,000 square metres of space.


Ejekam said, “The Jabi Lake Mall sits on five hectares of land on the eastern shore of the Jabi Lake, 10 minutes away from the Abuja Central Business District, and it is flanked by Garki, Maitama, Wuse and Asokoro, and has a very scenic view of the Jabi Lake.


“The multiplier effect of the mall on the Nigerian economy is enormous; already, it has created 900 jobs for construction workers and when completed, will further generate 1,000 jobs. Top retail stores like Shoprite and Game have already indicated interest in the mall, which will be the largest retail centre in the country.”


The director noted that economic indices indicated that the middle class had increased in sub-Sahara Africa, adding that the re-emergence of this group underpinned the investment focus of his firm.


Ejekam expressed confidence that the Jabi Mall would be completed on schedule, going by the speed of ongoing construction works.

Mr. Ejekam, Actis: “Nothing in Lagos, there is room for 15 shopping centers”


While the shopping center projects are increasing in Africa Michael Chu’di Ejekam, real estate director at Actis, one of the serious players in this field in Africa, outlines the major challenges faced by a business that is not, far from it, an easy activity.

In its edition on newsstands this week (n ° 2755-56 of 27 October to 9 November), Jeune Afrique investigated the boom of supermarkets and shopping centers in Africa. While the ads, ambitions and projects are multiplying, JA emphasized the major challenges facing this business far from simple: the high cost land, significant funding requirements, risk associated with poor design centers. And, of course, the issue of supply management in some countries, such as Congo, 80% of products sold in supermarkets are imported … Actis is a pioneer shopping centers south of the Sahara, with a decade experience. Michael Chu’di Ejekam, real estate director at the private equity investor, answers questions from JA



Interview by Frédéric Maury

Jeune Afrique: How many shopping centers have you built?

Michael Chu’di Ejekam: Five. Two in Lagos (Ikeja and The Palms), an Accra (Accra Mall), a Nairobi (The Junction) and Mauritius. And we have some ongoing projects.

Garden City, Nairobi, is the largest, with 48 000 m2 of GLA. Work began for delivery in 2015. Like the Jabi Lake Mall, which will be the first quality shopping center in Abuja. We will also build two more centers, one in Accra and one in Lusaka.

Do they know success?

Lagos Ikeja Mall attracts 750,000 visitors per month. The Shoprite supermarket is the third best performing store in the world of the South African group. Brands accompany us: the first wave was composed of South African, Massmart and Shoprite for food surfaces or Foschini for clothing, for example. We expect a second wave this time coming from the Middle East. Groups of these countries there either bring their own brands or international brands they already have the franchise to their area of origin.

You make the bet of the middle class …

SSA has a very large population and will be brought to grow. In 200, 66% belonged to a category defined as having basic needs. In 2020, the proportion will be completely reversed with 54% of households will have interim needs. The 18 major cities in Africa in 2030 displayed a level of expenditure of 1,300 billion per year.

France, it is 539 billion. Other elements count including the population growth in urban areas, where consumption is growing twice as fast as in the countryside. In 2007, 65% of the African population was rural. In 2025, the same figure will be reached but for cities. There is a massive unmet demand in many areas of real estate, because of years of under-investment: shopping centers, good offices and housing for middle income.

Do you think that there is room for a lot of shopping centers south of the Sahara?

Looking at the number of quality surfaces of over 20 000 m2: Johannesburg (between 4 and 5 million inhabitants) account 72. Lagos (22 million), has only 2. Accra only one, as Kampala. And Nairobi, 3. Nothing to Lagos, I think there is easily room for 15 shopping centers of this kind. There in Africa the same dynamics in India between 2003 and 2007, where the number of malls has increased from 30-230.

How do you choose your layout and size sites?

We order systematically studies by consultants. This last area analyze, assess road infrastructure and purchasing power. All this determines the choice of the site and size of the center. After, there are local contexts that may be blocking. In general, 40% of businesses in the centers are linked to the clothing sector. And until 2010, Nigeria was prohibited import of finished textile products. It had to be a blocking factor.

You have not invested in Francophone area. The potential is less important?

It is equivalent. We are interested in this area, which suffered the same boom as the rest of the continent. And in particular to the Ivory Coast.

Your job is complex. What are the main difficulties?

I would cite several challenges. First find the field and at a good price. Next, find the funding. A mall like Ikeja costs about $ 90 million, half in loans. It’s a sum not necessarily easy to find and expensive because the interest rates are high in Africa. Another challenge is the lack of local expertise in real estate development. The construction costs are also very high. It is 2.5 times more expensive to build in Nigeria and South Africa. And 70% of materials are imported. Then there is not enough known brands likely to settle in malls: more would be better. Finally, for us, Actis, which have vocation to sell the shopping centers a few years ago resale: reselling three centers to real estate experts, we have proven our ability to meet this challenge.

Nigeria’s Expert Retail Investor – Shoprite’s hypermarket earnings demonstrate a low import model is smart and defensive for success in an emerging market like Nigeria

Michael Chu’di Ejekam Nigeria’s Expert Retail Investor – Shoprite’s hypermarket earnings demonstrate a low import model is smart and defensive for success in an emerging market like Nigeria

Michael Chu’di Ejekam, a recognized authority in retail real estate investment, comments on the resilience of Shoprite’s Nigeria earnings despite foreign exchange controls and a sharp drop in crude oil prices. Shoprite is Nigeria’s largest hypermarket by sales volume (Bloomberg).


According to the Bloomberg article, derived from Shoprite Holdings half year financial results for the period ending Dec 31st 2015: Nigeria showed healthy sales growth despite a slump in the price of crude oil and foreign exchange controls, Basson said. The retailer plans to open six Nigerian stores by December, adding to the 16 currently trading, and will also set up a distribution center in Lagos in the next couple of months to improve product availability.


The Nigerian government depends on crude oil for over 70% of its revenues and over 90% of its foreign exchange earnings – therefore the steep drop in crude oil prices had dealt a major blow to the country’s foreign reserves and had put the Naira under great pressure versus the US dollar. As Ejekam explains, as a counter measure, beginning in June 2015, the Central Bank of Nigeria (CBN) introduced a ban on the ability to access foreign exchange via the official exchange rate to purchase 41 items. The CBN also introduced other measures to essentially ration foreign reserves, making it more difficult for many businesses in Nigeria to secure US Dollars to import key inputs.


Many retailers, especially those that were import dependent were hit hard, and have had challenges securing the Dollars to replenish their stock. Further, the sharp drop in the parallel market Naira exchange rate, meant that certain retailers effective dollar revenues from Nigeria sales would be reduced, with many being compelled to raise their prices materially.


Shoprite on the other hand, secures 76% of the items that it sells in Nigeria from local suppliers, of which 38% are manufactured locally. Therefore, Shoprite’s results have been relatively insulated from the foreign exchange shocks and Shoprite avoided material price increases.

The resulting earnings, demonstrate that Shoprite’s business model is smart and defensive and well suited for an emerging market like Nigeria. Other retailers should pay close attention…and learn!



About Michael Chu’di Ejekam

Michael Chu’di Ejekam is a renowned leader in the “retail revolution”. He is a  widely quoted retail thought leader, with strong local business and government relationships.  Michael Chu’di Ejekam served as Director Real Estate for W Africa for Actis, a $7.5bn private equity firm- most active retail developer in Sub Saharan Africa (ex SA) for 7+ years.  Ejekam originated $700+m in retail projects. Projects include $100m Ikeja City Mall Lagos, $120m Jabi Lake Mall Abuja and Accra Mall. Other projects include Heritage Place, Nigeria’s first green certified commercial building. Originated three upcoming Nigeria malls ranging from $150-185m each totaling over 40,000m2 each, which would be largest in the region.
Michael Chu’di Ejekam started his career on Wall Street, as an investment banker at Merrill Lynch in New York.
He graduated with Honors from the Wharton School, University of Pennsylvania, with BSc in Economics with a Concentration in Finance. He received the Howard E Mitchell Award for academic excellence and extracurricular contributions.


Nigeria’s Expert Retail Developer – extols the potential of the retail market in Nigeria and broader Sub-Saharan Africa

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.