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Nigeria’s rising middle class marks new waves of consumerism

Boom in the non-oil sector

Nigeria has been making steady progress in diversifying its economy away from the oil sector. In light of the Nigerian government’s “Nigeria Vision 20: 2020”, it aims to increase the share of the manufacturing sector in economic output to 15-30% and the services sector to 45-75%, while lowering the shares of agriculture and oil.

Aside from providing sources of economic growth, diversification also helps the country reduce its reliance on oil exports. On the back of disruptions to oil production due to terrorist attacks, Nigeria’s oil sector posted negative growth in 2011. Thanks to the stable growth momentum of the non-oil sector, Nigeria was able to maintain an annual growth rate of 7.4% in 2011, down from 8% in 2010.

  Chart: GDP growth rate by sectors
The services sector has been a major contributor of the country’s economic growth, with most sectors under this group posting double-digit growth in 2011. In particular, the telecommunication sector recorded some 30% growth. This sector, together with the banking sector, has created a considerable amount of high-pay job positions, fuelling the expansion of the middle-income population in recent years.

Nigeria’s wholesale and retail trade sector, which accounts for some 20% of GDP, has been growing at double-digit rates in recent years, reflecting the buoyant retail market in the country. The growth in retail trade has also stimulated the development of the real estate and construction sectors. Currently, there are only three modernised shopping malls in the whole country of Nigeria. Nonetheless, the boom of the non-oil sector has resulted in an expanding middle-income class, thereby touching off new waves of consumerism, and creating a growing demand for modern retail channels such as shopping malls and hypermarkets.

Mall operators indicate that there is a long waiting list for consumer brands wishing to become mall tenants, as demand for mall space will continue to outstrip supply in upcoming years, despite the construction work of several shopping malls being underway.

Retail trade aside, Nigeria’s hospitality sector is on the rise, thanks to increasing inter-city business travel and growing influx of foreign investors. Decent hotels and restaurants are a scarcity, driving up the room charges for reasonable  hotels, say to some US$300, which is a considerable fortune in Nigeria compared to the cost of living there.

Nigeria’s GDP by sector

Economic sector

Contribution to GDP (%)

Growth (%)

2010

2011

2010

2011

Crude Petroleum & Natural Gas

15.9

14.7

5.3

-0.6

Non-oil sectors

84.1

85.3

8.5

8.9

  Mineral

0.3

0.4

12.1

11.5

  Agricultural

40.9

40.2

5.8

5.7

  Wholesale and Retail Trade

18.7

19.4

11.2

11.3

  Telecommunication

4.6

5.7

34.4

34.8

  Manufacturing

4.2

4.2

7.6

7.6

  Finance and Insurance

3.6

3.5

3.9

4.0

  Building and Construction

2.0

2.1

11.9

12.3

  Real Estate

1.7

1.8

10.8

10.4

  Business and Other Services

0.9

0.9

9.3

9.5

  Hotel and Restaurants

0.5

0.5

12.0

12.1

  Others

6.8

6.7

5.0

5.1

Source: National Bureau of Statistics, Nigeria

Expanding middle-income class holds promise for consumer products

The boom in non-oil private sectors has catalysed the expansion of Nigeria’s middle-income population, with increasing numbers of professionals and managers working in high pay sectors such as banking and telecommunication. In addition, more and more private business owners have found a good fortune of running successful businesses. According to a recent survey on Nigeria’s middle class, some 40% of the middle-income people run their own businesses.

According to the African Development Bank, the middle-income class makes up about 20% of the Nigerian population, which is estimated at more than 167 million, and these people are expected to pursue a quality lifestyle and consumer products. Given its small manufacturing sector, consumer products are mostly imported. In 2011, imports of consumer goods accounted for some 8% of total imports, with average annual growth rates of 63% during 2008-2011.

Table: Nigeria's major trading partners in 2011

According to Nigeria’s National Bureau of Statistics, China is the second largest source of Nigerian imports, trailing only the US. Nevertheless, Nigerian imports of Chinese products consist of a higher proportion of consumer goods compared to those imported from the US. There is little wonder to see Chinese consumer products dominate in the Nigerian retail market, in particular electronics goods.

Chinese consumer products have found a good following in Nigeria’s mass market, given their low price and reasonable quality. Surging demand for Chinese products has prompted Nigerian traders to visit the Chinese mainland for sourcing popular products, with many Nigerians reportedly living in Guangzhou.

Nigeria will become one of the most important markets in Africa in the coming decades. While whetting their appetite for the upbeat retail market in Nigeria, Hong Kong companies should position themselves strategically with an optimal mix of price and quality, while fine-tuning product design to suit the African taste.

Setting sight on Nigeria’s middle class, Hong Kong companies should strive to differentiate their products from those low-price items from the Chinese mainland. With an apparent shortage of modern and organised retail channels in Nigeria in the offing, a well-planned distribution strategy is always the key to success in the Nigerian market.


1  ECOWAS refers to the Economic Community of West African States, a regional group of 15 West African countries including Benin, Burkina Faso, Cape Verde, Cote d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo.

Content provided by Hong Kong Trade Development Council
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