Nigeria’s retail market has experienced some setbacks as it lags behind peers such as Cote d’Ivoire, Tanzania, Kenya and South-Africa, dropping eight places from 19 in 2016 to 27 in 2017, a recent report ‘2017 Global Retail Development Index (GRDI)’ published by AT Kearney, a United States of America-based management consulting firm.
In other words, Nigeria retail sales dropped by 16 percent this year to 105 billion from 125 billion recorded in 2016. The fortune of Africa’s most populous nation’s retail market has so far depended on global commodity prices and with African oil exporters facing serious challenges from depreciating currencies, corruption, and deep cuts government spending, this reality is most acute in Nigeria.
“Overall, Nigeria presents immediate challenges, yet its large population, growing middle class, and long-term potential keep it on the radar” the report stated.
Two trends stand out. First is the development of shopping centres where Nigerians are slowing shifting to the modern shopping experience. Although mall development has slowed from its rapid growth over the past few years, new developments have not been shelved. A $50 million mega-mall is set to be constructed in Ikeja and construction on the new Yantebura mall in Kano is also set to begin soon.
The second is the increasing importance of e-commerce. Given its size, Nigeria remains an attractive destination for e-commerce companies, with online retail expected to grow at a double-digit rate through 2020. An estimated 53 percent of Nigerians access the Internet, and mobile shopping is growing rapidly.
Jumia, Nigeria’s largest e-commerce company estimates that 63 percent of its customers’ orders are placed via mobile. Although online growth is hampered by limited logistics and payment infrastructure, new entrants are attracted to the growing market knowing these barriers will be overcome over time.
Unemployment, which has reduced consumer purchasing power drastically, is a major factor that has changed the retail market story. While employed consumers were still under pressure from shrinking purchasing power of their salaries, recent figures from the NBS showed that unemployment had risen to 14.2 percent, making it the eighth straight quarterly rise from second quarter 2015 when it stood at 6.4 percent.
Nigeria’s biggest malls sat half empty, as they continued to suffer from the impact of the country’s first recession in 29 years. Rising unemployment and inflation rates have shown in significant decline in footfalls in the big malls, leading to high vacancy rates.
Big malls in the three major cities of the country, including; Lagos, Abuja and Port Harcourt, were the hardest hit by the economic recession. Novare Lekki Mall, a 22,000 square metre retail facility has a 57 percent vacancy rate as at June 2017, slightly reduced from the 63 percent figure recorded in December 2016.
This is followed closely by Jabbi Lake Mall in Abuja, whose vacancy rate by the first half of 2017 was estimated at 56 percent. The mall, a 30,000 square metres shopping outlet, which sits on about 48,000 square metres of land, is a joint venture project between Actis Nigeria (a private equity firm) and Duval Properties Limited.
Analysts attribute the rising vacancy rate in this mall and others in the Federal Capital Territory (FCT) including; Ceddi Plaza with 27 percent vacancy rate, Grand Towers, 22 percent; and Silverbird Entertainment Centre, 32 percent, to the lower purchasing power in the economy and the high political risk of the FCT.
Times were really hard for retail centres in prime locations, and worse for the newly delivered malls where achievable rents had fallen by up to 20 percent below asking rents.
Vacancy rates in Port Harcourt malls averaged almost 10 percent, as the three malls in the city, namely Big Treat, Genesis Centre and Port Harcourt Mall, recorded 14 percent, 6 percent and 8 percent vacancy rates respectively, a reflection of the consumer’s reduced financial position and the waning influence of oil, which is a major wealth driver in Port Harcourt.