Consumer market investment prospects in Nigeria revealed

One of our February guests on Lunch with our Leaders was Toyin Gbagi, partner at KPMG Nigeria. We invited readers to present questions to her on the topic of consumer markets investment prospects in Nigeria and an enlightening conversation developed. Here are some highlights from that hour, pared down to the meat.

Toyin Gbagi, partner at KPMG Nigeria

Toyin Gbagi, partner at KPMG Nigeria

Economic Community of West African States (ECOWAS)

Q: I am aware of ECOWAS role in investment maximisation in the Western Africa coast. How easy is it to have a business nucleus in Lagos and operate branches in Ghana or Benin?

A: Good question! There are currently several existing businesses domiciled in Lagos with operations across West Africa (Ghana, Benin, etc.). Companies need to strategise their approach and optimally consider such factors as trade legislation, socio-demographic groupings, and infrastructural development/challenges.

SME prospects in Nigeria

Q: Many multinationals (Guinness, Shoprite, etc.) have a strong foothold in Nigeria. What are the prospects/opportunities for small and medium enterprises (SMEs), especially in the food sector? Are there laws that protect/nurture SMEs’ growth?

A: You are absolutely right that the multinationals have gained a strong foothold in the consumer space. However, the Nigerian government has introduced various policies/incentives and initiatives to encourage and nurture the growth of SMEs in the country.

Competing with Chinese firms in Nigeria

Q: With many Chinese firms now producing in Nigeria, what’s the guarantee of return on investment for a middle-income investor?

A: That’s truly a challenging one. However, the Nigerian market is very diversified and there is definitely intense competition between formal and informal players.

A sound market-entry strategy gives an entity greater control over its market introduction and launch expectations. Key decisions must be made around defining the company’s value proposition, its organisational structure, financial resources and technical capabilities, products and targeted market. Of recent, we have seen quite a number of SMEs emerging and growing strong in the consumer markets space.

Lessons from Woolworths’ Nigeria exit

Q: What do you think international retail stores can learn from Woolworths’ story, when it recently announced it was exiting Nigeria a second time? In terms of entry strategy, what are your thoughts on critical success factors?

A: Based on my personal views, I believe the key is to formulate a winning business model to reach this emerging consuming middle class currently on the increase. As further reported, companies investing in Nigeria have to understand the culture and the consumers and not just the risks and challenges of the market. Overall, models have to be constantly fine-tuned and adapted.

Nigeria’s fast moving consumer goods sector

Q: From a cost profile perspective when do you estimate that companies in the Nigerian fast moving consumer goods sector would start reaping the benefits of the privatisation of the power sector in Nigeria?

A: That is a key question on every investor’s lips. As variously reported, power is top most on the Nigerian government agenda with all initiatives embarked upon to bridge this infrastructural gap. Exact timing is apparently uncertain at the moment.

Formal vs informal retail sector in Lagos

Q: I went to Lagos recently and was very shocked to find out that there are only two or three shopping malls. With a population of over 15m people I would have imagined there would have been more? How big is the informal sector and do you see the retail sector as a key opportunity for potential investors?

A: You are right in your observations. Nigeria definitely presents an attractive market. With a population of over 170m and a rising consuming class (middle class). We have seen existing investors expanding their footprints across the country in this regard (more shopping malls). KPMG is actively involved in assisting these investors. No doubt, the retail sector definitely presents a huge opportunity for potential investors.

This article was first published by KPMG.