The changing face of retail in Nigeria

Nigeria’s retail sector is undergoing change with international supermarket brands entering the country, new malls being constructed and the transformation of informal markets into more modern facilities.

Many of Nigeria's markets are being redeveloped into more modern facilities.

Many of Nigeria's markets are being redeveloped into more modern facilities.

A month ago the first Spar opened in a newly constructed shopping centre in the Lekki-Ajah district of Lagos, Nigeria‘s commercial capital.

“Nigeria offers an exciting opportunity for Spar,” said Dr Gordon R. Campbell, managing director of Spar International. “This is the right time for Spar to enter Nigeria. It has the largest population in Africa and the economy is growing fast, resulting in much better living standards.”

Spar’s partner in Nigeria is the Artee Group, which currently operates the Park ‘n’ Shop brand of supermarkets in the country. The Artee group has acquired six further locations for Spar supermarkets and plan to open at least four before the end of 2010. The group also plans to begin the conversion of Park ‘n’ Shop supermarkets to the Spar brand.

Spar will no doubt be competition for Shoprite, the South Africa-based retailer that opened its first store in Nigeria in 2005 and has significant expansion plans for the country.

Shoprite chief executive officer, Whitey Basson, however, doesn’t seem too fazed by the newcomer. “The Spar entry into Abuja and Port Harcourt and those places – they’ve done a deal with a very small group that really has very, very small stores, where they are going to trade under the Spar banner. So it’s not as if World War III has started,” he said on South Africa’s Moneyweb radio programme.

“We are going very well in Nigeria, but obviously we go for a different model. We go for big stores, and that involves real first-world shopping. We are not into that little corner café type of operation. But obviously Spar and the people in the rest of the world would follow. It took our opposition 20 years to follow with a warehouse, so there’s no reason why Spar won’t open a big store in the next five or ten or fifteen years. It’s just a question of how they manage them. It’s very difficult for franchise operations,” Basson added.

Shoprite currently has two stores in Nigeria but according to Bloomberg Businessweek it plans to expand the number of outlets to 20 within the next two years.

New malls

One of the major constraints for large retailers looking to do business in Nigeria is the lack of retail space. Commenting on Shoprite’s results for the 53 weeks ended June 2010, Basson said: “Growth in store numbers slowed due to a lack of foreign investment in property development in Africa.”

There are currently a number of new modern shopping malls in various stages of development. These include the Ikeja City Mall in Lagos, the Polo Park Mall in Enugu State and a planned shopping centre in Ilorin, Kwara State. Nigeria, however, currently already has a number of such facilities in operation, including The Palms in Lagos, the Tinapa Shopping Centre in Cross River State and the Ceddi Plaza in Abuja, to name a few.

“There is a lot of property development going on in [Nigeria] . . . and most of these new developments include a retail component,” says Dianna Games, executive director at consultancy Africa@Work. “The large growth of the middle class is the driving force behind this new way of shopping,” she says.

Upgrading of markets

Many of Nigeria’s markets are also being upgraded to more modern and organised structures. In Lagos, the state government launched a crackdown on illegal roadside trading and partnered with the private sector to construct modern markets. Many of these new facilities have infrastructure such as car parks, water supply, standby electricity and public toilets.

“A market is a meeting point; it is a point for sales; it is a point for the exchange of wares; it is a point where people meet. We thought that rather than having them on the streets, let’s organise them and put them in one good location,” Fransisco Abosede, Lagos State commissioner of physical development and urban planning, said in an interview with ABN Digital.

An example of one of these upgraded facilities is the Oluwole market in Lagos, the first phase of which was officially commissioned in April. The Oluwole area used to be home to criminal activities such international passport racketeering, credit card fraud, drug cartels, and various kinds of forgeries.

The government partnered with a private sector consortium led by ARM Properties Plc for the construction of the Oluwole Urban Market & Multifunctional City Centre. The new facility comprises four levels with shops as well as traditional market stalls.

“At Oluwole, our aim was to provide for the different layers of the existing retail space demand as well as encourage new and complementary uses. We provided stalls for the petty traders and hawkers that are characteristic of this area of Lagos, small and medium line shops for the garment and consumer goods shop owners and on the top floor small business units for the myriad of businesses (insurance companies, microfinance banks, telecom company customer centres, etc) that service the market population. This is akin to the bottom of the pyramid strategy, where we offer the basic features and conveniences of formal office and trading platforms in little dose to small entrepreneurs and traders. This has proven to be a high yield product,” says Yinka Ogunsulire, managing director of ARM Properties.

A similar development is the new Tejuosho Market, which will replace the old market that burnt down in December 2007. It is being redeveloped through a public-private partnership (PPP) concession by the Lagos State Government. According to reports the market is to be finished in 2010.

In Ilorin, Kwara State some of the phases of the Ilorin Ultra Modern Market have also been completed under a PPP arrangement. The idea behind the market was to bring under one roof all unorganised trading points scattered across Ilorin.

Many other modern markets are also at various stages of completion across Nigeria.

The future of retail?

These new retail developments will surely not be welcomed by everyone. Many informal traders have already complained that they cannot afford the rents charged by the revamped markets.

“Informal trading is an important feature of Nigeria’s everyday life, and given the significant infrastructure deficit as well as the limited use of electronic payment systems, is likely to remain an important aspect of commerce in most parts of the country for some time to come,” says Ogunsulire.

“Having said that, I do believe that significant changes will take place in most of the city centres where population exceeds about two million people. Our forecast is that the retail sector will steadily become more organised largely driven by the move by some of the state governments to ban street trading, revitalise city centres and modernise trading standards. This is, however, unlikely to lead to the complete disappearance of the informal markets. We see three trading platforms co-existing side by side in Nigeria. These are the traditional street trading option, the ‘semi-formal’ modernised markets; and, finally, the western-style shopping malls,” she adds.