Welcome to Nigeria: Land of contrasts and luxury ambition

This is the nub of luxury goods demand in Nigeria. There is a fast growing bling-fuelled consumption culture, driven mainly by men and characterised by a hunger for luxury brands that are big on logos and even bigger on prestige credentials. In that sense, Nigeria is fairly typical of any fledgling luxury goods market. As we have seen in China, Russia and Brazil, the sophistication (and the spread of wealth) tends to come later.

The Nigerian dream

What is arguably different in Nigeria to other emerging markets is the pervasive sense of opportunity, even among the poor. It is an African twist on the American dream. People from low-income backgrounds (in Lagos, especially) believe their time will come – and in part this is down to a new offshoot of Christian religion, preaching financial prosperity.

Religious services are held in massive churches that accommodate thousands of people. Inside, millionaire pastors hold court over rapturous congregations, preaching that prosperity is a sign of God’s blessing. Businessmen wearing Rolex watches mingle with street traders chewing gum. These are places where God and mammon occupy the same ground.

Aspiration, which is a prerequisite for the development of luxury goods in emerging markets, is tangible in these mega churches. However, for aspiration to turn into luxury consumption, Nigeria’s burgeoning wealth needs to spread through the social classes.

Social classes D and E account collectively for two-thirds of the population. Nigeria will need to implement the type of social welfare programmes, minimum wage hikes and employment stimuli that we have seen in Brazil over the last decade if there is to be significant upward social mobility.

The demographic dividend

What definitely bodes well for luxury goods in Nigeria is its youthful demographic. The average age of the population in 2012 was 22 compared with 32 in Brazil, 38 in China and 40+ in a number of developed markets. This suggests that there will be at the very least organic expansion of the wealthiest classes.

Social classes A and B, for example, are forecast to swell by almost 5m between 2012 and 2020, compared with less than 3m in the US and Brazil, for example. Globally, only India and China are forecast to see greater expansion of social classes A and B in real terms. By 2020, the total AB class in Nigeria will total around 25m – that is around 23% more than projections for Germany and the UK combined.

There is clearly risk in entering the Nigerian market. That is a major reason why both Hugo Boss and Zegna have entered Lagos via franchising arrangements (strong local partners with local know-how are a huge asset). But the risk starts to look small when you size up the long-term opportunity. Contrasts and contradictions aside, Nigeria is starting to look like the real deal.

Rob Walker is a contributing analyst at Euromonitor International, a strategy research firm for consumer markets around the world.