The wealthy, bigspending class in Africa have caught the eye of Western luxury goods manufacturers. This is because their patronage and crave for luxury brands and services have caused ripples of excitement in the boardrooms of some luxury retailers and service providers. Similarly, market analyses about the fast changing trends, now place a high premium on forecasts about increased spending activity by the wealthy in Africa and the corresponding sales growth for brand owners.
The 2014 Wealth Report Attitudes Survey, tells us that: “Across the world, the spending of UltraHigh-Net –Worth Individuals (UHNWIs) is predicted to increase this year. And almost half of the respondents to the survey in Africa anticipate “higher levels of luxury purchasing activity.” Leading luxury analyst, Ledbury Research, in its Luxury Opportunity Index highlights the top 10 locations around the world with the greatest potential for luxury growth. In its report, the prospects for luxury spending in Africa, gets prominent recognition. According to the Index, Five of the 10 locations for luxury growth are in Africa namely Ghana, Kenya, Nigeria, South Africa and Zimbabwe; three are in the Middle East; the developed world is only represented by the US, Mexico stands in for Latin America and no Asian country features in the top 10.
Commenting on the survey’s results, Andrew Shirley, Editor of the Wealth Report, said: “Africa is clearly an exciting growth story at the moment. In many parts of the Continent, a growing middle class with increasing levels of disposable income is creating new demand for luxury goods and a higher-quality retail experience.”
To say the least, the place of Nigeria on the top 10 list is not surprising. The Index confirms “ Nigerians as the third highest non-EU spenders in London during 2012”.
Undoubtedly, wealthy Nigerians are big spenders and from the conclusions of several international surveys, their huge appetite for upper shelf goods and services should not be overlooked. For example, in the luxury drinks industry, The Euromonitor International in its 2013 survey notes that: “Nigerians spend N41bn on Champagne annually
and the country ranks as the 2nd fastest growing market in the world for Champagne. The total champagne consumption reached 752,879 bottles (75cl) in 2011, higher than in consumption in Russia and Mexico placing her among the top 20 champagne market in the world.” Indeed, market analysts project that champagne consumption in Nigeria is expected to more than double. Luxury drink retailers, Moet and Hennessey are now major players in Nigeria. The Global Marketing and Communications Director at Pernod’s GH Mumm and Perrier Jouet Champagne Brands, Charles Armand de Belenet, acknowledges this fact: “Nigerian Champagne consumption is quite high.”
From newly-released data compiled by renowned agencies, certainly Nigeria’s consumer expenditure looks set to increase. But does Nigeria have all it takes to become the centre for luxury companies in the mould of say, Hong Kong? The Mckinsey Global Institute in its 2014 report predicts that “Nigeria has the potential to expand its economy by roughly 7 per cent per year through 2030, potentially raising GDP to more than $1.6 trillion.” Commenting on the conclusions Director and Location Manager of McKinsey’s Nigeria Office, Reinaldo Fiorini said: “Nigeria has extraordinary advantages for future growth, including a large consumer market, a strategic geographic location, and a young and highly entrepreneurial population.”
The penchant for both ‘soft’ and ‘hard’ luxury goods is further monitored by the African Economic Outlook (AEO) who say that: “Nigeria’s economic growth has averaged about 7.4% annually over the past decade, creating a wealthier Nigerian elite with a large spending power.” Other compilers of population and wealth data such as ReportsnReports.com in an analysis on HNWIs: Population and Wealth Management Market in Nigeria, notes that: “There were 16,686 HNWIs in Nigeria in 2013. These HNWIs held US$90 billion in wealth and wealth per capita was US $1,725. In 2013, Nigerian HNWI numbers rose by 4.9%, following an increase of 4.7% in 2012. Growth in HNWI wealth and volumes are expected to improve over the forecast period. The total number of Nigerian HNWIs is forecast to grow by 7% to reach 18,481 in 2018. HNWI wealth will grow by 27% to reach US$123billion by 2018.”
A few Western luxury brands such as Hugo Boss, Ermenegido Zegna, Porsche and Estee Lauder have scratched the surface of the oil giant, by planting retail outlets in the commercial capital of Lagos. Managing Director for Estee Lauder in sub-Saharan Africa, Sue Fox explains that: “Our target customers are the emerging middle class and the affluent African consumer who is probably extremely well-travelled and brand savvy”. There are two other significant factors that could pave the way for Nigeria as a potential fertile home for the world’s luxury companies. Last January, British economist and banker, Jim O’Neill, announced that: “Nigeria has been identified as a growth market and included in the MINT classification”. Comprising Mexico, Indonesia, Nigeria and Turkey, the MINT countries according to O’Neill “have the strongest prospects of joining the ranks of the world economic powers; second generation of emerging market pace-setters. They are potentially high-growth countries with strong prospects of joining the leading nations of the 21st Century” he said. It would be recalled that O’Neill was the first to identify the BRICS (Brazil, Russia, India, China, South Africa) a group of five major emerging national economies who today have become an economic bloc in their own right. At the Fifth BRICS Summit last March, the group used its growing weight to establish new structures such as the BRICS THINK Tanks and the BRICS Business Council to “strengthen intraBRICS cooperation to develop new paradigms for sustainable and inclusive growth models, as well as new learning and knowledge paradigms to deal with contemporary growth and development challenges.”
The ideas of these economic groups draws attention to the fact that the global economic balance of power has tipped in the other direction and will continue to do so. As far as the MINT classification is concerned, Economics Editor of The Guardian UK, Larry Elliott: concludes that: “ In Nigeria’s case, it illustrates the possibility that the next “tiger” economies could well be in Africa.”
While not discarding the infrastructural challenges the country still faces, there is no doubt that investors would find joys in Nigeria’s potentials. As the “leading growth story in Africa”, she should not be snubbed in favour of her rival located at the tip of the Continent. Nigeria boasts of some 170 million people and though still implementing much-needed power reforms, has the demographics of middle and high-income consumers. These factors alongside growing wealth and opportunities, position Nigeria to become a major retail luxury hub in Africa because vast opportunities exist for Western brands to berth at her shores.
The other significant factor that caught the attention of Western media was Nigeria’s economic status and the recent re-basing of its Gross Domestic Product (GDP). It provided the most accurate picture of her growing economic advantage.
In April 2014, the value of Nigeria’s economy doubled after the Nigeria Bureau of Statistics updated the approach to calculating GDP for the first time in 24years. Nigeria’s GDP calculation which now includes film industry, music, private jets, online sales and telecommunications sectors became the largest in Africa showing GDP of $454billion in 2012 and $510billion in 2013, overtaking South Africa. The rebasing also revealed that Nigeria’s economy grew by 12.7 percent between 2012 and 2013, making it one of the fastestgrowing in the world, another attractive statistic for investors looking to enter new markets. Commenting on the GDP rebasing, Nigeria’s Finance Minister, Dr. Ngozi Okonjo-Iweala, said: “ It’s big news, at least it shows investors that this is a sizable economy with a large consumer base with opportunities for investment in durable goods, consumer goods and their manufacture,”
From all indications, and as far as Africa is concerned, Nigeria is growing as a vibrant investment destination and if its current luxury expenditure activity and projections are anything to go by, it places her in pole-position for further foreign investor capital.