Nigeria's Supermarkets Decline For The First Time In Five Years

Nigeria’s modern retail trade market recorded its first decline in five years when it slid by 5.4 percent to $25.2 billion in 2020 from $26.7 billion in 2019.

New data from Euromonitor International, a provider of strategic market research disclosed this, highlighting the combined impact of the global COVID-19 pandemic and associated lockdown measures, which led to macroeconomic volatility, the naira’s rapid depreciation, weak purchasing power and household incomes as causative factors.

“Nigeria was negatively affected by lockdown regulations imposed on crucial economic areas like Lagos. The country was however further challenged by its oil dependency since it pressured the Naira fluctuation (which affects imports), as well as the rising inflation rates (which reduces buying power),” said Christele Chokossa, senior analyst at Euromonitor International.

The modern retail trade involves a more planned and organised approach to distribution and logistics management, e.g. hypermarkets, supermarket chains and mini-markets. The sector which has been growing for the past five years has however been challenged over time by the country’s shrinking middle class.

The sector was also pricked by the high rate of vandalism carried out by hoodlums after the EndSARS protests in 2020, as affected outlets needed to spend unbudgeted time and resources to get back on their feet.

Despite the sector’s expansion from 2015 to 2019, its penetration across Africa is still very low. For example, in Nigeria, modern retailing only accounts for about four percent of total grocery retail value sales, while in South Africa, it accounts for over 60percent. On the other hand, traditional retail accounts for 58 percent in Nigeria but 19 percent in South Africa, data from Euromonitor International shows.

According to Euromonitor International, in order to improve its penetration rate, the growth in modern retailing across Nigeria will depend on factors like rising urbanisation rate, infrastructure development of malls and expansion in the middle class.

“Beyond this, extraneous variables like government policies on import and foreign investments, as well as socio-economic stability in terms of civil unrests, inflation and currency fluctuations are also likely to play an important role in the processes,” Chokossa added.

Why is this important?

Typically, a strong purchasing power and high consumer spending from the middle class of any economy creates growth in modern retail channels. Retail sales are an important economic indicator because consumer spending drives a large portion of the economy.

However, due to pressure from the pandemic other listed factors, the sector weakened as there were several job losses and even pay cuts to sustain several businesses since patronage was low.

On the other hand, the e-commerce sector got a massive boost during the pandemic as the need for online marketplaces grew on both ends of the chain (supplier and consumer).