The ‘Africa Rising’ narrative, driven primarily by the region’s high growth rates, has captured a great deal of attention from global businesses. High growth rates in Africa’s largest economy, Nigeria, have been fueling growth in the country’s luxury market.
Recent developments in Nigeria’s retail landscape indicate the start of a retail revolution. Analysts view Nigeria’s retail sector as largely-untapped market for retail brands, including luxury brands.
One of the factors contributing to the growth in demand for luxury brands in Nigeria is the country’s burgeoning middle-class which has an increasing amount of disposable income. Additionally, the spending power of the inhabitants of Nigeria’s most populous city and commercial capital, Lagos, is expected to reach $25B annually by 2020. It is estimated that there are over 10,000 US dollar millionaires in Lagos alone, according to a recent report by African Business Magazine.
According to the World Wealth Report 2014, Nigeria was the country with the third-highest number of non-EU spenders in London in 2012. Wealth Insight forecasts that the number of ultra-wealthy individuals, with a net worth in excess of $30M, in Nigeria will nearly double over the next 10 years. Presently, it is estimated that Nigeria is home to over 200 of such ultra-wealthy individuals.
In March 2013, German luxury carmaker Porsche opened a dealership in Victoria Island, Lagos, Porsche’s first dealership in Nigeria. Victoria Island is one of the wealthiest districts in Lagos. Victoria Island has one of the highest concentrations of millionaires globally. According to Euromonitor International, “these high net worth individuals (HNWIs) are mostly oil industry executives, entrepreneurs in commodities such as sugar and cement, owners of booming consumer-driven businesses (Nigeria’s economy has grown by an average annual rate of 7% in the last five years, and by 8% in Lagos) and well-heeled politicians.”
Nigeria’s HNWIs have generally purchased their luxury brand items from overseas shopping hotspots, such as Milan, Paris, London, and Dubai. In the not so distant past, Nigeria’s retail environment was not perceived as being too hospitable to foreign luxury brands despite the huge demand. However, this perception is changing fast.
In April 2014, Italian luxury menswear label Ermenegildo Zegna opened a franchise store on the same Victoria Island strip on which the Porsche shop is located. Two months earlier, Hugo Boss opened a franchise store in the Palms Shopping Mall in Lekki. Other global brands have confirmed plans or indicated interest to set up shop in Nigeria.
Presently, Nigeria is one of the top ten largest markets in the world for the French cognac, Hennessy. Last year, as an indication of the importance of the Nigerian market to Hennessy, the company launched a special bottle design to commemorate the 50th anniversary of Nigeria’s independence. 2014 consumption of Cognac in Nigeria is forecasted to surpass 1 million liters, which is higher consumption than in markets such as Mexico, Canada, and South Africa.
Nigeria’s young population bodes well for sustained growth of the country’s luxury market. As of 2012, the average age in Nigeria was 22, lower than 32 in Brazil and 38 in China.
According to a 2013 Euromonitor report on Nigeria’s luxury market, “Social classes A and B, for example, are forecast to swell by almost five million between 2012 and 2020, compared with less than three million 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 25 million – that is around 23% more than projections for Germany and the UK combined.” Classes A, B, and AB, as used in Euromonitor’s report, represent groups of the wealthiest individuals in the world.
The number of Africans with $30 million in assets is set to grow by 53 percent to 2,858 by 2023, far outstripping the average pace of growth across the rest of the world, according to the Wealth Report 2014.
In the Knight Frank Wealth Report 2014, which identifies the countries with the highest projected growth rates for luxury brands over the next ten years, five of the top ten countries are from Africa. The countries noted in Knight Frank’s Wealth Report 2014 are Ghana, South Africa, Nigeria, Kenya, and Zimbabwe.
Africa’s growth potential was further highlighted in the new Luxury Opportunity Index report, which tracks growth in four areas – luxury retail footprint, wealth creation, premium air travel, and economic growth. The index shows that of the top ten locations identified, five are in Africa.