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South Africa’s Retailers Eye Bigger Chunk of Nigerian Market

26 Feb 2012

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Minister of Trade and Investment, Olusegun Aganaga

By  Festus Akanbi

South African retailers are defying the recent not-so-encouraging economic performance indicators from Nigeria to increase their stake in the country. The National Bureau of Statistics had last week put the inflation rate at 12.6 per cent for January, and warned over the rising level of poverty in Nigeria.

However, South African retailer Massmart said at the weekend that it plans to expand its business in Nigeria in what economic watchers attributed to the population advantage offered by the country and the ongoing innovation by the financial authorities to promote the use of payment cards for transactions.

The company, Africa's second-biggest retailer and 21 per cent owned by the US group, Walmart, which currently has two stores in Nigeria with a third under construction, says it is planning to raise the number of its stores to 20.

According to its chief executive, Grant Pattison, Massmart is ready to explore the potential in some cities. “We have identified five or six cities in Nigeria and we see the potential of between 10 and 20 Game stores.

“By all simple metrics, Nigeria has the potential to be larger than South Africa, but it has some way to go in terms of infrastructure and political stability,” Pattison was quoted by Reuters as saying, at the weekend.

Shoprite, the biggest retailer on the continent also announced a fortnight ago that Nigeria could become as big a market as its South African home base, where it runs 700 stores.
Economic watchers explained retailers are increasingly targeting Nigeria, given its population and potential for growth. The country is home to over 160 million people, compared with South Africa's 50 million, according to World Bank estimates.

Chief executive, Shoprite, Whitey Basson was quoted last week as saying, “Several cities in Nigeria have populations of more than eight million people. I can't say all of them have the same spending power, but Nigeria can support the same number of supermarkets as South Africa.”

Downplaying the rising rate of poverty released by NBS, Basson said: “Even if you have 60 per cent of the population living in poverty, 40 per cent of the Nigerian population is still bigger than the South African population.”

Shoprite, which reported a 19 per cent rise in first-half earnings, runs about 950 supermarkets with 729 of those in South Africa and two stores in Nigeria.
It plans to open 12 more stores outside South Africa by the end of June, including in the Nigerian cities of Ilorin and Abuja. It also plans to enter the Democratic Republic of Congo.

Market analysts noted that the cash-lite policy of the Central Bank of Nigeria which encourages the use of e-payment channels for transactions is also regarded as a boost to retail businesses in Nigeria.

Under the pilot scheme, which kicked off in Lagos on January 1, banks are expected to deploy over 40,000 point of sales terminals in public places including stores and supermarkets in the state.
The policy, according to analysts, will ease transactions between consumers and operators of stores and supermarkets in the country.

Tags: Business, Nigeria, Featured, Nigerian Market

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