Dike Onwuamaeze
Agusto & Co, has predicted an influx of new entrants into the small and medium scale enterprises (SMEs) segment of the Nigerian economy.
It also estimated that Nigeria recorded a volume of $12 billion transaction on online purchases in 2020, and projected that online transaction might hit $75 billion mark by 2025.
These predictions were contained in its latest report titled: “2021 Small and Medium Sized Enterprises (SMEs) Report,” that covered three key segments, namely the e-retailing, cement distributorship and apparels.
It stated: “Our outlook for the SME industry remains stable. We believe the nation’s escalating inflation rate will continue to dampen consumer disposable income and affect the demand for goods and services in the short to medium term.
“Nonetheless, we expect the rising unemployment level in the country as well as gradual reopening of the economy to encourage an influx of new players into the SME industry.
“The importance of the SMEs industry cannot be over-emphasised given its significant contribution to the national workforce and the economy as a whole. Thus, we expect to see sustained attention from the government, with intervention programs to support the expansion of the sector.”
The report stated that the growing surge in e-retailing would continue to see an upward trend and would be buoyed by the uptick in digital payments that have been growing, “on the back of the spread of information technology with internet penetration increasing to 46.6 per cent in 2020 from 23.7 per cent in 2015.”
It said: “Consumer spending on online purchases is estimated to stand at $12 billion in 2020 and is expected to reach $75 billion by 2025. Through e-commerce, players enjoy a wider customer reach with the ability to simultaneously connect to millions of consumers locally and globally.
“We note that the emergence of COVID-19 positively impacted the sector, with players recording a gush of customer orders particularly during the lockdown period.
“We expect this trend to continue into the emerging post COVID-19 era premised on the rising rate of adoption of online shopping by consumers on the back of the relative convenience it offers.”
The report also acknowledged the oligopolistic nature of the Nigerian cement market that is dominated by Dangote Cement Plc, Lafarge Africa Plc and BUA Cement Plc.
It concluded that “cement distributors have limited choices on which brands to stock and have little control over the price.
“Nonetheless, the ready demand for the product compels interest in delving into the cement trade.”
The report stated that the dynamics of distributing cement in Nigeria would revolve around the activities of wholesalers, retailers, and arbitragers that could source cement supply contracts from construction companies and link them with wholesalers to make the delivery.
It said: “Agusto & Co. notes the key success factors for the segment to include strategic marketing, good transportation system and flexibility to move the business to where customer demand is high.”
The report noted that the apparel market was still struggling, having recorded, “a 7.6 per cent decline in the real GDP of the textile, apparel and footwear segment to N1.3 trillion” in 2020.
It, however, believed that “the apparel sector has considerable potential particularly for second-hand clothes, which is relatively affordable and appeal to price-conscious customers given the nation’s economic realities.”
