Nigerian retailers who had the foresight of looking into local products when investing in the country have been able to adapt despite the tough economic standing, this is what Obinna Onunkwo, Co-Managing Partner at Purple Capital had to say.
Some retailers are constrained with the forex shortages and are considering consolidating which is not very encouraging for potential investors but Onunowo says there is still a lot of potential in the retail market.
"From the point of view of the investor in terms of where you're going to get returns because if you make an investment, you expect to have a certain return and that is predicated by the fact that your tenants or the retailer that you have is able to make sales - if those tenants rely a lot on importation obviously it will affect sales, if they have FX issues it will affect sales as well,” said Onunkwo.
He adds: "A lot of retailers have been able to adapt, and some that initially pulled out have come back into the market - those of them that had the foresight to look for local alternatives, or local producers are doing relatively well - those that were not able to make that transition are doing badly."
Onunkwo thinks most developers are looking at other segments of the market, luxury goods being one of them as Nigerians are very brand conscious but at the same time they are conscious of pricing.
A lot of developers are looking at what other alternative models they can bring to the table that ensures they do not only have luxury brands but a diverse pool of products.
"Remember that the market is huge, the luxury brands will attend to the upper middle class, but then there is a growing middle class in Nigeria, those guys still need to buy shoes, there is also the lower class - it is a question of asking yourself, at what stage in that structure do I want to play and if things change how flexible can I make those changes?"
Onunkwo says he thinks the retail space holds “tremendous” opportunity, using the country’s GDP to explain.
“Between the 80s and 90s to now, you will see a drastic change in terms of the structure of the economy - in those periods, the agriculture was the mainstay, if you look at the current figures you'll see that agriculture contributes no more than 20 per cent of our GDP - the biggest contributor of Nigeria's GDP is currently services,” he says.
"The future is bright, the structured economy has changed tremendously, it is no more agri-depend, services is growing and with services growing, it means a lot of jobs and opportunities being created.”