A new detailed survey and report on Nigeria’s expanding middle class, issued by the leading emerging markets investment bank, Renaissance Capital, has portrayed Nigeria as a nation that is optimistic about economic growth, values entrepreneurship and is well positioned to capitalise on a boom in consumption.
The survey, released in Lagos, also noted that Nigeria’s per capita gross domestic product (GDP) at market exchange rates has already increased from $390 in 2001 to $1,541 in 2011 based on the International Monetary Fund (IMF) figures, and would reach nearly $2,000 by 2016 “if the pessimistic IMF forecasts are accurate, or $2,500 in our more benign scenario”.
The survey and accompanying report, authored by Renaissance Capital’s Global Chief Economist, Charles Robertson; Head of Sub-Saharan Research, Nothando Ndebele; and Sub-Saharan Economist, Yvonne Mhango, drew attention to the wealth of opportunities presented by one of the world’s fastest-growing economies, as an expanding middle class fuels GDP growth in Africa’s most populous country.
The report drew out the investment opportunities and implications presented by Nigeria’s rapidly growing middle class, against a highly favourable macroeconomic backdrop.
It noted that GDP rose five fold from $46 billion in 2000 to $247 billion in 2011, according to IMF estimates, while the population increased by more than one-third over the same period, from 119 million to 160 million.
Nigeria’s middle class accounts for about 23 per cent of its population, according to African Development Bank data.
Renaissance economists added that, “The magnitude of the increase in Nigeria’s population between now and 2016 is the equivalent of adding another Romania; while, based on cautious IMF forecasts, the increase in Nigeria’s GDP in five years will be equivalent to the addition of another Vietnam or Bangladesh.”
The Renaissance Capital survey was conducted with 1,004 middle-class Nigerians, residing in the cities of Lagos, Abuja and Port Harcourt, 70 per cent of whom were aged 40 or younger.
“The Nigerian middle class we surveyed has a monthly income of some $500-600 and nearly half will be buying fridges, freezers and other consumer goods, suggesting a consumer boom is under way,” said Charles Robertson. “We cite the upside for consumer lending retail, appliance retail, lifestyle and leisure, housing development and home improvement.”
The survey made various findings on Nigeria’s middle class. Among them were the following: Average monthly income is in the range of N75,000 – 100,000 ($480-645, or roughly $6,000-7,000 pa).
It also found that the middle class are well educated: 92 per cent have obtained post-secondary education or have studied at an institution of higher learning. Educating their children well is a top priority, and over half send their children abroad to complete their education.
“A sizeable 76 per cent of Renaissance’s sample works in the public sector; of those working in the private sector, 38 per cent run their own businesses. Most of them live in leased/rented accommodation (68 per cent) with an average household size of 3.7 people. The average number of children in each household is 1.6 (excluding those away at school) vs a national average that is closer to 3; larger families are more common in rural areas,” the survey revealed.
According to the Rencap survey, nearly half of the middle class have no immediate plan to move house, 18 per cent are planning to move to a newly completed self-owned apartment, and eight per cent are planning to move to another rented apartment.
“The average number of cars per middle-class household is 0.8 (around one third of middle-class Nigerians have a car that is less than five years old); 5 per cent of homes have two cars. Car ownership remains well below levels seen in Zimbabwe, among others.
“The Nigerian middle class has a culture of saving: they care little about the deposit rate and do not expect to borrow from a bank. If they had the funds, they would rather invest in land/property than shares or bonds.
Most do not have mortgages (which represent approximately 1 per cent of GDP) or credit cards, although many expect to apply for the latter.
As in many emerging markets, the consumer lending sector is woefully underdeveloped,” it stated.
Their principal sources of information, the survey noted, are TV and radio. “Forty-eight per cent have internet access, but only 2 per cent shop online at least once a month. There is huge scope for internet shopping, if logistics allow. The majority shop at open-air markets (73 per cent), as well as use convenience stores (62 per cent). Twenty per cent dine out at least once a week,” it added.
From the detailed findings, only 15 per cent of this class have travelled abroad; 35 per cent of households have at least one person with an international passport, while the United Kingdom is the most favoured travel destination.
“Their key areas of concern over the next 12 months are the supply of electricity and unemployment, with between 19-23 per cent citing these as concerns; while crime (5 per cent) and corruption (3.5 per cent) are seen as far less concerning. Three-quarters are optimistic about the future of Nigeria,” the survey added.