‘Consumer Spending in Nigeria, other African Countries to Hit $2.4trn in 2020’

By Eromosele Abiodun

McKinsey and Company has projected that consumer spending in Nigeria and other major economies on the African continent will increase from $1.8 trillion (N358.2 trillion) in 2013 to $2.4 trillion (N477.6 trillion) in 2020.
McKinsey is a global management consulting firm that serves leading businesses, governments, non- governmental organisations, and not-for-profits.
McKinsey in a study entitled, ‘Africa: A Continent of Opportunity for Pharma and Patients’ added that the number of households with annual incomes above $5,000 (N995, 000) will increase from 134 million to 166 million by 2020.
While stressing that urbanisation will be the driver of the growth, McKinsey said there would be 1.5 million households in Lagos with incomes between $20,000 (N3.98 million) and $70,000 (N13.93 million) by 2030.

“The African market opportunity is concentrated with 10 of 53 countries – Algeria, Angola, Egypt, Ghana, Kenya, Morocco, Nigeria, South Africa, Sudan and Tunisia – accounting for 81 per cent of Africa’s private consumption in 2011.
“The bottom line here is that the perception of Africa as a locale of raw resources only is rapidly changing. Global firms are taking part in what the Wall Street Journal terms a “new gold rush” to cash in on the African consumer. It includes the US-based big-box-store Wal-Mart’s $2.5-billion dollar purchase of a 51-per cent stake in South African retailer Massmart as a prime example,” the report stated.
Encouragingly for local manufacturing, the report stated that in Nigeria and six other African economies, generics had gained market share since 2004 over branded products and over-the-counter medicines.

The report gave the example from Nigeria of Merck, which imports only the active pharmaceutical ingredient for its diabetic drug. The company’s local partner, it added, presses the tablets and is responsible for packaging.
While pointing out that opportunities may arise in consolidation in Nigeria, the report noted that most of the 400 new pharmacies opened in South Africa since 2006 were operated by two retailers, and that chains were also expanding in Kenya.
Health indicators from official sources in the ministry of health showed the size of the challenge for the authorities. According to estimates from the Nigerian Demographic and Health Survey, infant and under five mortality stand at 69 and 128 deaths per 1,000 live birth.
Justifying the huge investment opportunity in the health sector in Nigeria, analysts at FBN Quest noted that the federal government does not have the necessary resources to transform healthcare in Nigeria. For instance, they pointed out that the appropriation bill 2016 makes allocations to the ministry of health of N222 billion ($1.13 billion), the fourth largest, and N36 billion for recurrent and capital spending respectively.

They said: “Other public agencies have a role, too. The Nigeria Sovereign Investment Authority (NSIA) included healthcare among its 15 investable sectors for 2015. It has signed memoranda of cooperation with seven federal healthcare institutions, and a binding agreement with a group of private-sector operators to build and operate five modern diagnostic centres. The authority’s firepower, we have often observed, is limited by the impasse between the federal and state governments over reserves accumulation.”