One question that our organisation typically gets asked is what the size of Nigeria’s market is. Many marketing brochures talk about a total population pushing 200 million people, but neglect to talk about the effective purchasing power of each of those people. Nigeria’s true market size is really the number of people who are able to spend discretionarily once they get past spending on the essential commodities.
In collating our quarterly Jollof Index data over three years from July 2016 to June 2019, we have observed that majority of Nigerians spend a high percentage of their income on food, in line with data from Euromonitor which put it at 58% in 2018. In July 2019, SBM decided to test this out and embarked on a survey that took us to Ibadan, Suleja, Abuja, Kaduna, Kano, Jos, Makurdi, Port Harcourt, Owerri, Onitsha, Warri, Benin City and Lagos. We sought to know the income distribution of our 1,633 respondents. The income distribution follows a normal Bell Curve as can be expected in such a random survey. 7% of our respondents earn more than ₦120,000 per month, while 6% of them earn nothing.
This survey suggests that Nigeria’s market size is just under 37% of the population. The biggest concerns for Nigerians with discretionary income appear to be to keep connected either via phone calls or on the internet, and clothing, 10% of respondents falling into each of those categories. Perhaps reflecting Nigeria’s housing shortage, only 2% of our respondents said that they spend their discretionary income on rent. It is more likely, however, that most Nigerians do not cater to rent from their monthly income and usually find other sources that will yield sizeable lump sums, either by borrowing or by looking for alternative income sources asides from their primary source to deal with rent and school fees.
The two most important policy thrusts that the government must make central to its policy planning are to reduce the cost of food in order to free up more discretionary income as well as to increase productivity and therefore the income of Nigerians relative to the cost of the bare essentials. Just as important is facilitating access to credit, in order to cater to bulk expenses like rent and school fees, as well as increase the discretionary income pool. Without an increase in discretionary income, savings are unlikely to increase and therefore investible funds within the economy will remain relatively low. It is only as discretionary income increases that Nigerians will be able to afford more products, creating the environment for new businesses to thrive.
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