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TMCNet:  Understanding Nigeria's Middle Class [Ventures Africa]

[July 13, 2014]

Understanding Nigeria's Middle Class [Ventures Africa]

(Ventures Africa Via Acquire Media NewsEdge) VENTURES AFRICA – It is no longer news that Africa’s middle class has increased in size and purchasing power. In fact, this is a key driver of Africa’s economic exploits and ability to provide good returns on investment.


Africa’s middle class can be defined as the citizens with daily expenditure patterns ranging from $4 to $20 per day. Countries in the Northern African region have some of the largest middle classes: Tunisia - 45.6 percent of its citizens fall in the middle class category, Egypt - 31.6 percent and Algeria -27.3 percent.

Studies have been carried out on the Nigerian middle class to draw key insights and drivers. The middle class now accounts for about 23 percent of the population according to the African Development Bank. Some reports suggest that the upper middle class lead lives not too dissimilar to those of Western Europeans. An estimated 92 percent of this population segment has completed a post-secondary school education; therefore, getting their own children educated is so important to them to the extent that half of this population segment send their children to schools abroad.

At least one third of the Nigerian middle class households have at least one international passport but only some 15 percent may have actually used them and the UK proves to be the most popular destination with Dubai catching up. They crave the same sorts of consumer products as the middle classes the world over, the likes of cars and other luxury goods. Their activities with money seem to rest more with saving all spare cash irrespective of interest rates rather than borrowing to buy more goods. Lands and property seem to be the most preferred investment items. They have a relatively high aversion to debt so the consumer lending sector is very under-developed. Consumer lending is an obvious first. Nigeria would require more businesses with in-house financing schemes to create a sustainable retail sector.

Home ownership is another potential high-growth area as most Nigerians aspire to owning their own homes. This, coupled with the rising population, will support the construction industry, building materials sectors and all businesses along that value chain.

Telecommunications, which is always a front runner in emerging markets, cannot be left out of the party here. Penetration has surpassed 51 percent and revenues per adult may multiply by a factor as much as 3 as the middle class continues to expand. Internet penetration is being boosted as well and this is opening up Nigeria’s information market to the rest of the world.

Up to 78 percent of Nigerians appear to trust their banking institutions and see them as ideal providers of financial services. This means that another potential entry point for investors is through the banking sector. 93 percent of Nigerian middle class citizens own a bank account but the perception of banks is more of a place to store money than to borrow loans, they don’t seem to care much about the prevailing interest rates offered by banks.

If immediately bequeathed a huge amount of cash, some 67 percent of Nigeria’s middle class citizens would prefer to purchase real estate property while 33 percent will spend it on education. A minority may opt to purchase cars, electronics or go on a vacation.

Nigeria’s greatest resource is it’s people, not necessarily it’s oil. The emerging middle class will continue to grow and be empowered by the growing prosperity. This will, in turn drive the country’s rapid development.

(c) 2014 Ventures Africa. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).

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