Tag: Nigeria economy

Queens of Africa, Naija Princesses take on Barbie

With a booming economy in Nigeria and more black children than anywhere else in the world, Taofick Okoya was dismayed some years ago when he couldn’t find a black doll for his niece.

The 43-year-old spotted a gap in the market and with little competition from foreign firms such as Mattel Inc, the maker of Barbie, he set up his own business. He outsourced manufacturing of doll parts to low-cost China, assembled them onshore and added a twist – traditional Nigerian costumes.

Seven years on, Okoya sells between 6 000 and 9 000 of his “Queens of Africa” and “Naija Princesses” a month, and reckons he has 10-15 percent of a small but fast-growing market.

“I like it,” said five year-old Ifunanya Odiah, struggling to contain her excitement as she checked out one of Okoya’s dolls in a Lagos shopping mall. “It’s black, like me.”

Dolls dressed in local attire are arranged on a table at a workshop in Surulere district, in Nigeria's commercial capital Lagos. (Pic: Reuters)
Dolls dressed in local attire are arranged on a table at a workshop in Surulere district, in Nigeria’s commercial capital Lagos. (Pic: Reuters)

While multinational companies are flocking to African markets, Okoya’s experience suggests that, in some areas at least, there is still an opportunity for domestic businesses to establish themselves by using local knowledge to tap a growing, diverse and increasingly sophisticated middle class.

There’s no doubt about Nigeria’s economic potential. Economist Jim O’Neill has this year popularised it as one of the “MINT” countries – alongside Mexico, Indonesia and Turkey – that he sees as successors to the first wave of emerging markets he dubbed the Brics (Brazil, Russia and India and China).

With around 170-million people, Nigeria is Africa’s most populous country by far, and its economy is growing at about 7 percent, vying with South Africa as the continent’s largest.

Several multinational firms have been here for years. Drinks group Diageo, for example, now sells more Guinness in Nigeria than in the beer’s traditional home market of Ireland. South African grocer Shoprite has seven profitable stores in Nigeria and plans to roll out hundreds.

While Western economies struggle, the appeal of emerging markets for toymakers is clear. Between 2006 and 2011, developed countries saw toy sales grow just 1 percent a year, versus 13 percent in emerging markets, according to Euromonitor data.

But in Nigeria, basic goods aside, consumerism is in its infancy, creating opportunities for entrepreneurs.

“When it comes to sectors like spirits or beer, or even cement, all the international players are already there,” said Andy Gboka, London-based equity analyst at Exotix LLP Partners.

“Other sectors, such as toys or less-developed industries, provide a huge potential for local companies.”

Tailored to local tastes
Mattel, the world’s largest toy company, has been selling black dolls for decades, but said its presence in sub-Saharan Africa was “very limited”. Furthermore, the firm does not “have any plans for expansion into this region to share at this time,” according to spokesperson Alan Hilowitz.

There are good reasons for foreign companies to be cautious.

While Nigeria sees thousands of births every day, two thirds of children are born into families unable to afford anything off the shelves of most toy shops.

Multinationals also cite poor infrastructure and corrupt port authorities as reasons for steering clear.

South Africa’s Woolworths pulled out of Nigeria last year, blaming supply chain problems, though analysts said it also misread the local clothes market.

The longer companies such as Mattel wait, however, the more time Okoya has to build his business and shape consumer tastes.

At a small factory in Lagos’ Surulere suburb, his workers stitch brightly patterned West African fabrics into miniature dresses and “geles” – traditional head gear.

Nigeria’s three largest ethnic groups of Yoruba, Igbo and Hausa are represented in the “Queens of Africa” range so far, highlighting the growing sophistication of consumers – and the need to tailor products to local tastes.

The dolls go for between 1 300 Nigerian naira to the special edition 3500 naira ($22), while cheaper “Naija Princesses” sell for 500 to 1 000 naira apiece. Okoya makes a profit margin of about one third, and as well as selling at home, is increasingly shipping to the United States and Europe.

He plans dolls from other African ethnic groups, and is in talks with South Africa’s Game, owned by Massmart, a part of Wal-Mart, to sell to 70 shops across Africa.

Like Barbies, Okoya’s dolls are slim, despite the fact that most of Africa abhors the Western ideal of stick-thin models.

Okoya said his early templates were larger bodied, and the kids didn’t like them. But he still hopes to change that.

“For now, we have to hide behind the ‘normal’ doll. Once we’ve built the brand, we can make dolls with bigger bodies.”

Nigeria offers promise for investors looking for the next growth story

If you want an idea of what Nigeria can offer the world’s more fearless investors, raise a glass to South African supermarket chain Shoprite. Last year, its seven Nigerian branches sold more Moët & Chandon champagne than its 600 South African stores combined.

Nigeria may be best known for Islamist militants, bomb attacks, advance fee fraud and large-scale oil theft, but with a population of 170-million and a decade of annual growth rates around 7%, it also offers some outsized returns for investors willing to take the risk.

Just ask FTSE-listed Afren, whose share price shot up 9% in November when it discovered a “giant” oilfield in Nigeria, which is already the continent’s biggest energy producer.

But it is not just the traditional, grubby business of oil extraction that stands to make a mint. A youthful population is showing glimmers of a consumer boom: outside Ireland, Nigeria is the biggest market for Guinness, while brands from Porsche to men’s luxury clothes brand Ermenegildo Zegna have scrambled to open shops recently.

Champagne bottles displayed at a roadside shop in Lagos. (AFP)
Champagne bottles displayed at a roadside shop in Lagos. (Pic: AFP)

“It’s caught on with investors. They recognise that there’s a resemblance to what we saw in Asia [in the 1980s] and those who missed the incredible growth story [there] now have the opportunity to invest in the next growth story,” said Charles Robertson, global chief economist at Renaissance Capital.

The group forecasts that Nigeria’s GDP will hit $5tn (£3tn) by 2050, which would be on a par with Japan today as the world’s third-biggest economy. A statistical rebasing exercise next month – in which the base year for calculating GDP will be changed from 1990 to 2008 – could lead Nigeria to rival South Africa for the spot of the continent’s largest economy, with a value of close to $400bn. That would mean the economic output of Lagos, the vibrant commercial hub, alone overtaking Ghana.

Despite a decade of breakneck growth, two-thirds of Nigerians still endure crushing poverty.

After decades of false starts, Nigeria is slowly addressing its feeble electricity generation. It still produces only enough to power one vacuum cleaner for every 25 inhabitants.

“Nigeria cannot be ignored any more as an investment destination, but I’m not convinced [the Mint group – four countries identified as emerging economic giants, the other members being Mexico, Indonesia and Turkey – is] where it fits in,” said Samir Gadio, an emerging markets strategist at Standard Bank.

“If you take a closer look, Nigeria is the least developed, trails in terms of manufacturing base and displays limited economic diversification.”

Gadio said that the government relies on oil for up to 80% of its income. Shocking education levels – especially in the north, where one report found only a fraction of 16-year-olds could add up two numbers – have provided a way in for the Boko Haram Islamists. The attacks have sometimes shut down swaths of the north, prevented truck drivers from delivering goods there and prompted traders to flee south.

Along the southern shores, too, where 2m barrels of oil are pumped each day, militancy has increased amid anger as decades of oil wealth have failed to trickle down to people living in the heart of the oil industry in the Niger Delta.

Corruption and lack of transparency pushed Nigeria down nine places to 147 out of 189 countries on the World Bank’s Ease of Doing Business index this year. Business people say local oligarchs have such a stranglehold on most sectors of the economy that it is impossible to operate unless you “know someone”.

“If you don’t have the right person holding your hand in this country, you’re going to get your fingers burnt,” said the director of a multinational food brand.

But some see potential progress from a low base.

“The challenges we have here, if you look at them differently, they’re actually opportunities,” said former bank chief executive officer and business magnate Tony Elumelu. “For example, infrastructure is a limiting factor but it’s also an opportunity for investors.”

His gleaming glass and chrome office overlooks the leafy Lagos suburb of Ikoyi, which nicely sums up how Nigeria’s economic growth has failed to radiate. Tucked behind high walls, there are more millionaires living in this part of Lagos than anywhere in Africa, and most cities in the world. But the potholes are some of the city’s worst and flooding caused by blocked drains quickly turns roads into rivers, where sometimes barefooted fruit-sellers can be seen wading through with baskets on their heads.

Clearly, there’s a lot that needs doing – and no doubt plenty of money to be made doing it.

Monica Mark for the Guardian