Lured by Nigeria’s growing population, increasing purchasing power of the elite and limitless investment opportunities, foreign and local investors are falling over themselves to set up new ultra-modern shopping malls
By Chikodi Okereocha and Portia Onwuyalim
Alausa, traditionally, rings a bell as the seat of Lagos State government. But on December 14, 2011, it opened up further to another kind of business, a complete departure from governance, as an ultra-modern shopping mall, Shoprite, opened its doors to the public. With this, the hitherto serene ambience of the environment has become a beehive of shopping activities as residents on the Lagos Mainland axis are now taking advantage of its location to enjoy wonderful shopping experience. Alausa is the latest addition to the South African-owned chain stores in Nigeria. So far, the store has come up with four outlets located in high-class Lekki, Surulere and Ikeja, all in Lagos and one in Enugu. It also plans to open one outlet each in Ilorin, Kwara State, and Abuja, the Federal Capital Territory, FCT, in June this year.
The Ikeja City Mall, as the Alausa outlet is called, is the latest and largest shopping centre in Lagos. It is a joint development initiative between Actis, the pioneer developers and funders of the Palms in Lagos; Accra Mall in Ghana; RMB Westport, a leading developer and investor; and Paragon Holdings, the project originators and local partners in the venture. This combination represents a very formidable and experienced equity team, and is complemented by Stanbic IBTC, which is providing the debt funding. Shoprite’s aggressive expansion drive in Nigeria comes on the heels of plans by Pegasus Development Limited, an indigenous investment company, to establish a shopping and amusement resort at Mowe, along Lagos-Ibadan Expressway.
Already, residents in that axis, especially those who delight in travelling abroad for shopping, are ecstatic over the prospects of the facility filling a gap in world-class leisure and relaxation for Nigerians and tourists alike. For instance, the resort, which will be built on 25 acres of land, will have a five-star amusement park, world-class shopping mall, 400-room hotel and state-of-the-art five-screen cinema. These will be complemented by four full service restaurants, a food court with 10 fast food outfits, and over 4,000-car capacity parking space with a mega fuel service station, among others.
Like Shoprite outlets, located in choice areas within Nigeria’s commercial capital of Lagos, promoters of Pegasus have guaranteed a steady stream of customers and leisure seekers, the choice of Mowe for its mega-project is strategic. The Mowe axis alone is home to the international headquarters of the Redeemed Christian Church of God, RCCG; Mountain of Fire and Miracle Ministries, MFM; and Nasrul Lahi Ilfathi, NASFAT. Each of these religious bodies hosts millions of people monthly. About four new private universities are also located in that axis. This means that a ready-made market for various investors in shopping malls already exists in that area. As Nnamdi Nweze, chief executive officer, Tetra-5 International, an integrated real estate solutions firm handling the project, disclosed, international retail brands like McDonalds, Go-Kart Party, Bijoux Terna, Sega Republic, Burberry, Intercontinental Hotel and Resort and Louis Vuitton, among others, will be tenants in the complex.
Nigerian-based companies with international standard will also be considered at the mall. “We are open to consider local companies but it will be subject to Pegasus’ approval. Before we can consider anyone, we will investigate his business activities in the last 25 years among other issues,” Nweze said, noting that apart from meeting the shopping desires of its patrons, the resort also offers investment opportunities to Nigerians through its joint commercial development, JCD, scheme, an exclusive real estate offer. All an interested investor needs to do, according to him, is to partner with the JCD and become part owner of one of the largest shopping and amusement resorts in sub-Saharan Africa by investing in a lot at N1.1 million.
Nweze pointed out that every subscriber stands to earn a minimum of 36 per cent return on investment annually with a consistent growth of seven per cent from each of the 10,000 lots available. He assured that investors would recover the initial capital in three years with attendant appreciation in value and possibility for higher returns in the future. “We are creating a relaxation environment and at the same time empowering Nigerians to create wealth. We chose not to wait for foreign investment because we want the capital to remain here. This is an investment with guarantee on security and wealth for the investors even after retirement. It is not affected by corporate politicking, policy somersaults or government policy reversals. The stake of any investor is safe and intact because it will rather increase than diminish,” he explained.
The prospect for bountiful returns, which excites investors like Shoprite and Pegasus, is largely driven by the country’s large population, which is currently estimated over 160 million people. Whitey Basson, managing director and chief executive officer, Shoprite Holdings Limited, admitted that much when he said that given its large population, Nigeria has the potential for about 700 similar stores. South Africa has over 700 outlets with a population of 50 million people. “Several cities in Nigeria have population of more than eight million people. I can’t say all of them have the same spending power, but Nigeria can support the same number of supermarkets as South Africa,” he noted, stressing, “even if you have 60 per cent of the population living in poverty, 40 per cent of the Nigerian population is still bigger than the South African population.” He noted that the rapid growth of the company in Nigeria is a testimony of its popularity.
Indeed, Nigeria’s population and potential for growth have made the country an irresistible destination for prospective investors and retailers in the mould of Shoprite and Pegasus, including their local partners. In its plans to set up more outlets in Nigeria after that of Alausa came on stream last December, Shoprite is therefore counting on Nigeria’s large population, which constitutes a huge market to boost its already rising revenue profile. For instance, Basson disclosed that the grocery store made a 19 per cent rise in first-half earnings of 2011 and has about 950 supermarkets with 729 of them in South Africa. It plans to open 12 more stores outside South Africa by the end of June, including Ilorin and Abuja. The company is also looking at entering the Democratic Republic of Congo as part of the overall strategy to dominate the market. But for now, Nigeria, for obvious reason, remains its focus.
Dauda Adebisi-Balogun, managing director, Pegasus Development Limited, also agrees that Nigeria has huge potential for returns on investment given its population. According to him, the Pegasus JCD project is a highly rewarding property investment channel, which would appeal to shrewd investors who do not have the capital to invest in commercial properties but are still desirous of the high returns and security offered by real estate. “A situation in which over 500 Nigerians visit Dubai on a daily basis for shopping is unacceptable, hence the need to bring some of the world’s notable brands down home, not just in the interest of investors in the project but also in the overall interest of the nation,” he told the magazine.
To compete with its world-class counterparts like the Dubai Mall, Nweze informed the magazine that three top companies would construct the mall. “Due to the fact that people’s fund is involved, we are going to invite the best companies with world-class standard. Their records would be audited by KPMG, a world-class external auditing firm,” he explained. All an interested subscriber needs to do to participate in the venture is to download and complete the lot application form from the company’s website.
Adebisi-Balogun added that there is a clear difference between the subscribers and the tenants of the facility. “The subscribers would get a receipt, purchase agreement, deed of assignment and certificate of allotment which entitles the subscriber to receive income from the lots for life from September 2013,” he said. However, if the investor chooses to sell his lot or withdraw from the venture, such subscriber is free because the venture has a free entry and free exit provision. According to Adebisi-Balogun, a subscriber could trade or use the lot as collateral with financial institutions. He, however, added that the transactions would be subject to the approval of Pegasus Development Limited and the over-riding interest of the JCD venture. He added that ROI from the project would be paid to subscribers’ specified bank accounts with SMS or e-mail notification alerts and reports of external auditors.
Another factor driving the uptake of strategic locations in Nigeria for the establishment of shopping malls is the changing taste of Nigerian consumers most of who now crave sophistication by way of convenient, hassle-free, and fun-filled shopping experience similar to what obtains in the developed countries of the world. For instance, it is the quest for fun and sophistication that made Laura Ikegbu, a student, to consider the ambience of Ikeja Shoprite as a good place to hang out with friends. Hear her: “Though I have only bought something here once, my major reason for coming here most times is to snap pictures, and upload them on Facebook because this environment is very beautiful, especially at night.”
The increasing purchasing power of many Nigerian consumers who are now in good financial positions to afford most of the goods on offer by the malls is also believed to be driving such huge investments. Recent reforms in some sectors of the economy have thrown up a budding middle class whose income level is on the increase. But for the existence of this middle class, Nweze and Adebisi-Balogun would probably not have been optimistic that the 10,000 lots available for the Pegasus mega-project in Mowe would be over-subscribed. All Shoprite outlets are also enjoying huge patronage. For instance, even before the Ikeja City Mall opened, Zuma Anuwe, an employee of a telecommunications firm, was ecstatic. All she had prayed for and wanted was to stop going to shopping plazas on Victoria Island for her shopping, a prayer that seems to have been answered. “Since this mall was opened, I have lost count of the number of times I have been here. Before now, I usually did my shopping only on Saturdays. What got me upset during shopping on the Island was the fact that I had to leave my house in the morning and then get there in the afternoon due to traffic,” she explained. She would not have made shopping at the mall a ritual of sort if she had not the means.
The same goes for Bola Anifowoshe, a resident on Lagos Island. Anifowoshe was in Ikeja a fortnight ago on a training programme when she immediately took time out to visit the mall based on several comments she heard about the centre. She was not disappointed at what she found. “I think this place is good enough; I never expected to find this number of people here. This shows the level of items in the mall,” she said, submitting that the level of patronage is higher in Ikeja than on the Island for a working day.
Owners of shops in the complex also confirmed that business has been good. Mariam Bello, a graduate of accounting from the University of Lagos, owns a shop in the mall, where she trades in ladies shoes and bags. For her, business within the complex has been quite encouraging especially during the time operations began there. “Due to the rate at which people visit the mall, we have had more successes within this short period of operation. We have made double the sales my mother makes in her Alade Market shop,” she explained.
Stephanus Palmer, a Greek, is also glad that he heeded the advice of a friend to set up an eatery in the Shoprite mall in Ikeja. Palmer has since been raking in profits, as sales have been good. “What we sell here is quite different from the normal food Nigerians eat. The patronage has been very high, especially during break periods at work. I’m so happy that I did not disregard my friend’s advice,” he told the magazine.
But it is not always sweet tales. For instance, Memudu Fatai, a banker, is unhappy that he had to wait on a long queue for over 30 minutes to pay for his purchases at the Ikeja City Mall. “I think the managements of this place should know that things like this are bound to happen and should have made provisions for alternative means like creating more pay points since the mall is attracting so much patronage. Bello also says that other customers complain that the cost of goods are a bit on the high side there, but attributes it to the fact that everything that is sold there is genuine. “That is why our goods are expensive but the best,” she added.
John Adedipe, a retiree who came to the mall to buy some items for his grandchild, said Ikeja Shoprite, in spite of the early challenges, is an attractive ground for anyone to come and shop. “It is normal for any organisation to face challenges at their starting point, but it will overcome same later. I love the place; it is just cool for me. I had issues with parking my car initially but sorted it out before getting in,” he said. But even with all the complaints, shoppers can only hope for the best in the years to come.