The Illusion of Size And Why Nigeria Must Deepen Its Consumer Base in AfCFTA Era

The Illusion of Size And Why Nigeria Must Deepen Its Consumer Base in AfCFTA Era

In our programs, we make it clear that we hope for an outcome where many are working and adding values in already established companies. Yes, I do not want everyone to go and start his or her company even though we celebrate entrepreneurial capitalism. Why? A community where everyone is an employer is a poor community. Only big companies can attack big problems in markets and societies, and when the framework is there for companies to become big, communities and nations rise. 

So, while there is the exuberance on minting everyone to become his or her own employer, we like to focus on entrepreneurial capitalism where professionals can become project champions and internal innovators in existing (and of course new) companies. Simply, not all of us must start our own companies. If everyone is a business owner, it means we have a big problem in Nigeria and Africa. Indeed, that must not be celebrated when your company registration docket has millions of new companies in the books!

It is on this thesis that I call  for Nigeria to get serious, as we enter a new phase of continental competition with the float of AfCFTA. Nigeria must develop frameworks to ensure that our small businesses can become middle scale businesses, and the middle scale to move into big companies. The economies of scale are extremely important for the competitiveness of the nation at the continental arena.

“Africa and AfCFTA are today self-reinforcing. The AfCFTA, if done well, will be the platform that turbo-charges investment, innovation and ultimately growth and prosperity for Africa. The private and public sectors must work together to deliver on its promise,” Vera Songwe ECA Executive Secretary said on New Year’s Day.

With this statement, which has been accompanied by so many others to mark the beginning of African Continental Free Trade Area, which takes effect on January 1, 2021, the success of AfCFTA undoubtedly depends on what African leaders do and what they do not do.

The idea, which was born in 2012 from the desire to create a bloc that will spur economic growth through intra-African trade in the continent, went through hurdles to reach this point. It was until 2018 that the AfCTFA agreement was signed due to the hesitation of African Union (AU) member states.

We respect South Africa because they know how to build category-king companies. Nigeria must have a policy where through pure market forces, we can easily make it possible for our brands to grow. I do think, part of that is having a home win. And home wins will mean a good consumer base in the nation. Yes, it comes down to our effective addressable market which must of necessity improve.

So, as we see the exodus and death of companies, I remind everyone that Nigeria has about 30 million people who earn income and can pay for anything. Any model built outside that 30 million will disappoint. I have explained how I arrived at this 30 million number here. With the pandemic affecting that 30 million number, which carries the other 170 million citizens, you will then understand the challenge we have in the near future.

If we do not deepen the home consumer base, it would be hard for our local brands to go international. South African firms do go continent-wide under the strength they receive from their home nation.

Nigeria has this illusion of 200 million people. For years, that illusion has tripped local and foreign companies. Yes, people put money into the economy only to realize that 200 million is actually about 30 million effective (paying) consumers.

This dislocation in our consumer base within this emerging AfCFTA era will be challenging for Nigeria. Our government has to come up with better ideas to ensure we can deepen the middle class,  and that would mean having capacities to build great companies in the nation. Since the early 1990s when the new generation banks were created, Nigeria has not experienced another spark where many companies created many jobs at scale. That has to change.

Our President Should Sign AfCFTA Free Trade after Strengthening “Rule of Origin” Clause

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Comment: I started reading the “Protocol for Free Movement of Peoples” last night. It would be good for Nigeria’s extra capacity in the SME space.

My response: But notice that it is always hard for any home company to go international without a home run. If Nigeria does not have an expanding consumer base which will support and fund that expansion, most of our firms will struggle. South Africa’s companies get a lot of benefit from the home nation as they expand. So, the competition could be SME and Large firms. AfCFTA cannot magically make an Aba shoe maker a big player without Nigeria making it big first! Our optimistic exuberance must be calibrated before the rule of origin clause comes.

The Challenge Ahead As AfCFTA Takes Effect

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2 thoughts on “The Illusion of Size And Why Nigeria Must Deepen Its Consumer Base in AfCFTA Era

  1. The last comment suggests an entity must be a domestic winner before it ventures out. I don’t agree. Some entities are set up purely to service foreign customers. This is what the concept of EPZs (among other FEZs) is for. In the tech services space, Call Centre operations may be outward facing.

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    1. I do think you did not read this within the context of Africa. If call center does not work in Nigeria, I am not sure you will export it to Ghana or Kenya. My analysis was looking within AfCFTA and that means Africans trading among themselves. It was not you selling to London or New York. I doubt if Call Center which fails in Nigeria can be exported to Kenya, Gambia, Ethiopia, etc within AfCFTA. But I may be wrong!

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