Nigeria repositions as an attractive market as Wage increase pulls through

IFN Monthly Article on Nigeria: November 2018 Issue

Nigeria repositions as an attractive market as Wage increase pulls through


With a teeming population of 190million, and a burgeoining middle class, the Nigerian market remains one of the most attractive retail markets in Africa. The opportunities for consumer brands, commercial banking services and other retail focused financial services are immense and continue to be explored even as the country’s average income per capita appears paltry. However, with recent developments pointing to an increase in the minimum wage, the country’s attractiveness is poised to double.

In the second week of November 2018, the executive arm of the Nigerian government approved a broad increase in the minimum wage following lengthy negotiations with the Labour Union. Even as pundits speculate that the new wage increase is politically motivated and may not be sustainable, the decision marks a new dawn for the Nigerian household as wages were last increased seven years ago. There are expectations of a broad increase in spending, savings and investments following this wage review and this presents an opportunity for Islamic financial institutions to deepen their patronage.

Within Nigeria’s financial services industry, there are a number of products currently being pushed towards the retail end such as mobile savings, pay-day loans, equities, mutual funds and Exchange Traded Funds. However, patronage remains subdued due to low disposable income for a large part of the population. Perhaps, this wage increase could present that sigh of relief for local Islamic finance operators who still have to compete with regular financial institutions for customers’ deposits/savings. In addition, Islamic finance operators may be able to attract patient capital from foreign investors who seek to tap into the increased potential of the Nigerian market.

It appears that this wage review couldn’t have come at a better time, given that indications that foreign investors had started falling out of love with the Nigerian market. In October, two global banks reportedly exited the Nigerian market in October albeit for unspecified reasons; while a foreign company in the Tourism space also sold its Nigerian stake. Further, speculations emerged that a South African telecoms company which has Nigeria’s its largest market, could follow suit given a fracas with the government over repatriation of funds. While it remains clear that the Nigerian policy environment presents its own bottlenecks for businesses, the benefit of serving this newly empowered market, is expected continue to keep companies in search of real value locked in.