Nigeria has a large population and a thriving active segment. Recent data estimates put the country’s population at approximately 242 million, ranking it among the top 10 in the world. While that estimate provides an interesting market pitch for businesses, the underlying purchasing power index indicates a different reality.
Topline, based on expert insight, is that there are just about 9 million people within that strong population who can comfortably afford any non-essential product or service that is priced above ₦200. Precisely, whatever product isn’t within the category of food, water, and related offerings, for instance, must be positioned and priced strategically to gain any market-viable traction.
Market intelligence points to the fact that about 1% to 3% of the approximately 242 million national population earns a monthly income above ₦500,000 to ₦1 million. 80% of the population earns less than ₦150,000, and spends 83% of their earnings strictly on necessities such as food and core survival essentials as mentioned earlier. Besides that, high inflation has eaten deep into what those average earnings can buy, nudging a larger segment of the market to skip high-margin goods and prioritise meeting basic needs. The removal of subsidies on energy a few years ago hasn’t helped the cause of the larger population.
Comparatively, although the country boasts a far larger population, only a mere 10% to 15% of Nigerians can comfortably afford high-priced or premium goods, compared to around 30% to 35% in Egypt and 40% to 45% in South Africa. Inflation heavily skews the percentage of prospective buyers lower.
In reality, Nigeria is fast-growing but financially fragile. Although an informal sector exists whose incomes cannot be accurately tracked, it is established that the largest population segment filters every purchase through the lens of pressure, uncertainty and risk because wealth is highly concentrated within a slim and small circle. Factoring in trust, affordability, and seamless execution of market penetration strategy is key to succeeding in this market.
Here are three keys for achieving meaningful progress in the market:
- If you are selling premium products, leverage accurate targeting – If you are not selling a product or service that falls within the essential categories and price boundary affordable for 80% of the low-earning population, accurate targeting and location are your best bet. You must identify where the top 1 to 10% of the market’s top-earning segment are located, shop, and prioritise, including understanding what appeals to them, to achieve successful penetration.
- Shrink offering to match the mass market wallets where possible – Have you seen sachet packs sold everywhere these days? It is a clear response to the market reality. To break even, businesses are effectively tailoring packages to help consumers who can’t comfortably spend ₦200 on non-essentials. Services are being tailored to daily or per-minute subscriptions to break affordability barriers. Small, beat-down versions of high-end products are being made available to capture bottom-of-the-pyramid earners, rather than competing endlessly in the brutal red ocean. There is logic in that. Learn from it.
- Try the “Buy Now, Pay Later” (BNPL) and Instalments strategy – Seeing how inflation continues to impact consumers’ savings, asking for 100% upfront payment for premium products can affect market response. Where applicable, leveraging a fintech partnership to qualify prospects and chase payment while offering a split payment plan that helps buyers pay for products and services in 3 to 4 instalments within a time frame works for income earners who have steady monthly income but lack a lump sum.
Nigeria is a unique market. The challenges notwithstanding, it offers valid opportunities. In the end, business is about doing good numbers profitably. Combining any of those three keys with other marketing tactics can open up the market.
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