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bout a year ago I inquired on the price of a 200 sq. meter space at the Polo Park Shopping Mall in Enugu. The mall is the largest of all the so called "Shoprite Malls" in Nigeria, with dozens of multinational stores and other outfits. They are usually built to international standards complete with various stores, restaurants, and even movie theatres. This is certainly not your average Nigerian store or shopping mall; the air-conditioning is always at maximum blast with or without Nepa. The South African owners of these malls, along with their Nigerian partners first built one at Lekki in Lagos, ran it for a few years, and decided to embark on an aggressive expansion nationwide. They built a couple more in Lagos, then came the one in Enugu. They have since built others in Lagos, Abuja, Ibadan, and elsewhere. The manager at the Enugu mall told me that the space I wanted was available at the cost of $68 per sq. meter. At that rate this little 200 sq. meter space will cost me about 2.2 million naira per month.
Incidentally the vacant space I made enquiry about was vacated by "NIKE" a multinational and multibillion dollar company. NIKE apparently gave up the space after just a year because it wasn't profitable. And since the Enugu Shoprite Mall opened in September 2011, more than ten stores have closed up and vacated their space. These are no ordinary small companies, but many multinationals like NIKE, Levi's, Woolworths, Hub, and others. Some, like Wrangler, have simply downsized their space to make it affordable for them. Reflecting on this now it suddenly dawned on me the extremely high cost of doing business in Nigeria, even to these multinationals. Perhaps I should make some clarifications here. The monthly fee of 2.2 million naira at the Shoprite Mall would probably pay for up to four years rent for a similar sized store on any of the most commercial streets in Enugu. The difference in rent, I found out, was necessitated by the hefty cost of buying diesel that powers the gigantic generators, which provides non-stop central cooling for the massive building space.
These stores were in turn forced to tag on these extra cost on the prices of their goods. It is not surprising to walk into a NIKE or Puma store and see a sneaker selling for 24,000 naira or 32,000 naira, and these are sneakers that ordinarily won't sell for more than $90 in the US. The Hub was consequently selling CDs and DVDs for 5,000 and up, CDs that sell for no more than $15 in the US. Levi's for example was selling their average 501 pair of jeans for between 12,000 and 16,000 naira, same Levi 501 that sells for no more than $60 in an average US store. The problem with these prices is that you might find enough spenders in Lagos or Abuja to sustain the minimum volume of sales required to stay afloat and even make profit. But outside of those cities and maybe a couple more, it is impossible to find such level of high spenders on a repeated basis in the average Nigerian city. Apparently income levels vary greatly in Nigeria, especially outside of a handful of commercial centers. Thanks to our Central Bank figures we now know that 90% of all the cash movement in Nigeria take place in Lagos, Abuja, and five other states. This means that the remaining 30 states account for only 10% of all the cash movement in the country.
Enugu is a beautiful city to live. The governor has done a remarkable job of transforming the city beyond just good roads. It is now in my opinion among the top 5 best developed cities in Nigeria. But there is no escaping the fact that Enugu state is ranked among those 30 states whose combined cash movement accounts for just 10% of all our national cash movement. And here lies the problem in Nigeria; if the high cost of doing business cannot be absorbed by these multinational companies in cities like Enugu, then I hate to think of hundreds of less vibrant cities across this nation. The bottom line is that lack of steady electricity in Nigeria represents a clear and present danger to the success of our development at all levels. This is not just an issue for manufacturers, but one that permeates all sectors of our economy. Even if you shun the likes of Shoprite and rent a cheaper store front somewhere in town, you are likely to buy a generator and buy fuel endlessly to keep them going at a cost that you must inevitably pass on to your customers. Surely, one can save on fuel by running generators sparingly, and avoiding the use of air-conditioners, but the experience is not quite the same.
The modern big malls represent a sign of development, a sign of growing middle class, and the more of these we can see across the country the more I am assured of these new breed of middle class. Unfortunately the inability of various multinational companies to survive in such malls outside of Lagos and Abuja only confirms the great disparity in income that exists in Nigeria. The demise of a dozen or so such companies at the Shoprite Mall in Enugu has confirmed two things; the income inequalities in Nigeria, and the prohibitive cost of doing business here. This is not even limited to those that operate in the big malls. Three years ago my children visited from the United States, during their stay they made "Chicken Republic" (a fast food restaurant that makes great chicken and fries) their favorite hangout. I noticed that their average meal cost about 1,500 naira, about 500 naira more than their competitors in town. By the time my kids came back the following year, Chicken Republic has closed all their restaurants in Enugu even as they continued to operate in Lagos. A careful investigation I made revealed that the extra 500 naira per meal was their undoing as Enugu consumers who were price sensitive largely stayed away. A sensitivity no doubt related to their level of income.
As Nigeria is now moving up in the world rankings of wealthy nations after our recent rebasing, those in control in Abuja need to be aware of these disparities, and to realize that Nigeria can never achieve her potential if income levels in the vast majority of states remain on the fringes when compared to what is obtainable in Lagos or Abuja. Of course, no one expects the same levels of income everywhere, but the level of disparity matters a great deal. And most of all, we have written a lot about the problems caused by lack of steady power supply in Nigeria, this example I gave is just a glimpse of what is otherwise an endemic problem that continues to threaten our desired development goals.
