Nigerian Consumer Confidence Remains Highly Optimistic - MasterCard Index
Nigeria ranks as most optimistic market surveyed in Africa.
- (1888PressRelease) August 19, 2011 - Results of the latest MasterCard Worldwide Index of Consumer Confidence survey for the first half of 2011 have revealed that Nigerian consumer confidence remains highly optimistic.
The MasterCard Index recorded a notable 12.7% year-on-year increase from a score of 83.2 a year ago, to a very positive current score of 93.8.
Now in its third year in Nigeria, the MasterCard Worldwide Index of Consumer Confidence is the region's most comprehensive consumer confidence survey. The Index is based on a survey which measures consumer confidence on prevailing expectations in the market for the next six months based on five economic indicators: Economy, Employment, Stock market, Regular income and Quality of life. The Index score is calculated with zero as the most pessimistic, 100 as most optimistic and 50 as neutral.
The latest survey was conducted from the 15th March to 27th April 2011 and involved 17,620 consumers from 24 markets across the Asia/Pacific, Middle East and Africa regions [1]. Data collection was via Internet surveys, personal, telephone and Computer Aided Telephone interviews, with the questionnaire translated to the local language wherever appropriate and necessary. The Index and its accompanying reports do not represent MasterCard financial performance.
"The notable increase of nearly 13% compared to the 83.2 that the market scored a year ago clearly indicates that Nigerians are approaching the next six months with a strong sense of optimism," says Daniel Monehin, Area Head, East & West Africa and Indian Ocean Islands, MasterCard Worldwide.
"Nigeria is predicted to overtake South Africa as the largest economy on the continent by as soon as 2023,"says Dr. Roelof Botha, independent economic analyst. "This forecast has been widely publicised in Nigeria, and along with several other noteworthy developments in the market, has undoubtedly contributed to a new sense of national pride as Nigerians anticipate their status as a regional and global economic force in the years to come. The MasterCard Index of Consumer Confidence is clearly reflecting this, as are other studies conducted by the World Bank, Morgan Stanley and the Africa Business Panel."
Compared to Nigeria's Index results six months ago, two of the five indicators - Regular Income and Employment - increased marginally by 0.6 points each, while consumer sentiment on the Economy remained unchanged. However, these gains were offset by the Quality of Life and Stock Market indicators that both declined by 1.7 points.
Regular income at 99.0 points was the most optimistic of the five indicators for Nigerians, followed by Quality of Life with a score of 97.5.
When asked whether they were expecting their regular income to either increase, remain the same or decrease over the next six months, nearly 93% of Nigerian respondents said that they were expecting it to increase, 7% said they were expecting it to remain the same and only 1% said that they were expecting it to decrease."
These responses are based on two strong contributing factors, Botha points out. "The Nigerian government recently legislated that the market's minimum wage should increase by 140%. While there were initially some concerns at the inflationary impact of this increase, Nigeria's consumer price index (CPI) has been lowered over the last two years, while food price inflation has been curbed by a rise in agricultural output."
Furthermore, substantial investment from several multinational companies has boosted employment prospects, with several more companies seeking to introduce or expand their production facilities in Nigeria in the coming months.
"The government has also reduced the tax burden placed on Nigerians, with the ratio of taxes having dropped from 38% in 2005 to an estimated 26% at the time of the survey," he adds.
Botha said that while the slight decline in the Quality of Life indicator should not be ignored with respect to the identification of consumer confidence trends over time, it was less than a 2% decline compared to the previous Index which indicates that consumers remain firmly positive about their general quality of life in Nigeria.
Consumer sentiment on the Economy and Employment indicators remained exceptionally positive with scores of 97.3 and 96.3 respectively.
"Inflation is close to single digits, after hovering close to the 20% level in 2005 and the market's currency has been relatively stable, which has in turn prevented an escalation in the price of imported goods," says Botha. "The Nigerian government has implemented and maintained prudent macroeconomic policies over the last four years, strengthened financial institutions and made progress in addressing the market's infrastructure deficiencies. Along with a surge in the oil price and an increase in production, these elements continue to give Nigerians a high level of future confidence."
The Stock Market indicator, while still in optimistic territory with a score of 79.1, was the least positive of the five indicators and showed a decline of 1.7 points compared to the previous Index.
When asked whether they thought the local stock market index would go up, remain the same, or go down over the next six months, nearly 65% of Nigerian respondents said that they were expecting it to go up, however 35% expected it to either remain the same or go down.
Although still in very optimistic territory, the Nigerian consumer confidence level is off its historical high of 94.3 points recorded in the second half of 2010. However, it remains above Nigeria's historical average of 90.2 since the survey was first conducted in the second half of 2009.
"Nigeria's economy is significantly more diversified, with retail trade becoming more vibrant and financial markets deepening," says Botha. "This diversification has been fuelled by increased urbanisation, a growing population, access to technology, and a sustained rise in real per capita income levels. Increased spending on education (from 0.2% of the CPI basket to 4%) is particularly encouraging, as a market's development path is traditionally closely correlated with the level of education and vocational attainment."
An interesting contributor to sentiment in the market is the success of the Niger Delta Amnesty programme, through which tens of thousands of armed agitators have surrendered their weapons in return for rehabilitation and reintegration into Nigerian society. Apart from returning dissidents to the economic landscape, this initiative has reduced violence in the oil-rich region, leading analysts to be confident that oil production will more than double to 2.3 million barrels a day by 2012./
From an African perspective, amongst the four additional African markets included in the survey - South Africa, Kenya, Egypt and Morocco - Nigeria was the most optimistic market, 5.8 points higher than the next most optimistic market - Morocco.
"It's very encouraging to see that Nigerian consumer confidence continues to be strong, steady and positive, and currently higher than Nigeria's historical average since the survey was first conducted in 2009, " concludes Monehin.
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