April 22, 2020

Kano had Nigeria’s largest shopping mall in 2014 – Here’s why investors thought it was a good idea

Samuel Haidome

At the time of its completion in 2014, Ado Bayero Mall was the largest shopping mall in Nigeria with a gross lettable area (GLA) of 24,000 sqm and is currently only 2nd to the 25,000 sqm Jabi Lake Mall in Abuja, which was completed in 2015. It was named after Kano’s longest-serving monarch and developed by Alpine Investment Services, through a special purpose vehicle called Beverly Development & Realties Limited.

The rationale in building Nigeria's largest mall in Kano in 2014
The rationale in building Nigeria’s largest mall in Kano in 2014

Source: Estate Intel Database

What’s was the rationale behind a 24,000 sqm mall in a low-income city?

Since it’s completion, the centre has suffered low occupancy rates and high tenant churn. In the first instance, it may appear easy to foretell the underperformance of a large formal shopping centre in a low-income Nigerian city and advise otherwise. Thinking retrospectively, however, it is also quite easy to understand why a case for the mall existed, even if it was flawed. 

The rationale behind completing Nigeria's largest mall in Kano during 2014. Image Source: MOA
The rationale behind completing Nigeria’s largest mall in Kano during 2014. Image Source: MOA

To set the context, when construction work commenced on Ado Bayero Mall in 2010 Nigeria’s GDP had experienced an annual growth rate averaging over 7% in the preceding decade, making it one of the fastest-growing economies in the world. Additionally, when the mall was completed in March 2014, Nigeria’s GDP was about to be rebased and classified as the largest economy on the continent. 

2016 Population

2016 Population. Nigerian Bureau of Statistics (NBS)
2016 Population. Nigerian Bureau of Statistics (NBS)

Source: Nigerian Bureau of Statistics (NBS)

According to ironically questionable population data from the Nigerian Bureau of Statistics, Kano was also the largest state in Nigeria in 2012, with over 12.6 million people, marginally higher than Lagos by about 500,000 inhabitants. In that period, Northern Nigeria lacked a formal retail centre to match its population and this was identified as an opportunity because a population that large without a formal retail centre was peculiar. 

The rationale in building Nigeria's largest mall in Kano in 2014
The rationale in building Nigeria’s largest mall in Kano in 2014

Source: Estate Intel Database

Driven by the narrative of a rising Africa, a consistently growing Nigerian economy, Kano’s large population, and an ‘underserved retail market’, one can see why the project looked attractive at the time, but other things should have been required to justify this investment case.

What was overlooked?

The overarching fact is that widespread poverty in Kano negates the potential advantage a large population brings because the serviceable market is only a fraction of the total addressable market.

Population growth and urbanization are often positively correlated, and according to Wolfgang Fengler, a Lead Economist at the World Bank, economic development has a close correlation with urbanization. However, a large population and increasing urbanization are not an indication that an area is developed. Despite Nigeria’s apparent economic growth and the positive market sentiments that existed during the period, it seemed to have little impact on the welfare of the average Nigerian.

Ado Bayero Mall, Kano. 2014
Ado Bayero Mall, Kano. 2014

When we look at 2016 median aggregate spending per annum data in Nigerian States, Kano’s exciting population advantage is quickly diminished as it ranks 23 out of 36 + Federal Capital Territory. With a median aggregate spending of N67,000 annually, it is almost 4 times less than Lagos’ N256,000. We like the median as a measure of central tendency because it has an advantage over the average and is not influenced by outliers. 

Median Aggregate Spending Per Annum

Median Aggregate Spending Per Annum. Source: Fraym
Median Aggregate Spending Per Annum. Source: Fraym

Source: Fraym

Taking it further by looking at the Human Development Index in Nigeria, a summary of human development within a country based on health, education, and standard of living, the national average is 0.521. States like Lagos, FCT, and Bayelsa exceed this average. A good number of southern states are within a reasonable range of this average, in Northern Nigeria however, many of the states are within the bottom tier of the index, including Kano, with an HDI index ranging between 0.390-0.438. Human development in this region is at its barest minimum,  as such, this project was delivered ahead of its time.

Human Development Index

Human Development Index. Source: Nigerian Bureau of Statistics (NBS)
Human Development Index. Source: Nigerian Bureau of Statistics (NBS)

Source: Nigerian Bureau of Statistics (NBS)

The Ado Bayero Mall Kano really needed

We did a bit of fieldwork in Kano during Q3:2019, and in the course of our research, we came across a number of hypermarkets, semi-formal retail centres and others within Fagge, the Grand Square on Bompai Road, Sufi Mart on Wudil Road, and Country Mall on Farm Center Road. These centres were frequently visited by residents of Kano from various income levels, and a common feature of these centres is that they are relatively small. Most of them having GLAs that are less than 5,000 sqm. The amount of activity observed in these centres validates the notion that people in Kano are willing to make use of semi-formal centres. 

A more functional iteration of the Ado Bayero Mall would have been a modern cluster of low maintenance pharmacies and food and beverage retailers centred around a large grocer or white good store. All within a complex of no more than 6,000 sqm that could be scaled up as the market progressed. This would easily integrate into the system of retail that the majority of the people of Kano are accustomed to already.  Unfortunately, because projects of this scale have a smaller ticket size, institutional investors within a certain category might not be keen. 

Within the current landscape, retail is under increasing pressure, even more so with the COVID-19 global pandemic that is forcing retailers to optimise their online strategy. Successful retail models are increasingly incorporating experiential elements that consumers are unable to get from an online interaction. It is increasingly the best way for retailers to secure growth in foot traffic. 

To conclude, introducing formal retail centres into these non-Core cities is always welcome, but proceeding with development without a full demographic profile including income levels is clearly an unfeasible exercise. 

Where a particular area has promising projections, it is best that retail centres there are delivered in phases, which can be scaled up as the area moves closer to achieving its potential. This will ensure greater asset sustainability during a demographic ramp-up period. 

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