Courtesy of The Financial Times, an interesting article on Nigeria’s growing middle class and the likely impact it will have on economic growth in that country:

Nigeria may be a country plagued by corruption, violence and pockets of deep poverty but it’s also home to the largest middle class in Africa.

And that middle class, of some 37m people, is ready to spend. According to an opinion poll carried out for Renaissance Capital, a Russian investment bank, more than 9m of them plan to buy a microwave in the next 12 months and more than 8m plan to buy a washing machine. Manufacturers take note.

RenCap’s report highlights the implicit commercial opportunities and points to five main areas that are primed for exploitation.

First, there is very little established retail in Nigeria. Among the 1,000 middle-class Nigerians polled in the survey, most shop at open-air markets (73 per cent) or convenience stores (62 per cent).

RenCap argues that there is clear room for the full gamut of formalised retailing to make its mark – sellers of white goods and other household electricals should have a particularly profitable time according to one of RenCap’s charts:

RenCap says Nigeria’s population has increased by over a third in the past decade, from 119m to 160m, with its middle class ballooning to make up some 23 per cent. This has led to a lot of pent-up demand.

Home ownership is aspirational and a growing middle class will want houses and the mortgages with which to buy them – most people currently live in rented accommodation (68 per cent) and very few have mortgages – which are equal to just one per cent of GDP. When asked what they would do with a lump sum of money, 67 per cent of RenCap’s respondents said they would purchase land or property.

Another 36 per cent said they would spend it on education and – given that more than half of middle class Nigerians send their children abroad to be educated – there is definitely room for investment.

Telecoms is another area ripe for growth. RenCap notes that while mobile phone ownership (53 per cent) is reaching saturation point among adults, internet penetration (48 per cent) is still low and there is scope for increased spending on both platforms – only two per cent of the Nigerian middle class currently shop online, for example.

Finally, RenCap thinks that banking and finance are ready to boom. Somewhat unusually, 78 per cent of Nigerians trust their banks, yet far more Nigerians see banks as a place to store money than as a source of loans: only 16 per cent of those surveyed had ever applied for a loan and 91 per cent had never used a credit card. However, their entrepreneurial spirit is strong, with a fifth of those surveyed saying they planned to start a business in the next 12 months.

RenCap’s report, which questioned more than 1,000 middle class Nigerians, points to a burgeoning middle class which is well educated (with over 90 per cent having obtained post-secondary education), mostly under the age of 40 and which  saves a significant amount of its annual income of roughly $6,000- $7,000.

Nigeria’s GDP has risen fivefold over the past decade, from $46bn to $247bn, on an average growth rate of 8.6 per cent. RenCap predicts that it can achieve double-digit real GDP growth on a sustained basis. It notes that nominal GDP growth of 15 to 25 per cent could lead to a $460bn economy by 2016.

The African Development Bank estimates that by 2030, much of Africa will have attained lower or middle class majorities and Ethiopia, South Africa and Nigeria are expected to deliver the largest increases.

RenCap’s figures paint a positive picture of a Nigerian economy growing at speed, poised to boom as domestic consumption increases. But in concentrating on an exploding middle class much of the Nigerian picture, and its accompanying dangers, are obscured.

Despite its success and growth, Nigeria’s economy remains plagued by problems and its poverty rate may be as a high as 70 per cent. It suffers from deep religious and communal rifts which have resulted in sectoral and political violence; April’s elections left some 800 people dead in their aftermath.

The contrast between a growing middle class and a country that seems to be lagging behind is not uncommon. In many large growing economies,  those nearer the top of the income highway speed ahead before those at the bottom can start moving.

Globally, there has been an overall growth in the number of countries classified as ‘middle-income’.  According to the Brookings Institution, the number of states classified as low-income has fallen by two fifths, from 66 to 40, while the number of middle-income countries has ballooned to over 100. But many of those countries are still home to large populations of  poor people.