Stears’ Consumer Readiness and Financial Inclusion Indices segment countries into ‘Emerging,’ ‘Developing,’ ‘Maturing,’ and ‘Advanced’ markets. This classification, derived from income, asset ownership, electricity access, and financial inclusion metrics, offers a comprehensive insight into consumer market dynamics.
Our findings show that 27 crucial SSA markets are at different stages of development. Advanced markets are mainly in Southern Africa, contrasting with the varied Maturing, Developing, and Emerging markets in East and West Africa. The Financial Inclusion Index also reveals growth potential in markets outside the Advanced category, particularly for digital innovation and e-commerce.
The report explores the economic profiles of countries with Maturing and Developing markets, zooming into specific countries identified as crucial players in
Maturing and developing consumer markets
While Advanced consumer markets show promise of solid buying behaviours, it is noteworthy that 44%, a significantly larger share of SSA’s markets, are either Maturing or Developing, with a combined population of 579 million (48% of SSA’s total population). Maturing countries like Nigeria and Ghana and Developing countries like Angola, Uganda, and Cameroon share similar characteristics—being resource-rich, commodity-dependent, and having young demographics with unequal consumer class stratifications.
Due to rising coups and countercoups in the Sahel, West African Maturing and Developing markets, like Nigeria and Cameroon, hold prospects of concerted investor interests driven by highly perceived political stability. Combined with market readiness for technological innovations and adoption of digital solutions, West African Maturing and Developing countries like Ghana and Nigeria emerge as top markets investors can exploit, albeit cautiously. This is because of the bumpy macroeconomic path they face, which is enough to keep investors jittery and careful about the recovery of consumer disposable income towards pre-pandemic and pre-Russia–Ukraine war levels.
Ghana: Modest consumption growth as inflation decelerates
Ghana, ranked as West Africa’s second-largest economy, with a high HDI score of 0.632, is known for its significant advancements in health, education, and living standards. These factors have made Ghana an attractive destination for major tech companies. Despite recording impressive growth of 8.1% in 2017, Ghana’s economic momentum has slowed in the post-COVID era, with growth dipping to 1.2% in 2023. This downturn was compounded by a peak inflation rate of 50.3% in 2022, severely impacting consumer confidence.
The high inflation levels have led to a noticeable shift in consumer behaviour, trending towards lower-value brands and smaller purchases. This is reflected in the reduction of mobile money transactions, indicating a constraint on consumer spending power. Challenges such as a high sovereign debt burden have further limited Ghana’s attractiveness to investors and hampered job creation, vital for sustaining consumer spending.
However, there are indications of an economic turnaround in 2024. As of April 2024, inflation has decreased to 25%, relieving consumers, particularly in the middle-and-high-income brackets. Similarly, reforms by the IMF are anticipated to rebuild economic confidence, potentially strengthening the Ghanaian cedi against the US dollar throughout 2024. Despite a contraction in dollar terms due to currency devaluation, household spending in real terms is projected to rise by 12% in 2024 compared to pre-COVID levels.
Information and Communication Technology (ICT) is a standout sector in Ghana’s economy, which grew by 20% in 2022. The rise in mobile money usage from 39% in 2017 to 60% in 2021 demonstrates significant digital growth. Despite the May 2022 mobile money tax implementation, which caused a 10% dip in P2P transfers between February and August 2022, there’s been a gradual but notable recovery as Ghanaians adjust to the new normal of more expensive transfers.
Consumer spending in Ghana is expected to rebound with easing inflationary pressures in 2024. The challenges of the past few years have tested the resilience of Ghana’s consumer market, but there remains a strong potential for growth. Strategic investments in the ICT sector and policy reforms will be essential for fostering a dynamic consumer market in Ghana, providing opportunities for inclusive growth and financial inclusion.
Senegal: New political administration to shape consumer market potential
Senegal, a key player in the West African Economic and Monetary Union (WAEMU), has positioned itself as an Emerging economy in West Africa. From 2014 to 2019, the country achieved remarkable growth, averaging 6.5% annually, significantly higher than the SSA average. This growth propelled Senegal to a low-income economy status by 2019.
Since the discovery of crude oil and natural gas in 2014, the energy sector has largely driven Senegal's economic expansion. Significant contributions from agriculture, construction, and transportation have further bolstered this growth. FDI has seen a substantial increase, indicating growing investor confidence. Despite these gains, the heavy reliance on extractive industries, known for limited job creation, has not translated effectively into broad social and economic development, especially in the face of rapid urbanisation.
Substantial state control and bureaucratic challenges hampered the private sector’s growth in Senegal, leading to a modest formal economy. Formal employment is limited, with most economic activities concentrated in Dakar, where a small upper-middle-class population drives most consumer spending. However, this is constrained by the high cost of living. The vast majority of Senegalese work in the informal sector, often with unpredictable and low incomes, resulting in a focus on essential spending.
Digital connectivity, critical for economic modernisation, remains a challenge. Senegal trails behind its SSA peers in digital infrastructure, which limits the growth of digital commerce and access to online services. Although the government has identified ICT development as a key growth area, significant advancements are still required to realise this vision.
Looking forward, Senegal’s government aims to develop a more robust economy by 2035, focusing on sectors like tourism and implementing business-friendly reforms. Political stability will be crucial for attracting investment and fostering consumption growth. The newly emerged President Bassirou Diomaye Faye, the youngest in Senegal’s history, could usher in reforms that benefit the economy and consumer market. His upcoming policies signal a radical change towards boosting economic prosperity and fostering international partnerships that will contribute to the upward trend of FDI inflows into strategic sectors of the economy. However, risks emerge with the President’s goal to sever colonial links with France to achieve full sovereignty, a move expected to disrupt economic stability should talks and negotiations falter.
Senegal’s economic growth forecast of 8.8% in 2024 primarily hinges on maintaining a stable political environment. In summary, the country represents a market with potential but requires careful monitoring due to its current challenges and the necessity for political stability to realise its economic goals.
Nigeria: Navigating challenges to unlock consumer market potential
Nigeria, with a population of 216 million and a youthful demographic, is poised for significant consumer market potential. The country is projected to be one of the global population drivers by 2050. Despite a high HDI score, Nigeria’s growth has yet to translate fully into a robust consumer market. The country’s challenge lies in the gap between its growing population and GDP, leading to an output gap that limits effective resource utilisation and consumer spending.
The economic landscape in Nigeria is complex, with over 60% of its population classified as multidimensionally poor. This widespread poverty and modest income growth have led to constrained consumer spending. High inflation, reaching 33.69% in April 2024, has further eroded disposable income, especially among lower-income groups. Rising energy costs due to the removal of petrol and electricity subsidies and a devaluing currency are the primary drivers of Nigeria’s inflation.
Despite these challenges, Nigeria’s digital landscape shows promise, particularly in fintech, reflecting advanced internet usage and high smartphone penetration. However, due to the prevailing economic conditions, this digital boom has yet to fully impact the broader consumer market.
Consumer behaviour in Nigeria is shifting towards more economical consumption patterns. The growing trend of ‘sachetisation’ reflects this change, as consumers opt for smaller, more affordable portions of goods. Price sensitivity also increases unit demand, with consumers favouring neighbourhood stores over more prominent retail outlets.
The Nigerian market is expected to evolve with the government’s ongoing economic reforms. The current economic challenges necessitate businesses to offer adaptable solutions and products to meet the changing needs of the Nigerian consumer. This evolution presents opportunities for investors and businesses, especially in less-explored regions outside major hubs like Lagos, where local governments actively work to improve living standards and attract investments.
In summary, Nigeria’s consumer market, characterised by its complexity and potential, offers unique opportunities for long-term growth, albeit with the need for strategic approaches to navigate its current economic challenges.
Uganda: Continued rise in consumer spending
Uganda’s economy, buoyed by its agricultural sector, which contributes 24% to its GDP, has shown consistent growth, outpacing many of its SSA counterparts. This sector employs around 68% of the workforce and has benefitted from favourable weather conditions, enhancing agricultural production and export earnings.
Inflation in Uganda has shown a notable decline, falling from 10.4% in early 2023 to 2.6% by the end of the year, aided by a tightening monetary policy and a strengthening local currency. The development of the oil sector, with significant projects like the Lake Albert Oil Project and the East Africa Crude Oil Pipeline, is set to drive economic growth further. However, concerns still need to be addressed over reduced external financing and tourism inflows due to legislative decisions like the Anti-Homosexuality Act.
Despite low unemployment rates, a large segment of the Ugandan population works in low-productivity sectors with correspondingly low wages.
Ugandan consumers' average income level, significantly lower than that of neighbouring countries, limits their spending capacity, resulting in a focus on essential goods and services. This economic landscape offers potential for businesses and investors to target the needs of the local consumer market, especially in urban and suburban areas.
Digital financial services (DFS) have grown in Uganda, increasing access to formal financial services. However, the penetration of digital credit remains limited. With a significant proportion of the population resorting to borrowing, there is an emerging opportunity to offer affordable credit solutions, especially in areas driving growth and employment, such as agriculture.
Looking ahead, the Bank of Uganda’s (BOU) shift to an interest rate-based monetary policy, and efforts towards the East African Monetary Union signal a move towards stabilising the economy and fostering a conducive environment for consumer spending. As the country anticipates becoming an oil producer by 2025, there is a need for structural transformation to boost economic activity and alleviate poverty. With economic growth expected to accelerate, consumer expenditure in Uganda is likely to see an upward trend, presenting opportunities for investors and businesses to tap into a market with increasing purchasing power.
The youthful, digitally savvy and varied income landscapes of SSA consumers
The profile of the average SSA consumer, typically from Maturing or Developing markets, is youthful and digitally adept, often preferring formal retail avenues. This demographic’s value-driven and cautious spending behaviour signals opportunities for tailored financial services.
However, income disparities play a significant role in shaping consumer behaviours across SSA. Understanding these variations is crucial for aligning products and strategies to address the needs of both the high and low ends of the income spectrum and the diverse middle class.
Ghana and Nigeria are possible markets for investors to explore, and they rank highly in the Stears Financial Inclusion Index.
This attests to Nigeria’s digital payment revolution, with robust fintech investments witnessed in the past five years. It also amplifies Ghana’s mobile money revolution, led by MTN, which is widening the consumer landscape and deepening the inclusion of lower-middle-income earners by creating solutions tailored specifically to enable spending.
In East Africa, burgeoning markets like Uganda and Ethiopia enjoy the spillover effects of positive investor sentiments towards Kenya. East African Community (EAC) countries are moving towards a monetary union that promises a more robust and almost evenly segmented consumer class with distinct buying behaviours and preferences by location, access to credit, rising employment, and favourable trade balances. Uganda, for instance, ranks highly within the Financial Inclusion Index, signalling readiness for new technology that equips the consumer class and boosts spending. Uganda has made remarkable progress in the past three years, with advancements such as enhanced electricity access. These improvements have propelled its GDP growth trajectory upward and positioned it as a frontrunner among its regional counterparts in Western Africa.
Essentially, Maturing and Developing countries are booming and readily accessible consumer markets. Most of these countries support and invest in non-conformist digital solutions to endow their young consumer class with alternative sources of income and solutions to bolster spending. Though exposed to regional risks, like insurgencies that disproportionately affect market perception towards West African countries, favourable attempts to enable the mostly low-to-middle income earners are expected to keep these markets as prospective consumer hubs in the near future.
