July 4 (Bloomberg) -- Before she can buy a loaf of bread at her local Shoprite in the northern Nigerian city of Kano, Binta Isa has to clear security.
After getting her car swept for bombs and her body searched for guns, the 37-year-old lawyer and mother of three can get on with shopping for groceries at Nigeria’s biggest shopping center, Ado Bayero Mall, which opened in March after an $80 million investment amid the worst violence the most populous African nation has seen since a civil war ended in 1970.
The violence, centered in the north, is the result of an insurgency by Islamist group Boko Haram, which has killed thousands of people since 2009 and is holding hundreds of schoolgirls hostage. That’s exacerbating the main challenge Ado Bayero had in the first place -- filling a two-story mall in a dusty, northern Nigerian city with enough stores to appeal to Kano state’s 9 million residents at prices that will convince them to ditch the scorching street markets to shop inside.
Retail security across Africa has “often been relatively lax and you will probably see that being beefed up,” said Chris Gilmour, an analyst at Absa Asset Management Private Clients in Johannesburg, citing an attack in a Kenyan shopping mall that killed more than 60 people last year. “It’s an issue all retailers have to contend with.”
For operators brave enough to push in, the formal retail market in Nigeria offers big rewards -- it is forecast to almost double to $112 billion by 2018 as Africa’s biggest economy gets richer and an emerging middle class becomes more aspirational.
With an eye on the future, Lagos-based Alpine Investments and other investors in 2008 pledged to build the mall in Kano, a former hub on the trans-Saharan trade route that had fallen on hard times. In addition to the 21 stores open already, another 11 have been leased, and by the end of September, 70 percent of the 81 spaces should be occupied, said Mohammed Hayatu-Deen, chief executive officer of Alpine, the mall’s biggest investor.
Anchored by Shoprite Holdings Ltd. and Wal-Mart Stores Inc.’s Game chain, the 24,400 square-meter Ado Bayero mall is a scene familiar to shoppers the world over. At lunchtime in midweek, teens take selfies by Shoprite’s hot-food counter while others check out Lego blocks and Adidas AG shoes in other stores. An average of 12,000 people are visiting each day, according to Hayatu-Deen.
Stores like Shoprite offer “good quality and there are many things that are not in other shops,” said Muhammad Sadiq, a 19-year-old business student, clutching a bag full of cake and cans of Maltina, a non-alcoholic sugary malt drink. Game and Shoprite declined to comment on their shops in the mall.
Expanding in Nigeria comes with big costs, according to retail executives. Aside from the extra millions of dollars that Ado Bayero has spent on security, opening a shop in Nigeria can cost twice as much as in South Africa, they said.
The naira was little changed at 162.63 per dollar at 11:17 a.m. in Lagos, bringing its decline this year to about 1.4 percent.
Persistent difficulties in Nigeria led retailer Woolworths Holdings Ltd. to say in November that it would close its three outlets in the country, saying the price of doing business there wasn’t worth it. Others are waiting to see how the mall pans out before setting up shop.
“We are not going to rush into anything,” said Doug Murray, CEO of The Foschini Group, the owner of more than 2,000 clothing stores in Africa, saying he wants to wait to see how other South African retailers do in a mall before opening himself.
He might be right to wait, according to David Shapiro, a director at Johannesburg-based money manager Sasfin Securities.
“In history, we’ve seen you can learn from the mistakes of the first movers,” Shapiro said.
On top of that, security right now remains a growing concern. A bombing in a shopping plaza last week killed at least 21 people in central Abuja, the nation’s capital, an area popular with wealthy Nigerians and foreigners. And at least eight were killed two days before that after a car bomb exploded at the Kano State School of Hygiene in the northern city.
So far, it’s not stopping the Kano mall, where policemen armed with Kalashnikov rifles sit guard outside. The investors are preparing to expand further, with a cinema and food court due to open in August, bringing the promise of more traffic to the 1,000-spot parking lot. Eventually, the developers say they hope to build a luxury hotel and amusement park.
That all depends on the mall’s ability to prove itself and keep visitors safe, something that residents say they have faith in. Kano’s size and influence as the north’s commercial hub will mean that it’s able to move on quickly from attacks, bombings and the threat of insecurity, said Ibrahim Mu’azzam, a professor of political science at Bayero University in Kano.
As for Isa, so far the security has made her feel safe and that’s gotten her to “come here almost every day,” she said as she piled her cart with cereal, days after a suicide bomb attack rocked Nigeria’s second-biggest city. “I absolutely love it.”