Hospitality, still some room for expansion

The hospitality sector, which is classified by the NBS as the accommodation and food services segment, is regarded as one of Nigeria’s vibrant industries. However, it did experience reduced patronage in the recent recession. The national accounts from the NBS show that the sector grew by 0.2% y/y in Q3 2017, compared with a contraction of -4.9% in the corresponding period of 2016. Now that the economy has emerged from the recession, we expect to see a pickup in consumer spending.

Although the fx market is now relatively stable, we gather that restauranteurs have turned towards the local market for their required inputs, rather than heavily relying on imported food products. This bodes well for local farmers, particularly rice and fish farmers that have been able to set up “farm to table” value chains.

This boost to local agricultural production has been a positive for the food and accommodation sector in that it has added to its profit margins.

The largest part of hotel accommodation is corporate lodging rather than leisure. However, given the adjustment to spending patterns by most Nigerian nationals, the local tourism industry has recorded a pick-up in activity as vacations abroad are now relatively expensive. This has given a boost to hotels across the country.

Hospitality, still some room for expansion - FBNQuest Research

We expect an uptick in consumer confidence as the real sector begins to feel the impact of the upward trend in growth, and based on a trickle-down effect from increased government spending on the back of delayed capital releases from the 2017 budget. Ultimately, the food and accommodation sector should benefit from increased consumer spending.

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