In search of the trickle-down effect

Lagos was the fourth wealthiest city in Africa in 2016. The measure is of net private wealth held by individuals resident in the city and excludes “government funds”. This is the finding of a report by New World Wealth, a Johannesburg-based market research firm, in conjunction with AfrAsia Bank, which has a presence in South Africa and Mauritius. Lagos (US$120bn), not surprisingly, has the no 4 slot behind Jo’burg, Cairo and Cape Town, and is well clear of the no 5 (Nairobi, with US$55bn).

The report estimates that Lagos had 6,800 dollar millionaires, 360 multi-millionaires and four billionaires. This information may whet the appetite of would-be wealth managers. We would caution that they will find a crowded market with domestic players and international investment banks, both present in the city and on regular visits to target clients.

In search of the trickle-down effect, we recall the 2016 survey by Enhancing Financial Innovation and Access (EFInA). This showed that the South West (including Lagos State) was the only geopolitical zone to have achieved a decline in financial exclusion between 2012 and 2016, and the only one set to hit the official target of a ratio below 20% by 2020 (Good Morning Nigeria, 10 July 2017).

This is not compelling evidence of the trickle-down effect, rather a reflection of the depth of the banking sector in the zone. There are several reasons to conclude that the middle-income segment has been squeezed, including: that the growth of e-commerce has stalled; that the skyline of the major cities has a large number of unfinished buildings; and that the products of consumer goods manufacturers are now often available in smaller sachets/packets.

Most, if not all, successful models of economic development assume a rapid growth in the middle class. This process has seemingly been reversed in Nigeria.

Another element of the models is lifting people out of poverty. China is due to achieve high-income status, defined in this context as GDP per head above US$15,000, in 2020, and to have lifted 600 million people out of poverty in the process. For its part, the FGN, supported by the World Bank, is developing a social welfare programme based on the conditional cash transfers in Brazil’s Bolsa Familia. Its ambitious target is to reach five million households within five years.

Abuja occupies the no 17 slot in the league table for 2016. Its net private wealth is estimated at US$14bn with 800 millionaires and 40 multi-millionaires.

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