Tobacco in Nigeria

Tobacco in 2024: The big picture

Amid rampant inflation, which led to a sharp rise in unit prices, volume sales of tobacco continued to decline in 2024 but at a much slower pace than in the previous year. Higher prices were largely driven by the depreciation of the foreign-exchange value of the local currency. The shortage of foreign currency also restricted the availability of some imported brands. The buying power of local consumers was further undermined by slowing economic growth. Amid rising unit prices, many local consumers traded down to cheaper tobacco products. High unit prices also encouraged a shift by some consumers to illicit trade, but the widespread availability of low-priced licit products limited this. Demand was also supported by ongoing strong population growth.

2024 key trends

Retail current value sales of tobacco rose sharply in 2024, but this was mainly driven by price rises on the back of elevated inflation and a depreciation in the foreign-exchange value of the naira. Apart from cigarettes, most tobacco products are imported and therefore highly susceptible to rising import costs. Difficult economic conditions, which weakened consumer spending power, led to a decline in volume sales across all categories. However, value sales growth outpaced inflation, underpinned by strong unit price growth. The rate of decline in retail volume sales slowed compared to 2023, which was similarly marked by high inflation, as consumers had largely adjusted by trading down.

Competitive landscape

British American Tobacco (Nigeria) Ltd (BATN) continued to dominate retail volume sales of tobacco in Nigeria during 2024, primarily through its ownership of the top three cigarette brands – Rothmans, Pall Mall, and Benson & Hedges. However, its share declined significantly both in 2024 and over the review period as a whole, as it faced stronger competition from players positioned at more competitive price points, which expanded both their distribution and visibility. While the competition is primarily led by brands from Japan Tobacco Inc and Philip Morris International Inc, 2024 saw the rapid growth of a range of imported brands from Asian and the Middle East, including Bohem, Time, and Gold Mount. These brands have expanded strongly thanks to competitive pricing and innovative formats, often featuring slim or super-slim designs and flavour capsules, offering a more affordable alternative to BATN’s premium or super-premium flavour-capsule offerings. Nonetheless, BATN continues to see solid revenue growth due to its focus on the premium segment.

Retail developments

Small local grocers remain the dominant distribution channel for tobacco in Nigeria; sales in this channel are generally through small kiosks that sell a variety of grocery products as well as tobacco products, particularly cigarettes and smoking tobacco. These kiosks are popular due to their near-ubiquitous presence in cities and towns across the country. However, the channel's share declined slightly in 2024 due to the growth of supermarkets, which many middle- and upper-income consumers increasingly prefer for their shopping needs. Hospitality (on-trade) is a popular channel for the sale of cigarettes and other tobacco products, particularly cigars. Bars frequently sell cigarettes, as many consumers tend to smoke while drinking.

What next for tobacco?

Over the forecast period, retail volume sales of tobacco will rebound as economic conditions stabilise, inflation eases and the foreign-exchange value of the local currency (NGN) stabilises somewhat, making it easier for importers to operate. A slowdown in the growth of the illicit trade in cigarettes and ongoing urbanisation will also support demand. Although smoking prevalence is projected to continue declining, this will be offset by rapid population growth, which will lead to an increase in the absolute number of smokers.