Home Latest Insights | News Open Markets and Naira Devaluation Kill Shoprite Nigeria

Open Markets and Naira Devaluation Kill Shoprite Nigeria

Open Markets and Naira Devaluation Kill Shoprite Nigeria

Running a supermarket in Nigeria is very challenging. Then, running a supermarket chain like the Shoprite model may be hopeless. The reason is evident: every major street in key Nigerian cities is a “market” with a security man doubling as a vendor. Then, walk a few miles, there is one market or the other. Just around Ikeja in Lagos state, you have Alade Market, the one at the junction, computer village, etc. Move a little further, there is the Oshodi Market and Ajao Estate Market. Most of those market participants do not pay tax. So, formal supermarket chains have to collect taxes and still beat them on value when quality and price are considered.

So, the news that Shoprite has failed in Nigeria should not come as a surprise. To have operated in Nigeria these years, Shoprite was running a full local government operation with its private security, waterboard, electricity, and more. But when the naira was devalued, the governance system failed as it had so much global exposure. Shoprite is a South African company.

Shoprite, the biggest retail supermarket in Africa, is reportedly leaving Nigeria after 15 years, according to the statement issued by the retail company on Monday.

“Following approaches from various potential investors, and in line with our re-evaluation of the Group’s operating model in Nigeria, the Board has decided to initiate a formal process to consider the potential sale of all, or a majority stake, in Retail Supermarkets Nigeria Limited, a subsidiary of Shoprite international Limited.

“As such, Retail Supermarkets Nigeria Limited may be classified as a discontinued operation when Shoprite reports its results for the year. Any further updates will be provided to the market at the appropriate time,” the statement said.

The South African company has experienced low sales in the past few years, prompting it to weigh the cost of staying in Nigeria among other countries outside South Africa.

More so, during a season of economic paralysis, luxury fades. Why pay N1,000 in a university canteen when you can eat in the bukka for N500? The university canteen has priced the clean tables, nice music, etc in that N1,000 meal. But the bukka did not provide those things and  could effectively lower the prices of meals. Shoprite was doing great on many elements, offering standard products within a well controlled environment. But just as many students went for bukka over school canteens, Nigerians abandoned it for open markets when they raised prices to account for the currency deterioration. Naira has lost more than 20% of its value in 2020.

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Like I noted a few days ago when my friend offered a suggestion after watching our Vice President’s speech, noting “your country does not know that the only reform Nigeria needs for foreign investment now is a stable currency,” our core challenge is lack of stability in Naira. And unless we deal with this instability, Nigeria will not attain the equilibrium we expect on development.

Today, our Vice President, Prof Osinbajo, gave a speech on improving the ease of doing business in Nigeria through reforms. A friend in New York sent me the link with this comment: “…your country does not know that the only reform Nigeria needs for foreign investment now is a stable currency. Your problem has gone beyond bureaucracy”.

Shoprite may not be doing terribly bad in Naira but struggles in Rand when it reports in South Africa. It is exiting Nigeria even though it makes tons of naira. So, if a local investor acquires Shoprite Nigeria with no burden to report in USD or Rand, the currency issues could be eliminated. It is like Dangote generating more naira and still losing $17 billion in net-worth in 7 years.

Read full Shoprite statement here (pdf)

Comment on LinkedIn Feed

I worked closely with ShopRite for years as a representative of the investors who developed the malls in finance technical role in Nigeria for ShopRite to trade in. So I can say that continued Naira devaluation killed ShopRite as mentioned by Ndubuisi. Yes, I know the numbers they make here in Naira are huge in billions but the devaluation of Naira continuously makes the tonnes of Naira worthless and made making profit difficult. Until Nigeria fix the Naira, more companies will be killed by the whipsaw called Naira devaluation.


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8 THOUGHTS ON Open Markets and Naira Devaluation Kill Shoprite Nigeria

  1. Buhari said he would make Naira equally to Dollar, that was over five years ago, I understand that he has zero knowledge on economic matters, but Naira has been sliding since he became president; he couldn’t keep it where he met it, rather he devalued it.

    Between Naira and the guys at the CBN, we do not know which party is managing the other, but it does appear that Naira is beating them black and blue, they got no clue on how to stop its rampaging and ferocious decline.

    No excuse would be enough, these folks have told us over the years all that needed to be done to make Naira stable, yet it never worked. But we are still paying them fat salaries, and every now and then they introduce one excruciating policy or another, telling us that it would improve the Naira, and we forcefully believe; but those promises never materialised!

    The same way the service chiefs have failed us on security, those saddled with making Naira a proud child (or parent) have failed us the more, but we are not calling for their heads, rather we tend to excuse them of the catastrophe they have become.

    We are paying and venerating a lot of people just to supervise over failure here, and it’s ignoble that they don’t still think they are all failures.

  2. Exactly!
    Which country would have strong currency where you have illiterates and half illiterates openly selling the nations hard earned dollars, corruptly allocated from their central banks, on the streets?

    • One of the major problem in Nigeria is that some part of the country do not have any allegiance to the Naira. This is more particular in the North. Though they are in Nigeria, the allegiance and loyalty is to the dollar and pounds. Naira is just a mere interface. From the streets of Lagos to Abuja, Kaduna, Imo, Portharcourt, Bayelsa, Calabar, Akwa Ibom and so on, it is the Northerners who trade the foreign currency. No Igbo man, even with their dexterity in business, is able to successfully break into that line of business. The loyalty is certainly not to the Naira. Here is are some draconian laws if Nigeria wants her currency to be strong: Have all Forex transactions restricted to the Banks. Every one (not foreign business operators) who wants to change his dollars or pounds to naira should be made to lose 35 per cent to the government. If the government still decides to keep the Bureau D Change, let them be mandated to charge 35 percent of any amount changed payable to the government. The modalities can be worked out. All genuine business transactions in the Banks may not attract such draconian measures. Once Nigerians start losing money from changing the hidden dollars/pounds to Naira, the love for Naira will come to stay. It’s unfortunate it will be a difficult task for US and Britain to change their currencies in order to trap Nigerians who have trillions of Dollars and Pounds stashed away.

  3. They sell dollars to their friends and brothers, who sell on the streets, then operate the system of governance where president is sympathyzing with terrorist.

  4. Dr Ndubisi, you may need to write on the need for the Nigeria to ban Bureu D Change operators in Nigeria. They are skilled in the art and act of keeping the dollar and pounds ahead of the Naira. Please to not refer to the economics of production and how it earns foreign exchange. The masters of the Bureau D Change in Nigeria have a formula that is not taught in any school all over the world. The operation bends every known economic rules. There is always a loop hole for them to exploit even if the government decides to take any action. Outright ban is the first major step. Decentralisation of its operation by only a region of the country is another step. Multiple charges on conversion of Pounds or Dollar to Naira and vice versa is another dimensional action that can be taken. This action could cause war beyond any other war ever fought.

  5. We cant blame those selling the hard currencies. A trader gets his goods from the cheap source and sales based on cost. Its demand/supply regulated.
    Prof Soludo as central bank governor refused to treat them as “black marketers”
    He recognised them as “parallel market operators” He helped make it legal and functional. They have links abroad and can transfer money to you sometimes faster than the formal system. Consider what would have happened to those traders from 5% part of the country who definitely cannot access forex via the formal system. Most of them would have been killed deliberately via political strangulation of hate. The parallel market comes to the rescue.
    We can argue that if the system is fair, it will not be possible for some people to officially or unofficially get tons of hard currency at cheap rate from the government and sale at going rate. That maybe the bad side of the parallel market. Even that bad side is under the control of government – not the malams who buy and sale. They source from home and from abroad. Only competent CBN, sound economic policy
    and reduction in corrupt currency dealings by the privileged will save the Naira if the government thinks saving it is necessary.
    If the government believes that it benefits more by devaluation to enable it meet the wage Bill’s in Naira from the lowered foreign exchange earnings, that will be its priority. Whether the workers are impoverished will remain secondary. Besides, it looks the other way when the hard hit workers help themselves via corrupt ridden routes. Those who cant help themselves must find additional things to do or simply die.
    That is the sad reality.

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