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.

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)

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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.

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.

Bloomberg reported that the process was initiated in November due to currency-induced inflation that compounded other business obstacles it is experiencing in the African most populous nation.

International stores (excluding Nigeria) contributed 11.6% to group sales, recording 1.4% decline in sales from 2018. South African operations contributed 78% of overall sales and saw 8.7% rise for the year.

However, COVID-19 economic downturn reduced customers’ patronage to 7.4% but the average basket spend saw an increase of 18.4%.

The decline in sales took a bigger turn in the second half of 2019, following the xenophobic attacks and the consequent retaliation in Shoprite Supermarkets outside South Africa, which forced the company to close many of them.

According to H2 financial results published by Shoprite, its Supermarket segment lost 8.1% of sales in constant currency terms at the end of the second half.

Other issues bordering on poor infrastructure and unstable currency rate aggravated the poor patronage woes. The situation, which impacts other businesses in the country, has forced another South African company to leave.

In June Mr. Price Group made plans to close its stores in Nigeria citing poor sales and high cost of operation that have placed its business at loss. Many have attributed the development to the present administration’s poor economic policies.

“Mr. Price has closed shop and left Nigeria. Apparently Shoprite too is closing its operations and leaving Nigeria after selling its stakes. Kelvin Odanz wrote on Twitter. “Very soon Multichoice and MTN might will also leave… almost a dozen big multinational companies have left Nigeria between 2015 and today, due to Buhari’s anti-Business policies.

“Buhari’s anti-Business policies affect both foreign and local Businesses. Thousands of local Businesses have been closed too. From using taxes to strangle local businesses to introducing policies that make it almost impossible for local businesses to survive.”

Shoprite had last year expressed hope of profit if there’s no further currency devaluation.

“We are confident in the absence of further currency devaluations and any unforeseen circumstances, that these operational measures will positively impact profitability,” the company said in a statement.

However, the slump in oil price resulted in naira depreciation, forcing the Central Bank of Nigeria to devalue the currency once again, exposing Shoprite and other companies to harsh exchange realities along poor infrastructure that spikes the cost of running business in the country.

The Nigerian government has been urged to maintain a unified exchange rate to woo investors and to keep existing companies. With the rate of unemployment, Nigerians are worried that more companies are going to join the train very soon if drastic actions are not taken by the government to address the forex disparity among other issues.

“If you are a foreign firm, and your profit in Nigeria grew from N364 million last year to N450 million this year, there’s no profit growth in dollars,” wrote a business analyst.

 Read full Shoprite statement here (pdf)