Against the backdrop of the move by Shoprite Holdings Limited to exit its Nigeria operations, the Lagos Chamber of Commerce and Industry has highlighted several issues taking a toll on businesses in the country.
The South African supermarket retailer announced in its 2020 financial statements that the terms of sale had been concluded for the disposal of a 100 per cent equity stake in its Nigeria subsidiary, Retail Supermarkets Nigeria Ltd.
It said the transaction had been lodged with Nigeria’s Federal Competition and Consumer Protection Commission for approval.
“The exit of any investor from an economy is not good news. It has negative signalling and perception effects. However, such moves are essentially outcomes of a business decision and strategy,” the Director-General, LCCI, Dr Muda Yusuf, said.
He said the move could be a consequence of intense competitive pressures posing a risk to business sustainability, adding that it could also be as a result of harsh business conditions.
He said, “Shoprite is an international brand with presence in 14 African countries and about 3,000 stores. The comparative analysis of returns on investment in these countries may have informed the decision to exit the Nigeria market.
“The opportunities for retail business in Nigeria is immense. But the competition in the sector is also very intense.
“There are departmental stores in practically every neighbourhood in our urban centres around the country. There is also a strong informal sector presence in the retail sector. It is a very competitive space.”
According to Yusuf, there are also important investment climate issues that constitute downside risks to big stores like Shoprite.
He said, “These include the trade policy environment, which imposes strict restrictions on imports; the regulatory environment, which is characterised by a multitude of regulators making endless demands.
“There is also the foreign exchange policy, which has made imports and remittances difficult for foreign investors. There are challenges of infrastructure which put pressures on costs and erodes profit margins.”
The LCCI boss added, “But we need to stress that Shoprite is only divesting and selling its shares; Shoprite as a brand will remain. I am sure there are many investors who will be quite delighted to take over the shares.
“It should be noted that there are other South African firms in Nigeria doing good business. We have MTN, Multichoice, Stanbic IBTC, and Standard Chartered Bank, among others. Some of them are making more money in Nigeria than in South Africa.”
Some sectors, according to Yusuf, are more vulnerable to the challenges of the business environment than others.