The reason why Shoprite is leaving Nigeria after 15 years

The COVID-19 pandemic and the group's re-evaluation of its operating model in Nigeria means Shoprite is leaving town.

Africa's biggest grocery retailer and the South Africa-owned chain of stores, Shoprite, is exiting Nigeria, Africa’s most populous nation and largest market after 15 years.

The reason why Shoprite is leaving Nigeria after 15 years

Shoprite is re-evaluating its operating model across Africa, amidst logistic concerns and the novel coronavirus pandemic.

A dip in sales in Nigeria means it is now shutting shop.

“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,” the company said in a statement.

“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.”

Shoprite Holdings has reported a drop in annual earnings, hurt by an impairment charge it recorded during the year.

The Cape Town-based retailer has started a formal process to sell all or a majority stake in its supermarkets in Nigeria.

International supermarkets (excluding Nigeria) contributed 11.6% to group sales, and reported 1.4% decline in sales from 2018.

A struggle

South African retailers have struggled in the Nigeria market. Mr Price exited the Nigerian market after Truworths pulled out as well.

Shoprite is Africa's biggest retailer with several outlets in Nigeria

In April, Nairametrics reported that Shoprite Holdings in Nigeria lost 8.1% of its sales in constant currency terms at the end of the second half (H2) of 2019 due to September's Xenophobic attacks and reprisals back in Nigeria.

Chief Executive Officer of Shoprite, Pieter Engelbrecht, says: “we remain committed to operating on the continent but are limiting future expansion whilst we review our options with regards to alternate operating models.

“Notwithstanding this, we have taken a number of immediate operational actions, all of which are ongoing and include rent reductions, store closures, productivity improvements and de-dollarising costs.

“We are confident in the absence of further currency devaluations and any unforeseen circumstances that these operational measures will positively impact profitability. Looking ahead, the Group enters the second half with ongoing determination.

“Our investment in technology affords us greater visibility and results in better decision making across the business. This, together with the launch of our Xtra Savings Rewards Programme, is significant for the Group and bodes well for a future-fit Shoprite.”

Shoprite's departure will leave a void in Nigeria's Fast Moving Consumer Goods (FMCG) sector; with attendant job losses in a country with high unemployment figures.