Shoprite Nigeria plans to open standalone neighbourhood stores as it works to revive its business after a financial crisis forced a restructuring.
An investor in the retailer disclosed this on Friday. Adekunle Adebiyi is Executive Director, Investments at MBO Capital Management Limited. He spoke on Nairametrics’ Drinks and Mics, where he discussed the supermarket chain’s troubles and recovery plans.
Adebiyi said three outlets have reopened. The company had shut its operations temporarily to negotiate with suppliers and settle outstanding obligations. He called the decision “very, very drastic.”
Smaller Stores in Residential Areas
The retailer will now expand through smaller stores in residential neighbourhoods. It will no longer rely mainly on large shopping malls. Adebiyi said this was always the plan.
The approach lets the company focus its money on supermarket operations. It avoids heavy spending on property development.
Financing Challenges
Adebiyi explained that supermarkets usually operate from leased premises. Their main investments are shelves and refrigeration systems.
This model can make funding hard in Nigeria, he said, because banks often demand tangible assets as collateral. MBO Capital faced this problem when it acquired Shoprite Nigeria. Lenders could not find enough physical assets to back the deal.
The company earns billions of naira in revenue. Even so, its structure made conventional asset-backed loans difficult to get. The investors therefore looked at other funding options.
Dollar Rents and Weak Systems
Adebiyi blamed foreign exchange volatility for much of the company’s trouble. About 17 of its 28 stores had dollar-denominated rent agreements when the acquisition took place. The fall of the naira then raised those costs sharply.
He said rent should normally take eight to 10 per cent of a supermarket’s revenue. Some Shoprite locations paid far more.
He also pointed to weak inventory management. The company lost access to the enterprise resource planning system of its former parent firm. Replacing it cost billions of naira, money that could have supported the business.
Years of Pressure
The recovery follows several years of upheaval. In June 2021, a consortium led by Persianas Investment Limited completed the acquisition of Shoprite Nigeria. South African retailer Shoprite Holdings had decided to exit direct ownership of its Nigerian operations.
The business then continued under Retail Supermarkets Nigeria Limited through a franchise arrangement. Rising costs and tough trading conditions followed. In June 2024, Nairametrics reported the closure of its outlet at Novare Wuse Central Mall in Abuja.
