Shoprite and Our Economy, By Chris Adetayo

Shoprite is planning to leave Naija and we are all genuflecting. If only we know the number of those who have voted with their feet in the last few years.

Why did Etisalat walk from Nigeria?

Where is Intercontinental Hotel today?

Even the oil majors are happily selling off oil fields and no longer investing in the sector like they used to.

Truth is our economy is not FDI friendly. It hasn’t been for the better part of a decade. All the hopes invested in Nigeria post military rule has been betrayed.

Our currency has to be one of the most unstable currencies in the world. The sheer amount of devaluation it has suffered in the last 5 years especially is staggering. Nothing scares investors like uncertainty. And it explains why so many are walking away.

Let me illustrate our predicament with Etisalat.

It took a syndicated $-based loan from Nigerian banks to expand its operations. At the time it took the loan, exchange rate was in the region of N160/$. For as long as the exchange rate stayed at this level, it had no problem servicing the loan. And everyone was happy – banks were getting paid, customers were getting better service, company was growing subscribers and revenue.

Then in 2015/16, the Naira collapsed. For the better part of a year, it swung between N250/$ and N400/$. It eventually stabilized at N360/$. That is more than double the rate at the time the loans were taken.

The effect? The amount of Naira required to pay back the $ loans had doubled. But, crucially, the Naira revenue had not (because increases to the customer was just not possible or viable). In other words, the company was now required to double the amount of its relatively static revenue set aside for debt servicing. It was not sustainable.

At the end, Etisalat walked out of Nigeria.

That same scenario has played out with many other companies. It is playing out now with Shoprite.

COVID has not helped. But it really only worsened and hastened what has been a depressing situation.

Put simply, our macro economic management leaves a lot to be desired.

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