LETTER: Nigeria must get its act together

Date:

My first impression on reading Dianna Games’ article was: No! You don’t say? (“Shoprite exit shows Nigeria is not an easy place for business”, August 6). Let’s say it as it is — Nigeria is a difficult place to do business. Speaking up may even help.

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A range of factors, in particular a supposedly large market, makes it easy to understand why investors are initially attracted to Nigeria. However, when you distill the numbers you find that the middle class is not large, and indeed relative to the size of the population it is small.

Competition for domestic household consumption spend is high, therefore dollar per capita household expenditure — even adjusted for purchasing power parity — is low. When these facts are mixed with inadequate infrastructure (which makes delivery to the mass market expensive) the attraction wanes. This situation is difficult for most businesses, but particularly so for retail operations such as Shoprite, which depend on efficient supply chains.

Intrigued by its record, in about 2008 an investment group of which I am a member added Shoprite to its equity portfolio. And about the same time, equally intrigued by its history, a colleague from the University of Surrey and I wrote a detailed case study of Shoprite. (The work was subsequently published in the Journal of Economic Geography).

We charted its origins from establishment in 1979 via the purchase of eight supermarkets from the Rogut family in Western Cape, its preference for internal funding through retained earnings over debt, its 1986 JSE listing and careful internationalisation strategy.

It is therefore not a surprise that Shoprite has taken the decision to substantially withdraw from Nigeria. That decision is in keeping with enhancement of shareholder value. The market’s response suggests that the decision is prescient.

Though it is difficult to forecast, all the signs are that the long-term crude oil price will be a fraction of its current price. Nigeria needs to get its act together. It is running out of time, but it can do so. Foreign direct investment is always looking for a good home.

The provision of an environment that can attract and retain such investment is a function of good government and governance. Nigeria has to stop talking about electricity, railways and roads and get on and deliver them. Until then, companies and the market will continue to take rational decisions — as Shoprite did a couple of weeks ago.

Charles Okehalam
Houghton

Naija247news
Naija247newshttps://www.naija247news.com/
Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

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