South African retailer Truworths has left Nigeria citing import restrictions.
“We were unable to operate the stores properly any longer because we were unable to send merchandise to the stores because there’s regulation preventing that,” chief executive Michael Mark told Reuters in telephone interview on Thursday.
The company said it was even struggling to pay its rent and get access to foreign exchange which is scarce these days in Nigeria as a result of the slump in oil prices. Oil accounts for more than 90 percent of Nigeria’s forex earnings. The country’s currency has thus lost most of its value, exchanging for 380 naira to a dollar on Thursday, February 19, 2016 from 263 naira per dollar at the beginning of January.
President Muhammadu Buhari has effectively banned the import of over 600 goods, hoping this would help boost local manufacturing and strengthen the naira. He has spoken publicly against devaluation, insisting no one has been able to convince him on why he should devalue the naira, although the decision on this constitutionally lies with the central bank governor, who has not said much about the falling currency in recent times. Buhari has reiterated his resolve to hold the exchange rate at the current official band, saying he would not kill the naira. However, the currency has continued to lose more value with every new restriction aimed at reducing pressure on the foreign exchange which is drying up.
Foreign companies are not the only ones hurt by the current red tape, local small businesses that use raw materials or services sourced abroad have also been complaining about how their businesses are affected. With the foreign exchange available inadequate for everyone who can access them legally, they and others who have been restricted by recent policies, have had to turn to the black market to source foreign exchange, further increasing the value of foreign currencies at the expense of the naira.
Although the import restrictions have affected Truworths, South Africa’s largest publicly traded clothing chain, the company has not really been having it good in Nigeria. Despite making losses, the company had been banking on the growth potential of Nigeria and did not follow fellow South African retail chain Woolworths out of Nigeria in 2013.
“We were making losses, but I don’t think we will in the future,” Bloomberg quoted Mark to have said of Nigeria.
As at 1:13 PM SAST today, Truworths shares had dropped 1.61 percent to 9,416.00ZAC on the Johannesburg Stock Exchange (JSE).