Truworths International Ltd, South Africa’s largest publicly traded clothing chain, closed its two remaining Nigerian stores last month as stringent regulation of stock imports, foreign exchange controls and rising costs made it too difficult for the South African retailer to operate in Africa’s biggest economy.
The firm struggled to get stock into Nigeria and cash out of the country, Chief Executive Officer Michael Mark said in a phone interview on Friday. Truworths’ dollar rental bill also soared as the rand weakened against the U.S. currency, he said.
“The regulations were making it extraordinarily difficult to get stock into the stores, we couldn’t get money out, so there was no point any longer,” Mark said. “Obviously everyone gets exited about Nigeria because of its size, but I think they’ve taken an incredible strain with internal problems in the country politically and then there are the issues with their oil.”
The Central Bank of Nigeria has effectively pegged the naira at 197 to 199 per dollar since March by restricting imports of products from glass to wheelbarrows, halting supply of foreign currency to exchange bureaus and all but shutting down the interbank market with trading limits. The country, Africa’s biggest crude producer, has suffered a slump in government revenue as oil prices plunged.
South African companies to have struggled in Nigeria include food and clothing retailer Woolworths Holdings Ltd., which announced the closure of its three stores in the country in 2013 because of high rental costs, duties and difficulties getting stock into stores. MTN Group Ltd., the continent’s largest wireless operator, said Thursday that 2015 earnings fell at least 20 percent after Nigerian regulators withdrew services and ordered the company to disconnect 5.1 million customers.
“It’s a tough market, with high rental expenses and I felt you needed to get big or get out,” Ian Moir, the chief executive officer of retailer Woolworths, told reporters in Johannesburg on Tuesday. “We made the right call, we didn’t see things really changing there for the next 10 years.”
Mark had said Mark said in a 2014 interview at the company’s headquarters in Cape Town that the company won’t pull out of Nigeria.
“We were making losses, but I don’t think we will (exit) in the future,” Mark said of Nigeria.