Truworths International Ltd. 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 clothing company 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 it’s 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 Nigerian central bank 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.”
Truworths is expanding in countries outside South Africa as economic growth and consumer spending remain under pressure in its domestic market. The Cape Town-based company bought a majority stake in U.K. shoe chain Office Retail Group Ltd. last year, and also has stores in sub-Saharan African countries including Kenya and Botswana.
“The stores in countries bordering South Africa are doing well and in Ghana it’s O.K.,” Mark said. “It’s just Nigeria that’s not and we would go back there if everything changes. This is not a permanent thing, we will see what happens.”
Truworths said Thursday first-half profit climbed 21 percent even as consumer spending in South Africa remained sluggish. The shares fell 4.7 percent to 91.21 rand at the close in Johannesburg, having gained 2 percent the previous day.
Office Retail is also looking to expand in Europe. As many as 30 store locations have been identified in the U.K. and up to 15 stores may be opened in Germany in the next two to three years, Mark said.