Adekunle Adebiyi, Executive Director, Investments at MBO Capital Management Limited, an investor in Shoprite Nigeria, disclosed the plan during an interview on Nairametrics’ Drinks and Mics programme on Friday. He also outlined the financial and operational challenges facing the supermarket chain and the measures being taken to restore its business.
According to Adebiyi, three Shoprite outlets have reopened following a temporary shutdown that allowed the company to negotiate with suppliers and address outstanding financial obligations.
“We took a very, very drastic decision to just shut everything down whilst we negotiated with suppliers. Now three stores are back open,” he said.
He explained that the retailer intends to pursue a more flexible expansion strategy by establishing smaller, standalone supermarkets in residential neighbourhoods rather than depending mainly on large shopping malls.
“We’re going to be opening standalone neighbourhood stores, which was always the plan,” Adebiyi said.
The strategy is expected to reduce the capital required to operate the business by allowing Shoprite to focus on its core supermarket operations rather than tying up substantial funds in property development.
Adebiyi noted that supermarkets typically lease their premises and direct investments towards operational assets, including shelving, refrigeration systems and other store equipment.
However, he said this model can make it difficult for retailers to secure conventional bank financing in Nigeria, where lenders often require tangible assets as collateral.
He disclosed that MBO Capital faced difficulties obtaining bank loans during the acquisition of Shoprite Nigeria because the business lacked sufficient physical assets to meet lenders’ collateral requirements.
Despite generating billions of naira in revenue, the company’s asset-light structure limited its access to traditional financing, forcing the investors to consider alternative funding arrangements.
Foreign exchange volatility also contributed to the retailer’s financial difficulties, Adebiyi said.
He revealed that approximately 17 of Shoprite Nigeria’s 28 stores had dollar-denominated rental agreements at the time of the acquisition. The subsequent depreciation of the naira increased the cost of servicing those leases, placing additional pressure on operating expenses.
Adebiyi said rent should typically account for between eight and 10 per cent of a supermarket’s revenue. However, some Shoprite outlets faced significantly higher rental costs, further undermining their financial performance.
Beyond financing and rental expenses, the company encountered operational setbacks, particularly in inventory management and technology infrastructure.
Adebiyi said Shoprite Nigeria lost access to the enterprise resource planning (ERP) system previously provided by its former parent company. Replacing the system required an additional investment running into billions of naira, diverting resources that could otherwise have supported the retailer’s recovery.
The planned neighbourhood stores, alongside the reopening of selected outlets and efforts to address the company’s financial constraints, form part of a broader strategy to rebuild Shoprite Nigeria’s operations.
