The strategy marks a shift from the retailer’s traditional reliance on large outlets in shopping malls, with the company seeking a more cost-effective operating model that will enable it to concentrate resources on its core supermarket business.
Adekunle Adebiyi, Executive Director, Investments at MBO Capital Management Limited, an investor in Shoprite Nigeria, disclosed the plans during an interview on Nairametrics’ Drinks and Mics on Friday. He also provided insights into the financial difficulties that led to the temporary closure of the retailer’s operations and the measures being taken to restore business stability.
Adebiyi said three stores had reopened after the company took the difficult decision to suspend operations temporarily while negotiating with suppliers and addressing 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 company intended to expand through standalone neighbourhood outlets, which would allow it to serve consumers closer to their homes without the substantial costs associated with operating in major shopping malls.
“We’re going to be opening standalone neighbourhood stores, which was always the plan,” Adebiyi said.
The proposed format is expected to provide greater flexibility in selecting locations and managing expenses, particularly at a time when high rents, energy costs and other operational pressures continue to weigh on retailers in Nigeria.
Financing challenges constrain expansion
Beyond the immediate operational difficulties, Adebiyi identified the structure of the supermarket business as another obstacle to securing financing in Nigeria.
Unlike businesses that own extensive property and other high-value fixed assets, supermarkets typically operate from leased premises, with much of their investment directed towards equipment such as shelving, refrigeration systems and other store infrastructure.
While this approach allows retailers to avoid tying up substantial capital in property ownership, it can make borrowing more difficult in a financial environment where banks frequently require tangible assets as collateral.
According to Adebiyi, MBO Capital encountered this challenge while seeking bank financing for the acquisition of Shoprite Nigeria, as lenders struggled to identify sufficient physical assets to support the transaction.
The situation presented a financing dilemma for a business capable of generating billions of naira in revenue but without the level of property-backed assets that conventional lenders often prefer.
Consequently, the investors had to explore alternative funding arrangements to support the acquisition and the retailer’s subsequent operations.
Foreign exchange volatility compounds pressure
Foreign exchange volatility also played a significant role in Shoprite Nigeria’s financial difficulties, particularly through its impact on rental obligations.
Adebiyi disclosed that approximately 17 of the retailer’s 28 stores had dollar-denominated rental agreements when the acquisition took place.
The subsequent depreciation of the naira significantly increased the local currency cost of servicing those leases, putting additional pressure on operating expenses.
He noted that rent would ordinarily account for between eight and 10 per cent of a supermarket’s revenue. However, some Shoprite locations faced substantially higher rental burdens, making it increasingly difficult to sustain operations under the existing cost structure.
The challenge highlights the vulnerability of retailers whose revenue is largely generated in naira but whose contractual obligations are linked to foreign currencies.
As the cost of rent rises relative to sales, businesses are left with less revenue to cover inventory, staff salaries, logistics, electricity, diesel and other essential expenses.
For Shoprite, the combination of expensive leases and other operating costs strengthened the case for smaller neighbourhood outlets that could potentially offer a more manageable cost base.
Technology and inventory management setbacks
Adebiyi also identified internal operational weaknesses as contributing factors in the retailer’s difficulties, particularly in inventory management and the loss of access to the enterprise resource planning (ERP) system previously provided by its former parent company.
Such systems are central to the coordination of retail operations, helping businesses manage stock levels, purchasing, sales data and other activities across multiple outlets.
Replacing the system required additional investment running into billions of naira, according to Adebiyi, diverting funds that could otherwise have been deployed to support the business and strengthen its recovery.
The technology transition, alongside inventory management challenges and rising operating expenses, added to the burden facing the company as it worked to establish a more sustainable operating structure.
Ownership transition and phased restructuring
Shoprite Nigeria’s current recovery efforts follow a significant change in ownership and a prolonged period of difficult trading conditions.
In June 2021, a consortium led by Persianas Investment Limited completed the acquisition of Shoprite Nigeria after South African retailer Shoprite Holdings decided to exit direct ownership of its Nigerian operations.
The business subsequently continued under Retail Supermarkets Nigeria Limited through a franchise arrangement, allowing the Shoprite brand to remain in the Nigerian market under a different ownership structure.
However, the change in ownership did not insulate the retailer from the broader challenges affecting the operating environment, including rising costs and pressure on consumer spending.
In June 2024, Nairametrics reported the closure of Shoprite’s outlet at Novare Wuse Central Mall in Abuja, reflecting the difficulties facing parts of its store network.
By March 2026, the company had reiterated that it was not leaving Nigeria but was instead implementing a phased restructuring programme that began in August 2025.
Bunmi Adeleye, Chief Strategy Officer at Retail Supermarkets Nigeria Limited, had also disclosed plans to reopen outlets at The Palms Shopping Mall and Circle Mall in Lagos while exploring smaller neighbourhood store formats to reduce expenditure on rent, electricity and diesel.
The latest plans outlined by Adebiyi suggest that the company’s recovery strategy will place greater emphasis on operational efficiency, more flexible store formats and improved management of its cost base.
Expansion timeline remains unclear
Despite the renewed focus on neighbourhood supermarkets, important details of the expansion remain undisclosed.
The company has yet to specify how many new standalone outlets it intends to establish, where they will be located or when the proposed expansion will begin.
Those details will be important in determining the scale of Shoprite’s planned comeback and how quickly it can rebuild its presence in Nigeria’s competitive retail market.
For now, the reopening of three stores and the proposed shift towards neighbourhood outlets represent steps in the retailer’s effort to stabilise operations after a period of financial and operational strain.
The longer-term success of the strategy will depend on whether the new format can reduce occupancy and operating costs, improve access to financing and provide a commercially sustainable foundation for renewed growth.