• Thursday, July 25, 2024
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Retailers caught in web of dollar scarcity, as mall inventory rises


Retailers in Nigeria are experiencing tough times in their business transactions, owing to scarcity of foreign exchange, as a result of the restrictive monetary policies of the Federal Government  which have affected them tremendously, leading to record low sales.

The implication is that the malls are finding it difficult to import the major foreign content of their wares, as the forex is not available.

Their recourse to the black market at the official price of N298/$ has resulted in an over 20 percent rise in the prices of their wares- a development that is being resisted by customers, with  attendant high inventories.

Some of the operators who spoke to Business Day expressed deep worries over the impact of the dollar restriction, which they say has greatly reduced their sales. They reveal that the attendant high inventory could lead to mass retrenchment very soon.

“The rate of dollar scarcity has really affected all our prices and our customers are complaining. Most times when they see that an item they bought for N10, 000 has risen to N12,000, they end up not buying because they don’t have enough money on them”, Rachael , a manager in one of the shops at the Apapa Mall told Business Day at the weekend.

Atunrase acknowledged the fact that retailers  are witnessing low patronage, but expressed confidence that the Central Bank of Nigeria would do ‘something positive very soon’ to save the malls.

After devaluation in November 2014, followed by its plunge to a record low in February 2015,  the CBN stabilised the naira by imposing trading restrictions and banning importers from using the foreign-exchange market for about 41 items.

The naira has held between N198 and N199 since March last year at the official market, which analysts say is becoming increasing difficult to access.

Nigeria’s consumer price inflation stood at 9.6 percent year-on-year in December, up 0.2 percentage points from November, and still above the Central Bank’s target upper limit of nine percent, the National Bureau of Statistics said in its recent report.

“This dollar issue is affecting our sales terribly. Since the dollar went up, we are finding it difficult to sell most of our products since they are imported, and an increase in dollar means our prices have to go up as well. Our customers are no longer coming around; sales are generally poor now”, Adebunmi Adebanjo, Sales Supervisor, Homely stores told BusinessDay.

In an earlier report, BusinessDay has quoted Hakeem Oguniran, UPDC’s managing director, as saying that, “In 2015, the sector experienced a huge setback in its growth and development due to some abrupt modifications to certain regulatory policies which stalled new development activities and stifled existing operations in the sector”.

According to Oguniran, the CBN’s prohibition of US dollars (a cheaper financing option), which is mostly sourced from offshore, to fund real estate projects, left most of the developers with the only option of naira funding, which was not viable for the economics of their projects due to higher financing costs.

He added that the uncertainty and ambiguity of the CBN’s classification of 41 items as ineligible for accessing US dollars from the official market, made most retailers, including anchor tenants, incapable of supporting their businesses, despite having invested dollars in setting up their operations in Nigeria.

“The challenge with the 41 items is the broad definition of the product categories. For example, it includes steel, which comprises rebar (that can be partly sourced locally) and flat sheets, I-beams stanchions, shelving components, etc. which cannot be sourced locally”, he lamented.

He noted that retailers who have chosen to procure dollars from other international sources have not been able to secure the CBN’s approval of their Form M(s) (Trade clearance document) which are required for the importation of stocks, leading to significant financial losses, and stressed that uncertainties in the direction of the Federal Government’s policy continue to create a huge concern.

Oguniran said that,  “as a result of these constraints, some of the large international and local retailers in Nigeria have started to review their operations in some malls; retrenching workers and holding back on their commitments to take up spaces at newly planned malls. In addition, international retailers from foreign countries who were planning to invest in Nigeria have begun to withdraw their plans.”

On the development side, he observed that most of the newly planned shopping malls and centres by international and local investors were being suspended due to the waning interest of retailers and high financing costs of naira funding.