The country’s retail sector will continue to face significant challenges over the next 12 months as a result of its dependence on higher foreign exchange rates offered in the parallel market, analysts have said.
In a recent report by a real estate services firm, Broll Nigeria, on the Nigeria’s retail market update in the second quarter, the analysts stated that while the change in the Central Bank of Nigeria’s policy was expected to increase liquidity and access to forex, the retail sector would depend on the parallel market to fund imports due to the ban on over 40 items to use the window.
The CBN had, over a year ago, banned the issuance of foreign exchange for the importation of some commodities, which could be produced within the country, in a bid to boost the economy.
The report stated that the prevalent economic conditions had continued to adversely affect the retail sector in the second quarter.
“The inadmissibility of items currently banned from the interbank forex market under the CBN’s new policy will see many retailers continue to depend on the higher forex rates offered on the parallel market to fund Imports. The reality of a shallow tenant pool in the retail market continued to bear down on the sector with respect to leasing activity and take-up rates.” the report added.
It further found that as the market practice in the sector continued to allow leases with dollar-denominated rents payable in naira at the interbank exchange rate, there would be an upward rental pressure in the future, given the depreciation of the naira against the dollar.
“We, however, expect that push back from tenants given these realities will intensify and we anticipate that landlords may be willing to consider extending substantial concessions to tenants who are likely to see effective rents increase by 35 per cent to 45 per cent.
An indigenous mall developer and Chief Executive Officer, Top Services Limited, Chief TokunboOmisore, said the recent downturn in the economy, caused by the collapse in oil prices and devaluation of the naira had adversely impacted many local operating retailers.
According to him, the retailers that have felt the brunt of the impact are those who sell a plurality of imported items and have their rental expense either directly paid or indexed to the dollar.
“However, the Nigerian middle-class consumer is 0 prize that both local and international retailer will continue to fight for. With an estimated 35 million people in the Nigerian ‘consumer’ class, it is not a market where entrants will be willing to leave and outside players not considered because of the recent economic downturn,” he said.
Omisore stated that a major structural change that would occur in the sector was that retailer would no longer pay high prices for marginal space and market share.
IBEDC Disconnects UCH Over N500m Debt, Critical Services Affected
The University College Hospital (UCH) in Ibadan, Oyo State, experienced a disruption in its power supply after the Ibadan Electricity Distribution Company (IBEDC) disconnected the hospital over a debt amounting to N500 million.
Dr. Jesse Otegbayo, the Chief Medical Director of UCH, confirmed the disconnection but refrained from elaborating on the exact cause.
IBEDC’s spokesperson, Busolami Tunwase, acknowledged the outstanding debt owed by UCH but denied that the disconnection was intentional.
Tunwase stated that while UCH owed the substantial amount, the power outage was due to a technical fault in the area, coinciding with the debt situation.
Despite repeated attempts to engage UCH in discussions to settle the debt, IBEDC had resorted to disconnection as a last resort.
The disconnection poses significant challenges to UCH’s critical services, affecting patient care and hospital operations.
While IBEDC emphasized its understanding of the hospital’s importance and commitment to resolving the issue amicably, the situation underscores the financial strains faced by healthcare institutions and the essential need for reliable power supply.
Efforts to negotiate and find a resolution between UCH and IBEDC are ongoing to restore normal operations and ensure uninterrupted healthcare services.
Oil and Gas Dealers Threaten Withdrawal as 70% of Downstream Businesses Collapse
The downstream oil sector in Nigeria faces a looming crisis as oil and gas dealers, represented by the Natural Oil and Gas Suppliers Association of Nigeria (NOGASA), issue a stern warning of potential service withdrawal.
In a recent resolution following their executive committee meeting in Abuja, NOGASA expressed grave concerns over the collapse of approximately 70% of businesses in the industry due to the harsh operating environment.
President of NOGASA, Benneth Korie, highlighted the dire situation, emphasizing the challenges faced by oil marketers in funding operations amidst soaring bank interest rates.
Korie underscored the overwhelming burden faced by operators who are compelled to acquire funds at exorbitant interest rates upwards of 30%, exacerbating financial strain and hindering business viability.
The primary demand voiced by NOGASA is the pegging of the foreign exchange rate at N750/$ to facilitate refinery operations and stimulate the production of refined products domestically.
Failure to address these pressing issues, Korie warned, could result in the withdrawal of services by NOGASA’s over 200 members starting from the next month.
The downstream oil crisis coincides with heightened anticipation for the release of refined petroleum products from the Dangote and Port Harcourt refineries, seen as critical for alleviating supply shortages nationwide.
However, amidst forex crises and inflationary pressures, operators in the oil and gas sector confront mounting economic challenges, necessitating urgent government intervention.
As Nigeria navigates through turbulent economic waters, stakeholders eagerly await decisive action from authorities to salvage the downstream oil sector from imminent collapse and avert potential disruptions in fuel supply chains.
Developers Reject Federal Government’s Cement Price Reduction Agreement
Billionaire Watch4 weeks ago
MacKenzie Scott Sells Off $10.4 Billion Worth of Amazon Shares
Forex3 weeks ago
Dollar to Naira Black Market Exchange Rate February 1st, 2024
Company News4 weeks ago
UAC Posts N12.7 Billion Profit Before Tax in 2023
Forex3 weeks ago
Dollar to Naira Black Market Exchange Rate February 2nd, 2024
Education4 weeks ago
WAEC: Over 8,000 Candidates Register for First Series of Computer Based-WASSCE in Nigeria
Banking Sector3 weeks ago
CBN Accuses Banks of Hoarding $5 Billion in Foreign Currencies
Forex4 weeks ago
Dollar to Naira Black Market Exchange Rate January 30th, 2024
Forex2 weeks ago
CBN Mandates Nigerian Banks to Pay International Transfers in Naira