Nigeria is facing a significant economic challenge as five notable multinational companies have decided to shut down their production factories, leading to an estimated loss of over 6,000 jobs. This development has raised concerns about the country’s business environment and its impact on employment.
Among the companies exiting Nigeria is the American multinational consumer goods company, Procter & Gamble, which has announced plans to transform Nigeria into an import-focused market, ceasing its on-ground operations. This decision aligns with the actions of other multinationals like Unilever Nigeria (home care and skin cleansing division), GlaxoSmithKline, Sanofi, and Bolt Foods, all of which have cited the pursuit of an import-based model for business sustainability as their reason for leaving.
The departure of these companies is expected to have a profound impact on the Nigerian economy, with Procter & Gamble alone accounting for approximately 5,000 jobs. The exit of GlaxoSmithKline, with a market cap of N22bn and over 400 highly technical workers, further exacerbates the situation. Unilever Nigeria’s exit, with a division worth N50bn and 755 employees, adds to the growing concern.
The President of the Manufacturers Association of Nigeria, Francis Meshioye, has attributed the exodus of these international manufacturing firms to factors such as the power crisis and the unpredictability of Nigeria’s foreign exchange rate. He emphasized that the high energy costs and other challenges have made it difficult for manufacturers to sustain their operations in Nigeria.
The financial performance of these companies also sheds light on their decisions. For instance, Unilever Nigeria reported a N1.09bn profit after tax loss in the third quarter of 2023, while GSK saw its half-year revenue decrease significantly. Sanofi, another departing company, has struggled to maintain profitability in Nigeria.
The acute scarcity of foreign exchange has been identified as a top factor influencing these exits. Procter & Gamble’s Chief Financial Officer, Andre Schulten, pointed out the challenges of operating in Nigeria as a dollar-denominated organization, citing the macroeconomic environment as a key reason for their strategic decision.
The Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce have expressed concerns over the increasing trend of multinational corporations reducing their involvement in the Nigerian market. They have highlighted issues such as foreign exchange scarcity, poor power supply, port congestion, multiple taxation, insecurity, and poor infrastructure as major deterrents to business sustainability in Nigeria.
This situation calls for urgent and immediate steps to address the continuous exit of businesses, as emphasized by the Nigeria Employers Consultative Association. The growing rate of unemployment and its consequences for security and economic activities are alarming. The Nigerian Economic Summit Group and the Nigerian Association of Small and Medium Enterprises have also voiced concerns, indicating that more exits could be expected if the business environment does not improve.
Editorial
The recent decision by several multinational companies to exit Nigeria, leading to the loss of over 6,000 jobs, is a distressing development that signals deeper economic challenges within the country. The exit of these companies, including giants like Procter & Gamble, Unilever Nigeria, GlaxoSmithKline, Sanofi, and Bolt Foods, is not just a series of isolated business decisions; it is indicative of systemic issues in Nigeria’s business environment.
This mass exodus and the resultant job losses highlight the urgent need for a comprehensive review and reform of Nigeria’s economic policies and infrastructure. The reasons cited by these companies for their departure — including the power crisis, foreign exchange instability, and an overall harsh business climate — point to longstanding issues that have plagued the Nigerian economy for years.
The power crisis, in particular, has been a persistent problem that significantly increases the cost of doing business in Nigeria. Reliable power supply is a fundamental requirement for any modern economy, and the lack of it can be a major deterrent for both local and international businesses. Similarly, the unpredictability of Nigeria’s foreign exchange market adds another layer of complexity and risk for businesses operating in the country.
These exits underscore the need for Nigeria to diversify its economy. Over-reliance on oil revenues has made the country vulnerable to external shocks, such as fluctuations in global oil prices. Diversifying into other sectors and creating a more conducive environment for businesses in areas like manufacturing, technology, and services is crucial for economic stability and growth.
The government’s role in creating a favorable business environment cannot be overstated. There is a need for policies that support business growth, such as tax incentives, infrastructure development, and streamlined regulatory processes. Additionally, addressing issues like port congestion, multiple taxation, and insecurity is essential to make Nigeria an attractive destination for investment.
This situation calls for a strategic approach to job creation and skills development. As the country faces the loss of thousands of jobs, there is an urgent need to create new employment opportunities, particularly for the youth. This can be achieved through initiatives that encourage entrepreneurship, vocational training, and skills development in sectors with high growth potential.
The departure of these multinational companies and the consequent job losses are a wake-up call for Nigeria. It highlights the need for urgent and comprehensive economic reforms to address the challenges in the business environment. The government, in collaboration with the private sector and other stakeholders, must take decisive action to create a more stable, diversified, and business-friendly economy. Only then can Nigeria hope to attract and retain both local and international businesses, thereby ensuring economic growth and job creation.
The recent exit of multinational companies from Nigeria, leading to significant job losses, is a phenomenon that requires critical examination. This trend is not just a reflection of individual company decisions but is symptomatic of broader economic and policy challenges facing the nation. The departure of these companies, including Procter & Gamble, Unilever, GlaxoSmithKline, Sanofi, and Bolt Foods, highlights several key issues that need to be addressed to reverse this worrying trend.
Firstly, the exits underscore the importance of a stable and predictable macroeconomic environment. Companies, especially multinationals, thrive on certainty and stability, which are currently lacking in Nigeria’s economic landscape. The fluctuating foreign exchange rates, coupled with the scarcity of foreign currency, create a challenging environment for businesses that operate on a global scale. These conditions make it difficult for companies to plan long-term, manage costs, and maintain profitability.
Secondly, the infrastructural deficits, particularly in power and logistics, significantly increase the cost of doing business in Nigeria. The unreliable power supply necessitates additional costs for businesses to generate their power, while issues like port congestion and poor transportation networks lead to inefficiencies and delays. These factors collectively contribute to an environment that is not conducive to business growth and sustainability.
The regulatory environment in Nigeria can be challenging for businesses. Multiple taxation, bureaucratic hurdles, and policy inconsistencies create an environment that is often seen as unfriendly to business operations. Streamlining regulatory processes and ensuring policy consistency can go a long way in improving the business climate.
The exit of these multinational companies is a clear indication that Nigeria needs to urgently reform its economic policies and infrastructure to create a more attractive environment for both local and international investors. This includes addressing the power crisis, stabilizing the foreign exchange market, improving infrastructure, and creating a more business-friendly regulatory environment.
The departure of these multinational companies from Nigeria is a stark reminder of the challenges facing the country’s economy. It highlights the need for concerted efforts by the government and stakeholders to create a more stable, predictable, and business-friendly environment. Addressing these challenges is crucial for attracting and retaining investment, which is essential for economic growth and job creation.
Did You Know?
— Nigeria is Africa’s largest economy and the most populous country on the continent, with a diverse economy encompassing agriculture, telecommunications, and services.
— The Nigerian economy has historically been heavily reliant on oil, which accounts for the majority of government revenue and export earnings, making it susceptible to global oil price fluctuations.
— Nigeria’s Nollywood film industry is one of the largest film producers in the world, highlighting the country’s potential in creative industries.
— Despite its vast natural resources and human capital, Nigeria faces significant challenges in terms of infrastructure, particularly in power supply, which has been a persistent issue impacting businesses and households.
— The concept of “Ease of Doing Business” is an index measured by the World Bank, and Nigeria has been implementing reforms to improve its ranking, aiming to create a more favorable environment for business operations and investment.
