Introduction
The Nigerian economy was disrupted by two decisions Bola Tinubu’s administration took as soon as he took office in 2023. Subsidies had to go, and exchange rates had to be allowed to float. The goal was to prevent Nigeria from becoming bankrupt and to start a new phase of reforms. However, the choices had unexpected effects. Since then, monthly inflation has gotten worse for consumers. It increased for the ninth consecutive month in October 2023, reaching an 18-year high of 27.33% as of 2023. Additionally, numerous manufacturing companies have either closed their doors or relocated abroad this year.
Within a year, more than ten notable companies departed Nigeria, including Unilever Nigeria PLC, Procter & Gamble Nigeria, ShopRite Nigeria, Sanofi-Aventis Nigeria Ltd., Equinox Nigeria, and Bolt Food & Jumia Food Nigeria. Other international corporations have departed Nigeria by selling their interests, ownership transfers, or operations reductions. Diageo’s beverage company sold its 58.02 percent shareholding in Guinness Nigeria to Tolaram Group on June 11, 2024.
Microsoft stated on May 8, 2024, that its Africa Development Center in Lagos will close. Microsoft Corporation, one of Nigeria’s largest contributors, was responsible for N94 trillion of the nation’s output loss. The computation indicated a cumulative loss of output and potential investment of N24 trillion between 2020 and 2022. Larger multinationals’ withdrawals between 2023 and H1 2024, notably Microsoft’s decision not to invest in Nigeria, accounting for more than half of the total.
Microsoft has stated that it will not be ending its activities in Nigeria. Still, it did declare that it would invest an additional $100 billion in a data centre in Kenya after closing its $100 million centre.
The question is, why are these companies leaving the country?
Even though the corporations give different explanations for their departure, other factors contributed to their departure. International corporations, including Procter & Gamble, GSK, and Unilever, stated that low consumer demand and currency issues were the main causes of their downsizing and withdrawal from Nigeria. They decided to close their factories and workforce in favour of switching to import-only models or contracting out their distribution to regional partners. These businesses have been industry leaders in Nigeria’s fast-moving consumer goods (FMCG) sector for many years.
Andre Schuten, the chief financial officer of P&G, claims that the macroeconomic conditions in Nigeria are now too difficult to manage. “As a U.S. dollar-denominated company, it is very difficult for us to create value” in Nigeria. He mentioned this at Morgan Stanley’s Global Consumer and Retail Conference, an investor event in New York. Since Nigeria decided to adopt a “floated” system, the naira to dollar exchange rate has doubled at the official exchanges. He pointed out that a 200 million-person nation ought to be a market that attracts foreign investment. Given the company’s $85 billion in global net sales, he described Nigeria as “a really small” market with $50 million in net sales.
The situation is comparable to other international corporations departing Nigeria: fewer than 3% of their revenue comes from the nation. Remarkably, P&G is also making cuts in Argentina, an economy with comparable inflation levels. However, it has established a $400 million company that employs 46 million people—much more effectively than in Nigeria.
In 2023, PZ Cussons, a British group, stated that it was delisted from the Nigerian stock market because of “foreign exchange challenges.”
Conclusion
While the companies that left the country faced various difficulties in 2023, most did not arise this year. They mostly just made it to their limit. In 1992, P&G, for example, started conducting business in Nigeria and based its manufacturing at two factories in nearby towns.
It established a multimillion-dollar facility in 2017 to produce baby care items, but it closed a year later due to difficulties locating inputs. Furthermore, a few of the biggest firms in Nigeria, such as Dangote and MTN, disclosed that their Q1 2023 earnings were negatively impacted by macroeconomic conditions and cash scarcity.
There is also the idea that these companies are departing because of intense rivalry. Over the past ten years, Nigerian market participants have increased their activity, with entries coming from developing nations like Turkey and India. For example, it has been claimed that the well-known P&G brand Pampers lost its dominant market share a few years ago to a rival diaper brand made by the Turkish company Hayat Kimya, which debuted in Nigeria in 2015 and has a $100 million factory. The latter succeeded by offering less expensive substitutes for Pampers. However, this debate keeps returning to Nigeria’s foreign exchange issues. P&G and other companies operate in U.S. dollars. They, therefore, have a harder time locating lucrative models in nations where exchange rates fluctuate. Typically, this isn’t the case for Indian and Turkish companies.
Some businesses are still doing well even if these enterprises have left the nation, which is thought to be due to effective management, strong leadership, well-thought-out strategic plans, and devoted followers.
